AARRR Metrics for a Fintech

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 Lets assume this is a case study for a Fintech company’s KPI definition.

Company X is a Fin Tech company providing payment solutions to SME and small businesses via mobile app, card reader and NFC. Company X solutions provide bookkeeping and analytics features to its customers by means of tracking its product usage and events.

Tracking mobile app usage and web sites are done by using web and mobile analytics tools such as Localytics, Flurry, Google Analytics, Tealium, Xiti etc. But in some cases the data from the analytics tools are not enough to deduce conclusions and hence require additional data from various systems such as CRM, Financial transaction systems, CMS and inventory control systems. Due to the need for blending data from disparate systems, a data strategy needs to be defined and a robust and scalable data architecture needs to be in place.

I would like to provide two relevant blog posts from my own blog that point to the concepts of growth hacking and data blending.

Data Value Chain

Growth Hacking

KPIs

Data monetization for the growth of businesses, entails tracking user behavior both online and offline to optimize products and processes. A list of KPIs or metrics to measure product usage and means of revenue generation are used as a guideline for data monetization efforts. Whether it is to assess global performance of a site, measure the impact of a specific campaign or product feature change, a set of indicators will be needed to focus on the changing parameters.

There are 5 metrics defined by Dave McClure : Acquisition, Activation, Retention, Referrals, Revenues or AARRR also known as the pirate metrics that serve as a good indicator of business growth.

For each of the metric area there are several KPIs defined. For each of the KPIs there are again 4 essential components or ways of analyzing:

  • Data points – Data points are the points in the app or site that generate interesting insights about the business in question. It could be individual features in the product or events.
  • Funnels – Setting up funnels ensures tracking all the steps that lead to completion of a particular process on the site or app like tracking steps that lead to an online payment page or the steps that lead to a signing up for a newsletter.
  • Segmentation – Segmenting the potential and existing customer base to be able to understand their wants and needs in order to be able to serve them better, which is a means of revenue generation. Segmentation can be
  • Behavioral – Users who spend lot of time on the site or app, frequently login or rarely login, browsers, visitors that leave without making purchases or visitors that make purchases
  • Technical – The browsers used, the OS versions, devices used and if the users have saved the site as a bookmark or enter the site through search engines or social networks
  • Demographics – Clustering users based on their age, gender, location etc.
  • Cohorts – Cohorts are also a type of segmentation but more from a time series perspective to be able to compare data sets at different points of time. For example checking trends or shopping behaviors at different points in time.

The pirate metrics for product usage can be broadly classified as below:

Acquisition

The process of acquiring customers, which would mean tracking new customers that visit the site or download the app or search the product. The KPIs for acquisition would include all the metrics that indicate a growth or changing trends:

  • Number of unique visitors
  • %mobile traffic
  • %web traffic
  • % traffic from social networks
  • % traffic from search engines
  • Number of app downloads
  • Visit trends
  • Page view trends
  • App Download trends
  • New User Account Creation Rate
  • Bounce Rate
  • Funnel analysis for conversion
  • Number of new customers in the last Month/Quarter
  • Number of new customers YoY growth
  • Campaign effectiveness – measuring the number of customers signing up or deregistering

 

Activation

When the users have logged in and have started using the product, the usage needs to be tracked to be able to further develop the product for better customer experience.

  • Page views
  • Time spent on the site
  • Hourly traffic
  • Seasonal traffic
  • Monthly Active Users
  • Number of paying customers in the last Month/Quarter
  • Number of paying customers YoY growth
  • Type of payments
  • Types of Merchants (small/SME/seasonal)
  • Types of businesses/industry
  • Type of most sold items
  • Customer Segmentation (Technical, Demographics, Behavioral) to understand customer’s need to use the product to improve product development

 

Retention

Retention is the process of retaining existing customers by continued service leading to customer satisfaction. Measuring the factors that lead to retaining customers is a good indicator.

  • Number of returning customers
  • Average time for transaction
  • of transactions
  • Transaction failure rate
  • Number of transaction per payment type
  • Peak hour
  • Peak Season
  • Types of Merchants
  • Average revenue per Merchant
  • Average Revenue per Merchant per branch/Industry type
  • Average time taken for deposit to merchants
  • Competitor Analysis through web/Facebook crawling
  • FaceBook engagement (Likes, Shares, Comments) per Month/week
  • Number of Complaints per category of complaint type
  • App Store Ratings/Review trends
  • Text Analysis for tweets/ Facebook comments
  • Number of cash payments Vs Card payments

 

Referrals

When the customer satisfaction index is high, the customers refer the products to others thereby acting as brand ambassadors. Referrals are a means to measure customer satisfaction because customers refer the product only when they are themselves happy with the product usage.

  • Number of visits coming from social media
  • Number of site entry from Facebook ads
  • Number of shares on Facebook
  • Text analysis of tweets and Facebook messages

Revenue

One of the most important part of a business is revenue generation as revenue is not only the sustenance factor but an indicator of growth.

  • Total Payment Volume
  • Total Net Revenues
  • Transaction losses
  • Net revenue YoY growth
  • Net revenue YoY growth per type of business
  • Net Revenue per type of card (Master/Visa)
  • Sales turnover of customers
  • Number of transactions per Month/Quarter
  • Number of transactions per type of business
  • Number of transactions per Location
  • Net revenue per platform (mobile app {ios/Android/ipad}/ card reader/NFC)
  • Net revenue per type of merchant
  • Average revenue per client
  • Average value per transaction
  • Peak volume of transactions per hour
  • Peak volume of transactions per hour per location per type of business (to be able to suggest to similar merchants about the optimum time and hour of transaction)
  • %churn
  • %churn per type of merchant/type of business/Month/Quarter
  • Average Selling price per type of Merchant per type of business
  • Average Selling price per type of Merchant per type of business trends – Monthly/Quarterly/Seasonal
  • Number of customers that have applied for loan
  • Type of customers (business/demographics) that have applied for loan via Company X

 

Conclusion

Product usage tracking to improve the overall product features and outreach is an iterative process involving several processes like continuous A/B testing, UX strategy, Analytics, ideation and product development. In order to create state of the art products, Company X needs to know who their audience is and how the product will make it easy for businesses to sell. By tracking product usage, the aim should be to learn deeply about the customers’ needs and behaviors to be able to generate great solutions, proactively. Iterating towards the solution that creates the most value by collecting and analyzing data is the key.

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