What is Growth Analytics?Last edited: Aug 18, 2022
Growth analytics is the practice of evaluating data related to user acquisition, conversions, retention and sales to gauge performance based on business goals, identify key metrics for measuring growth and determine attributes that contribute to profitability.
Why Companies Should Use Growth Analytics
Gathering and analyzing growth metrics gives companies a clear understanding of what promotes conversions, repeat visits, customer retention, churn rates and other growth factors. Without it, there’s no definitive way to know what influences growth because even customer questionnaires aren’t 100% accurate and don’t provide a complete picture.
Tracking growth metrics is reciprocal in that the information provides insight on past events and can help a company keep growing or improve growth in a desired way. Growth metrics tell a company much more than whether sales are improving or falling off. They can provide valuable insights like:
- Which products or offers generate the most revenue growth
- Which channels afford the most growth potential
- Where weak links are that hinder growth
- How healthy the business is in general
- What high-value user cohort to target for growth
- Which ad campaigns deliver the most new users or best retention rate
- Which campaigns deliver the best ROI
The insights that can be gained all depend on a company’s goals and the growth metrics that are tracked.
The Growth Analytics Metrics You Want to Track
There are literally hundreds of metrics that can be tracked by an organization. However, many of those metrics are meaningless in terms of growing the business.
Any metric that directly or indirectly shows measurable value towards reaching business growth goals is worth tracking. They’re what’s known as key performance indicators (KPI). The growth metrics you definitely want to analyze include:
1. Revenue Generation
This is the most basic growth metric, but worth keeping an eye on. Ideally, revenue improves year-over-year. If revenue is falling short of expectations, leadership needs to delve deeper into what can be altered to boost sales. Are you targeting the right users? Is your message reaching them at the right time in the sales funnel? Do you need to adjust the pricing?
2. Cost Per Lead
How much does it cost to generate a lead? Is the cost justified by the conversion rate? Cost per lead is measured by dividing your marketing and advertising costs by the number of leads generated for a specific period of time. Ideally, the acquisition cost will decrease over time as campaigns take effect and are optimized.
3. Cost Per Customer (CPC) Acquisition
Go a layer deeper by analyzing the cost per customer acquisition. This takes into account leads and conversions. If your conversion rate is 5% it takes 20 leads to get one customer. Assuming it takes $5 to generate a single lead the cost per acquisition would be $100. The goal is for the value of the customer (i.e. how much they purchase or spend) to be higher than the acquisition cost as much as possible.
4. Average Revenue Per User (ARPU)
Dividing total revenue by number of users gives you ARPU. It’s best to analyze this metric by cohort to figure which type of user generates the most revenue.
Are you able to keep customers once you get them? It’s much more cost effective to retain customers compared to converting a new lead. According to Outbound Engine’s research acquiring a new customer is five times more expensive than retaining an existing one. Boosting retention by just 5% can grow profits by up to 95%. Retention also indicates the strength of customer loyalty, which has long term effects on growth.
Sometimes revenue growth can hinge on the sales team’s ability to upsell clients. Upsell metrics can tell you if you are missing opportunities to increase revenue and improve the cost per lead.
7. Annual Recurring Revenue (ARR)
Revenue that comes in on a monthly basis over the course of the year is the ARR.
8. Conversion Rates
The number of leads that become a customer or take a specific action is your conversion rate. This metric is highly variable depending on a company’s goals and what they consider a conversion. Lagging conversion rates can be due to shortages of quality leads, landing pages that miss the mark with messaging, the approach of the sales team, or a number of other factors. The metrics can give you an idea of where improvements can be made.
9. Active Users
For many businesses, user base is a very important growth metric, and can be more insightful than total users metrics. What’s considered an active user must be clearly defined. Two metrics that are worth tracking are daily active users (DAU) and monthly active users (MAU).
10. Churn Rates
Churn rate can refer to the number of users or customers that are dropping off in a given period or the amount of revenue that is lost due to users/customers dropping off. This is a metric that you don’t want to see grow, and if it does it needs to be addressed immediately.
Taking the Next Step: Implementing Growth Analytics Tools
Simply monitoring data isn’t enough. Once you have the growth metrics it’s time to put the data to use. Growth metrics are just a lot of numbers unless you create reports that reveal insights and leverage that information to plan for future growth.
The basics of growth metric analytics include:
- Track user/customer data across all channels
- Bring the data into one single report/source that can be accessed by all team members
- Segment the user data by cohort, channel, device, behavior, etc.
- Make goals and adjustments to campaigns, funnels, etc. based on the metrics
- Continue to measure, analyze and adjust goals
DIY Growth Metrics System or Third Party Solution?
After working with thousands of businesses, including 30% of the Fortune 100 list, we can definitively say using third party solutions from analytics experts often offers the greatest benefits. Right out of the gate growth project managers can begin making sense of growth metrics that they know are accurate and actionable.
A solid third party growth analytics platform will:
- Simplify data gathering across all channels in real time
- Send alerts when key growth metrics change
- Identify areas where growth is strongest or weakest
- Determine the acquisition sources that generate the most growth
- Reveal opportunities for experimentation to test growth factors
Whatever route a company chooses, what’s most important is that growth metrics are utilized to give companies valuable insight on how to keep growing.