If the economic climate is scuttling your confidence (understandable, as we are in a technical recession), don’t panic — let these immortal words from The Princess Bride’s Dread Pirate Roberts comfort you:
“Life is pain… anyone who says it differently is selling something.”
As marketers, we know this. If we weren’t solving customers’ pain points and challenges, we wouldn’t have any business.
And, of course, we are selling something.
Just because financial outlooks are dismal doesn’t mean that people don’t need what your brand has to offer. I’d argue if you do your job well, they’ll need your products and services now more than ever.
If you want to hit gold consistently, you’ve got to establish your dominance over one crucial factor: demand.
Demand isn’t just a function of supply; you can create it by design using hard data and so-called “soft” skills, like empathetic listening. Then, all you need is a treasure map to unlock growth in the form of possibilities and progress.
The good news is designing demand is something you can do for your brand or business through a three-step journey of discovery, analysis, and tactical action.
- Demand audit: Using the Pirate Metrics Framework (AARRRR) and a red/yellow/green traffic light system to benchmark and evaluate
- Demand Recommendations & findings: What you learn from the audit — recommendations for improvement and growth opportunities
- Demand Map: Like a customer journey map, but much more actionable; documents that every touchpoint and action are rooted in through a rigorous, data-backed system, (plus messaging and tests/KPIs to do/watch)
Ready to dive in?
The Demand Audit: A Pirate’s Life for Us!
I always advise my clients to start where they stand. That means assessing what’s working and what’s not in a rigorous, data-driven way.
To articulate how to measure and grow your business, I love using the AARRR Framework, created by investor and entrepreneur Dave McClure, the founder of 500 Startups. (I’ve added an extra R, which I’ll explain more below.) It’s catchy, easy to measure, and simple to understand quickly. Plus, when you say the acronym out loud, you sound like a pirate.
The framework is actually a connected funnel, and here’s what each letter stands for:
Acquisition: How are you getting your customers?
Activation: What channels are you bringing people through to activate them? (i.e., landing pages, social media ads, etc.)
Retention: How are you retaining your clients, both long-term and new acquisitions?
Recapture: This is my pirate-like addition that’s different from retention because it’s about people who interact with your brand but don’t buy from you — how can you capture their attention and engagement?
Referral: Where do your best referrals come from? (i.e., social media shares, passed along emails, affiliate marketing)
Revenue: How do you capture the sale? Continuously grow your revenue?
Simple, right? And yet, I’ve used this to bootstrap and grow small businesses from ideas in a pitch deck to six-figure, seven-figure, and even eight-figure revenue companies. There are only two ways to grow a business: you can acquire customers you can sell to, or sell more things to your existing customers. This framework helps you pinpoint opportunities to do both.
Now, let’s put some meat on that skeleton.
At the top of the funnel, you’re thinking about all the broad actions you take to acquire customers. That includes things like:
- Your website
- Content marketing
- SEO (organic, paid)
- Paid social media ads/sponsorships
- Email marketing
- Affiliate marketing
The key metrics you should consider when evaluating all of your acquisition channels (both from external touchpoints and owned) include:
- The overall number of unique website visitors
- Customer Acquisition Cost (CAC): The amount you spend to acquire a customer divided by the number of customers acquired. The lower your CAC, the better; also important to look at this number in relation to Customer Lifetime Value (CLTV).
- Customer Lifetime Value (CLV): Customer Lifetime value is a measurement of the total value a customer is worth to a business, typically measured in total revenue. Far too many people overlook steps in the journey they can optimize to increase CLV. It costs less to retain an existing customer than to acquire a new one, yet far too many businesses optimize purely on CAC vs. enhancing their CLV. You can calculate CLV in so many ways (that’s an article by itself) but for now, let’s look at CLV = total customer value x average customer lifespan, which will give you a monetary value of what the average customer is worth to your business.
- Conversion Rate: The percentage of customers that actually complete a given business goal (i.e., subscribe to your email newsletter). For math geeks, that’s the total number of conversions divided by the total number of sessions.
- Click-through Rates (CTR): For email or like campaigns, this is the number of people who click through divided by the number of people who received the campaign (the less number of bounces, the better).
- Impressions: How many people view your ads?
- Bounce rate: How many/how quickly do people leave your site?
