Optimize Growth Funnels, User Reach, Activation

TPF- PLG Session 2, by Avadhoot Revankar (Chief Growth Officer, Netcore) & Himanshu Periwal (Co-Founder, Unlu Class)

6 min readMar 2, 2022

What is a Growth Funnel?

A Growth Funnel is basically the set of stages that a potential customer goes through when making a purchase. Growth funnels can be created for any type of product in any type of setting i.e. B2B/B2C.

One such way of representing growth funnels is the AARRR framework which has been a dominant guiding framework to metrics, goal setting, and strategic growth conversations.

AARRR framework represents that at the top layer you get the maximum number of users and as the users start using your product they start churning out and at the last step, i.e. revenue you have a small fraction of users as compared to what you had at the top of the funnel.

Acquisition

Acquisition or Reach is where the customers actually discover your product/brand/company. It deals with the following questions:

How do your customers find the product?
Where do they discover the product?
Which channels are the customers coming from?
- online, offline, referrals, word of mouth etc.

A PM needs to understand which all channels could lead to getting the customers to the acquisition bucket. Once all these channels are identified, the PM needs to understand which channels have the maximum ROI (Return on Investment)

(P.S. We usually check the cost per acquisition metric for the same)

Activation

What is the first event that we can define where you feel that the customer has experienced the “Aha moment”.

Activation = Aha moment (90% of the Times) → When the user first realizes the value of the product

Examples

For a travel aggregator in flight booking product — the Aha moment can be the flight search. This means that a customer is activated once he/she has made a flight search and until then s/he stays in the acquisition bucket.
For Dropbox — When a customer tries the product out and adds any one file on the dropbox cloud in the free product plan.
The time taken for activation can be around 1 day for some whereas, a few months or up to a year for others.

Retention

How many customers are retained till they try out your product

Referral

All good customers i.e. customers with high NPS, would give you free referrals which are getting customers by word of mouth, referring or sharing the link of the app etc

Revenue

How many customers helped generate revenue for your product?
Can you do cross-sell or upsell to increase revenue for the product?

Channels for Reach

The purpose is to leverage all the following channels, each channel should be treated as an opportunity for itself. Some of those channels are:

Organic search — Somebody searches for your product as he has need. If we have configured our website or webpage by adding enough keywords, etc. then it would land us the right traffic. Methods → SEO, on-page and off-page optimisations Google speed insights,
Paid search — Pay to search engines like google to list your website higher in searches and is generally paid for every customer brought in.
Direct traffic — People start directly coming to your website
Social media — Traffic from Social media like FB, Instagram etc
Paid Social — Similar to social media but we are paying FB, Instagram or Twitter to bring in more traffic
Referrals -Set up referral loops, branch.io which can help you set up referrals very easily
Events — Online and offline events
Email marketing — Tool → Mail chimp, Netcore
Word-of-mouth marketing
Cold outreach
Direct mail

We have a lot of channels available but we need to optimize the focus and usage of these channels to get optimum output, this can be done using a prioritization framework.

SEM (Search Engine Marketing ): Paid Google search optimisation
SEO (Search Engine Optimization): Free Google search optimisation

The next step is to assign values to each metric and multiply to obtain the priority value.

One of the examples to optimize reach is by flight booking platforms like ixigo, MakeMyTrip which show dynamic ads based on user search which didn't end up in booking of flights.

Importance of tracking metrics

Metrics are a “quantifiable measure” or defined numbers/values to gauge the level of performance, quality and improvement (or lack thereof) of a business.

Benefits: Metrics are important for startups as they help to:

Accurately measure what is going well & how activities are correlated
Influence the direction in critical decision-making

Importance of following a framework

Analytics Framework is the examination, exploration and interpretation of the metrics, which is important because:

It helps to decipher metrics into meaningful patterns and insights for decision making
It helps to determine product-market fit by helping understand the target users and how the product can solve a specific market problem.

Framework to find the size of your reach audience

Hence, TAM > SAM > SOM

Top Metrics for Reach

CPM — Cost per mille(1000) impressions.
eg. an Ad is seen by 10000 users and the Ad agency charges you 1000 rupees then CPM = 1000/10 = Rs. 100
CPC — Cost per click.
eg. You paid 10000 rupees for an Ad and only 500 people clicked on it then CPC = 10000/500 = Rs. 20
CPI — Cost per Install.
eg. You paid 10000 rupees for an Ad and only 100 people installed in the end then CPI = 10000/100 = Rs. 100
CPA — Cost per Action.
Action can be defined in various ways such as Cost per Order, Cost per registration, etc
eg. You paid 10000 rupees for an Ad and get 100 orders then CPA = 10000/10 = Rs. 1000
AOV — Average Order Value (refer this article for more info)
Conversion Rate — Percentage of leads converted to sales eg. From 100 leads 2 users bought your product/service then the conversion rate is 2%
CAC — Customer Acquisition Cost.
It is the Total cost to acquire a customer.
CLTV — Customer Lifetime Value.
It is calculated as AOV x Avg. Order frequency x Customer Lifetime.
eg. AOV for a product is Rs. 1000 and the lifetime for a customer is 1 year in which they order 5 times then CLTV = 1000 x 5 x 1 = Rs. 5000

It is important for SaaS products where you have monthly subscriptions. One must not spend more than CLTV to acquire a customer otherwise it becomes a loss-making situation.

Examples of some activation metrics (Aha moment)

Hotstar → User watches content for more than 15 mins
PharmEasy → 3 medicine orders placed by the new user
Zepto → 2 orders with delivery within 10 mins
BYJU’s → 3 videos for 7 mins in the initial 2–3 days
Netcore → Reports of the 1st push notification campaign or journey

How do you arrive at the right Activation Metric?

Work Backwards: Why users are staying back?
Watch users Live in action / Session Recordings
Talk to your users
What are your customer-facing teams saying?

How can you reduce activation funnel dropouts?

Low code nudges to guide the user to an existing feature of the app
Analysing User Paths
— Helps figure out why the users are dropping out?
— Helps figure out what makes users retain and guide users on that path?
Analyzing live session recordings
— To identify the challenges the users are facing
— Tools: B2C → Fullstory, UXcam, UserExperior; B2B→Hotjar

Steps to take to improve your activation

Keep sign up process simple & talk benefit over features
— Benefits over features → Convey the user of what value he receives by keeping the app on phone/ using the product
Personalize the initial build experience of the user — Quick to Value
— Ensuring jobs to be done
— Solving user problems fast — Continuing Ads campaign messaging into the product
— Personalized Home Screen — Combine source of activation with the home screen
— Personalizing the users feed minimal info — creates Endowment effect
Guide the user to the most important parts (sections with the highest retention) of your Product/App
A/B testing & experimenting with screens and offers to understand what works best
Gamifying the onboarding experience