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2 years ago
17 Feb 2012
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Acquiring Customers: Talk by Florian Heinemann at Build 0.8

In this talk Florian Heinemann (CEO, Rocket Internet) shares his insights into the ways that a good business analytics concept is essential to your growth.

Florian’s message from his presentation at HackFwd’s Build 0.8 is straightforward: understand who your key customers are, the ones who are responsible for the highest lifetime value, and tailor your product around these people. The execution of this idea, however, takes a lot of effort. Start collecting business analytics data from day one, he says, and put your smartest person on to the job of understanding it.

The greatest difficulty most startups encounter during their growth period is determining which customers will push you to the next level of profitability, and how you can reach them. Business analytics is the key to answering these questions. At the outset, it’s rare to know exactly who your customers are. Essentially, every sale is a good one and every new customer is to be valued. But this isn’t a strategy that leads to long-term growth. The key is to determine the total lifetime value for each referral from each channel. Only when you have this information at your fingertips can you determine where you should be placing your marketing spend.

“Early in the process you need to have a really good business analytics concept in place to understand who your key customers are… right from the very beginning,” says Florian. He points out that you need three to five months of data in order to carry out good analysis, so even if you can’t devote time to analytics from day one, you should be collecting as much data as possible.

“In early stages test out every channel possible – even offline – and make it as measurable as possible,” says Florian. “We never do anything that we’re not able to measure.”  Too often, he adds, startups make the mistake of thinking that viral marketing doesn’t cost anything so it doesn’t need to be measured. He points out that this is wrong for two reasons: firstly, you need to know if the viral strategy is successful; and secondly, viral marketing requires input from the people who make the viral content and who start the initial wave of sharing. If the cost, and the benefits, of a viral campaign are hidden you risk throwing money away. Florian also points out that in the worst case scenario – if the viral campaign doesn’t take off – you need to have early warning of this. Business analytics will tell you where the conversion chain is coming apart. 

Slide from Florian Heinemann's presentation
Slide on marketing mix and customer acquisition channels from Florian’s presentation.

Florian gives the example of eDarling, the online dating site. At launch, eDarling was aiming for a lead-to-sale ratio of 12-15 percent: that is, 12-15 percent of people who filled in a questionnaire would, it was hoped, become eDarling subscribers. In the first few months, eDarling had lead-to-sale ratio of just 0.5 percent. Thankfully, the excellent business analytics system showed exactly where the users were leaving the conversion chain. They used this data to carry out some user research and discovered that they needed to tweak the matchmaking algorithm. Without good business analytics, eDarling would not be employing 250 people at the end of 2011.

Florian takes time in this video to explain how use cases are central to the development of your marketing and analytics strategy. He also talks about the different metrics, such as conversion rate and customer lifetime value, and what they can tell you about the relative performance of different channels.  He demonstrates how you can more than double the value of your marketing spend by identifying your most profitable channels rather than concentrating on cost per customer. 

Florian also reminds us of the importance of CRM as a way of building customer value.  Collecting business analytics data from the outset will help you to design new use cases that are nonintrusive and intelligent, and that will make your customers eager to reactivate their relationship with you.

Watch Florian’s talk to learn more about why business analytics is the key to customer growth. For more talks for startups, head to Passion Meets Momentum.

Notes

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