- Time on page: How much time do prospects/customers spend on a page?
- Pages per session: How many pages do visitors look at on your site?
- New vs. returning customers
As you look at your acquisition picture, notice how aligned (or not) your acquisition marketing strategies are across touchpoints, both owned and third-party.
The second step in the pirate metrics funnel is activation. How do you turn the people you’ve acquired into active customers? Or, more accurately, how do you create those “Aha or surprise and delight” moments that reinforce the value your brand provides?
Before you do anything, it’s critical you take a deep dive into who your customers are. Ideally, you started your journey with archetypes, personas, or real-life customer avatars — the people you’re assuming are your buyers — but that may well have changed, especially in a tough economic environment.
So, make sure you’re solving the right problems and offering the best solutions for your customers. Use active listening methods like polls, focus groups, survey instruments like (Net Promoter score NPS), and social media listening or sentiment analysis to be sure you’re creating value for your customers. And I can guarantee this: in-your-face sales techniques won’t yield the results you want.
Instead, take a more nuanced approach to creating irresistible offers. Great marketing content tells a story that resonates with your audience. You don’t have to be everything to everyone — as I always say, the riches are in the niches.
So, invest in learning how to write compelling marketing copy. Honestly, you don’t have to be a fancy designer or an amazing content creator to be able to create great experiences that convert. That’s the beauty of the Pirate Metrics Framework.
Here are some metrics to help measure your activation success:
- The total number of visitors that come to an experience, for example, a landing page
- Average time spent on your site, page, or other digital assets
- Visit-to-goal ratio — for example, the number of people that visit your landing page compared to the number of people who sign up for your newsletter (or take any desired action, like purchasing a product). Or even “active users” vs. gross number of users on your site.
- Your conversion rate vs. your industry performance benchmarks
- Bounce rate is also a good indicator
- Pages per session
- New vs. returning users
- Marketing Qualified Leads (MQLs), Sales Qualified Leads (SQLs), and Conversion Qualified Leads (CQLs)
Finally, while in the activation stage, look for opportunities to surprise and delight your customers. And remember, it’s not always about making a sale. It is about finding ways to engage authentically, encourage engagement, and create connection.
The next stage in the Pirate Metrics funnel is retention. Keeping the customers you have is mission critical for all brands, from service providers to eCommerce sites. You want to be sure there’s repeatability and even a predictive capability to cultivate customers you can count on.
This is next-level activation; it’s not enough to have customers flowing in. If you’re churning through them, your business won’t endure. So, you have to be strategic about the post-purchase experience and continuously focus on providing value with meaningful, personalized content and enticing offers for related products or enriching upsells.
It’s old-school to think of your customers as your “audience” — they are your community. Engage with them where they congregate, for example, on social media, and offer them good reasons to hang with you, like a loyalty program or must-read newsletter with exclusive offers.
Important retention metrics to consider include:
- Active users
- Repeat purchases
- Customer Churn Rate (CCR) — a simple formula is lost customers divided by total customers over a specific time period multiplied by 100. (Repeat frequently; at least monthly!)
- Email open rates
- Customer satisfaction surveys and Net Promoter Scores (NPS)
- Reviews (on your site or third-party sites or search engines)
A quick note about retention: always remember that social media platforms are fickle. Algorithms change. So digital sharecropping, which is building your presence on platforms you don’t own, should be minimized — especially when it comes to retention. You have your customers’ email addresses, so it’s a far better use of your time and resources to build your email list and garner any first-party data that you can own.
Not everyone who interacts with your brand on your owned assets or external destinations buys from you. So what can you do to entice them to engage and ultimately buy from you?
Much like retention, recapture has to do with understanding the customer journey, where it works — and where it doesn’t. Metrics are especially crucial to understanding opportunities for improvement and enhancement, including:
- Email open rates
- Promo or offer code redemptions
- Cart abandonment rate
- Cost per click (CPC)
- Cost per action (CPA)
- View-through conversions
- Click-through conversions
- Return on ad spend (ROAS)
When you dig into the numbers, you’ll find lots of opportunities to make your customers offers they can’t refuse.
The next step in the pirate metrics framework is referral. How do you get your customers to refer more people to purchase your products, services, and experiences? And how might you even get them to sell on your behalf?
