SnapEX
There are many reasons why a business should want to employ a marketing and expansion strategy, and companies whose growth has peaked in current channels aren’t the only ones to potentially benefit from this. If nothing else, a clear strategy for marketing and expansion can help make growth more structured and sustainable for any business with long-term goals.
At SnapEx, the fundamental marketing and expansion strategy we have always surrounded ourselves with is the customer lifecycle framework. described by the Pirate Metrics (AARRR), shown below.
This framework enables us to categorize metrics based on which side of the business needs to be quantified. Pirate Metrics is divided into five sections on the inverted pyramid, and while we will only be discussing the first two in this article, the rest is just as important.
Throughout the expansion journey of SnapEx, our team has assessed and tested various strategies, plans, and implementations. This has allowed us to determine product-market fit at the very early stages, and map out clear customer demands from our ‘Core Product Value’ offerings. This is reflected by the exponential customer growth we’ve seen over the last few months.
When measuring growth, it’s important to distinguish between metrics that genuinely reveal the state of the company’s expansion and vanity metrics. Vanity metrics are those that indicate the popularity or outreach of the service but do not directly contribute to the growth of the product or customer conversions.
This growth model can help uncover major drivers to growth, as well as gather baseline performance numbers to measure and record progress. It can also aid in finding the right areas to prioritize efforts and spending — the highest impact areas — while also enabling the team to have a better view of the company’s strategy and direction.
Although we currently do not have a significant presence online, we were able to build our customer base and to establish a close customer relationship through our network of KOLs (Key Opinion Leaders). With a polished product and improved system stability, we strongly believe that this will give us the solid foundation required to acquire even more users in the years to come.
Customer Acquisition and Activation
Aside from Pirate Metrics, our growth model also takes cues from the famous Growth Formula proposed by Alex Schultz and Andy John. The formula cleverly emphasizes that if the Core Product Value doesn’t exist, even the greatest traffic or the best emotional response won’t lead to growth that is sustainable.
This simple growth equation can be a remarkable tool for analyzing growth. It not only helps identify where best to direct your resources, while also aiding in managing your overall efforts to maintain sustainable growth.
The end goal is to convert strangers into promoters, as shown in the Pirate Metrics diagram above. With this in mind, it’s important to consider how users transition from one role to the other as they gain awareness of your product and brand before eventually deciding to trust you with their money.
During the customer acquisition and activation phase, typical growth measurement metrics include signups, follows, likes, and shares. While these do give you an early indication about projected traffic and conversion rates from the various channels, these are only vanity metrics, and, in most cases, do not impact the bottom line of the business too much.
Similarly, the term ‘Active Users’ must be carefully defined depending on your specific business model. If Facebook, for instance, measured anyone with an account who spent more than a minute on the platform as an Active User, that would work in their favor. For a business that relies on users spending money on the platform, not so much.
SnapEx’s current company-wide top-line approach, our primary Acquisition and Activation channel have been mostly KOL engagement. A large portion of the marketing expenditure and effort is spent directly on our network of KOLs in various Managed, and Non-Managed countries.
Through small-scale studies, we are also looking into incorporating other strategies to aid in our expansion, such as social media, email, and content marketing, as well as search engine optimization methods.
Like all other inbound marketing strategies, a reasonable plan should be put forward before any engagement takes place. For Non-managed or Developing countries, the initial setup or AB testing is crucial in obtaining valuable insights during the early seeding stages of a new market.
This could include various considerations, such as the presence of other existing competitors, customer demographic information, familiarity with similar products, and the economic situation of the country
Key Considerations
When building customer acquisition and activation models, it’s also important to consider the determination process for new customers, conversion rates through the various channels, as well as customer segmentation for quality distribution.
A good understanding of your business is paramount to accurately determining what parameters are suitable as success metrics. As with the Active Users example above, this will vary based on your business and business model. But in general, it’s always a good idea to have a clear definition of customer acquisition cost and cost per activated user (CAC and CPA).
We’ve also used the formula derived by Brain Balfour (ex-VP Growth at Hubspot) to define our CPA and CAC. Here, customer acquisition cost equates to the cost to acquire users that deposit and trade on the platform, while the CPA encapsulates the cost to acquire new users, getting them to trade using a demo account, and engaging with us on social media.
Due to gaps in the specific data set and limitations of the current system in tracing acquisition path at the customer level, we are still having difficulties trying to trace the user’s journey from lead generation to the final lead conversion.
Instead, we have reverse-engineered the process and assumed that money spent on marketing is directly proportional to users acquired through various channels. Once data tracking becomes more accessible, we will incorporate actual acquisition numbers metrics to further refine the current model.
From these definitions, we can infer that CPA measurements only affect vanity metrics. Therefore, to simplify things, we have omitted CPA computations from our model. However, there are additional parameters that can be included in the CAC calculation, and what those are will largely be case-specific.
It’s important to note that CPA and CAC expenses increase based on the performance of each channel at every level of the funnel. Understanding the direct or indirect influences from A/B testing can help to optimize your decision and future CPA and CAC calculations.
And with this, our customer acquisition cost calculation becomes rather straightforward.
The end goal is to create a growth framework or template based on this equation. Tailoring to case-specific requirements will bring out the best results, and understanding how to tinker with the framework to produce valuable and actionable insights is key to a company’s growth.
The equation can be as simple or complex as needed. Whether you include each and every metric or rely on just one (say, trading volume) to quantify growth, ensure you’re well aware of its capabilities in terms of what it can tell you, and how that information can be applied.
What’s Next?
The journey of a customer from being acquired to promoting your business is a long and arduous one. Care must be taken at every step to ensure the most number of customers are taken forward to the next stage.
Though the entire process relies on the first step, customer acquisition, there is hardly any economic benefit to the company from stopping at this stage. In fact, customer retention is one of the most important segments of our growth framework.
Customer retention not only increases each user’s individual lifetime value, which boosts revenue, it also helps build strong, trust-based relationships with customers. Additionally, it measures how good a company is at attracting new customers, as well as how well they are satisfying existing ones.
That being said, the absolute lifetime value of each and every user is also dependent on the target market. The quality of our users varies based on all kinds of parameters. For example, if your target markets are in different countries, you would essentially need a different funnel for each country.
In the next article, we’ll explore customer retention and the strategies we employ at SnapEx in that regard.