Understanding the referral pipeline is crucial. You’ve got to be clear at what step in the journey it makes the most sense to drive a referral — when can you catch your customer at the moment of elation, so it’s a natural step for them to share the wealth? And what can you do to ensure that the quality of your product/service stays consistently high, so it’s always a pleasure for your most loyal fans to spread the word?
In other words, what’s in it for your customers to help build up your brand?
The key is to embed referral loops or viral loops into online endeavors and campaigns to get more people talking about your product or service. In my experience, you get the most mileage not from a prospect acquired from an online or social media ad but from someone that was referred by a customer.
Key referral metrics include:
- Net Promoter Score (NPS): Uses a simple survey to gauge customer satisfaction, loyalty, and enthusiasm — hence, the likelihood to refer your brand.
- Total number of referrals
- Code redemptions
- Number of shares
- Viral coefficient (K-factor)
- Reviews: On your site and on third-party platforms
- Backlinks to your site
Pro tip: Read your competitors’ reviews, and be on the lookout for what people are unhappy about or what pisses them off. Then, make sure your messaging elevates how you solve that problem… which should help you earn glowing reviews and more referral traffic.
I’m wrapping up the funnel with revenue, but this can also show up as the first “R,” right after “Activation.” We marketers are always asking ourselves the question, how can we increase revenue? What’s our monetization strategy? How do we ensure browsers become buyers and buyers become loyal customers? What does our competition do?
The good news about revenue is it’s very straightforward to measure. Here are core metrics to consider:
- Average Order Value (AOV)
- Customer Lifetime Value (CLTV or LTV) — you’ll want to balance this like a seesaw with your CAC.
- Monthly Recurring Revenue (MRR)
- Annual Recurring Revenue (ARR)
- Repeat purchase rate
- Expansion revenue — a fancy way of saying cross-selling (i.e., if I sell cell phones, I might also sell cases, screen protectors, and other accessories which commonly have much higher profit margins).
By examining all the revenue metrics, you’ll gain insight into how well your conversion path is working (or not).
Lower the Boom — Time to Put Your Audit Into Action
Now that you’ve completed your audit and have a clear picture of empirical evidence (aka metrics) available, it’s time to decide what marketing tactics to start, what to stop, and what to continue. My team and I do this by using a simple red, yellow, and green color coding system to evaluate the current efforts and effectiveness against industry benchmarks and internal goals.
- Green indicates that your current efforts are above benchmarks and performing well
- Yellow means they’re at or below benchmarks
- Red signifies the need to reevaluate current efforts immediately
Be ruthless, like a pirate — you want double down on the green and drill into the yellow and reds, as those will help you uncover another Dread Pirate Roberts tactic (and favorite expression): “It’s possible…”
The point is to see every place your marketing efforts are falling short as a possibility for growth. Ask your team and yourself what did we learn and, as importantly, what does it mean?
Here are a few tips to get strategic about your yellow and red efforts to improve your results:
- First off, celebrate those green items — the wins! Starting from a place of positivity and recognizing your strengths puts you in the right mindset to deal with challenges.
- Next, pick off some low-hanging fruit — what can you easily shift to move any yellows into green? (For example, are there broken links on your site you can fix? Or can you add a chatbot or extend hours for a customer service rep?)
- Think critically about red tactics. Are they essential to fix? Or can they be replaced with new initiatives or strategies that improve your results?
The final step is to develop what my team and I call a Demand Map, which serves as the visual compass for your recommendations. Ideally, your Demand Map will illustrate the “why” for each tactic by visualizing the customer journey and every touchpoint and action. Additionally, it clearly defines the messaging used in a tactic, as well as what you’re testing and the KPIs you’re watching.
Often you hear the expression, “good marketing is delivering the right message, to the right person, at the right moment, in the right place.” On the surface, this sounds great, but in reality, it’s complicated to pinpoint every aspect that makes up all the “rights” described. This is why you need a growth marketing mindset, and it entails continuous testing and willingness to make incremental changes to improve conversion rates over time. Proper data collection is also a must. The Demand Map empowers you to visualize the user journey so you can identify the testing opportunities and how to measure them.
In other words, the Demand Map is your treasure map. Follow it carefully, and you’re on your way to hitting gold! And if you have questions about Pirate Metrics or any of the strategies and tactics in this article, hit me up in the comments or DM me on Twitter.