

Conversion Optimization in Practice: Baconbiz 2013 Presentation - sethev
http://www.kalzumeus.com/2014/05/12/conversion-optimization-in-practice-baconbiz-2013-presentation/

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napoleond
'patio11 if you're reading this (or anyone else who knows): What does the
"Fundamental SaaS Equation" equate to? I mean, it's obviously some measure of
the "expected value" of traffic over a period... is it the "expected LTV" for
a group of traffic? ie. is ARPU/churn == LTV ? (Possibly as a consequence of
the infinite series implied by churn...?)

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patio11
It's revenue, summed over any space of interest. (Months of life, sources of
acquisition, account types, etc.)

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napoleond
Thanks for replying! That's what you said in the talk, too, but I don't see
how it can be true unless I've misunderstood what "traffic" and "conversion
rate" mean in this context:

 _website traffic this month x conversion rate from website = # of new users
this month_

 _# of new users this month x ARPU = revenue from new users this month_

So if my churn is 5% then the fundamental SaaS equation would be equal to "20x
revenue from new users this month" but that doesn't seem to factor in the
existing user base at all (ie. a company with a user base which is 100x "# of
new users" would see drastically different revenue that month than a company
in their first or second month). Unless you're suggesting that, accounting-
wise, LTV for a user should be counted as a receivable as soon as they sign
up, but I doubt that's what you're saying.

Sorry for dragging on an old thread--if you'd prefer to continue via email
it's in my profile. TIA for your time :)

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patio11
You don't book LTV as receivables for accounting purposes, but you can plan
consequential features of the business around it, like e.g. customer
acquisition costs or future hiring plans.

e.g. Hypothetically assume that Appointment Reminder is currently operating at
a happy place for me but doesn't have room for an employee. If I onboard 20
new paying accounts, each at a monthly price of $200 and a predicted churn
rate (based on existing data) of 5% monthly, my prediction is that the
business added $80k in LTV this month. This is high enough to justify adding a
full-time employee.

The only place that will show on the books in the first month is as $4k of
earned revenue, but we know the true state of the business is better than one
would expect from just that data point. (The assumption in hiring a FTE, by
the way, is that after one $80k month you continue to have other months that
add at least around that much to LTV. Assuming that happens, and you can solve
the cashflow issues in months 1 to 3, then you can certainly pay for that
employee in an ongoing fashion.)

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napoleond
Very helpful, thanks Patrick.

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lukethomas
I love this presentation. One thing to consider (slide 22) is the first step
of the homepage acquisition funnel.

I have a feeling that the trial conversion is actually better than depicted.
It might be worth checking to see if this "viewed page" event is including
people who have already created an account, and are simply visiting the
homepage to log-in.

I had the same problem with Mixpanel and wrote about it:

[http://lukethomas.com/accurate-acquisition-funnels-
mixpanel/](http://lukethomas.com/accurate-acquisition-funnels-mixpanel/)

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gk1
Regardless of what analytics service you use, SaaS sites should--at the very
least--be segmenting guests and users. Your users behave _very_ differently on
your site compared to your guests (non-users).

If you're not segmenting analytics data by visitor type, then your metrics--
conversion rate being just one of them--represent _neither_ guests nor users.
In fact, they're useless.

(If anyone needs help setting this up using Google Analytics, shoot me an
email.)

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gk1
Anyone else having issues with the video player? Every time I enter or exit
fullscreen, it does odd things like skip ahead, rewind back, get stuck on a
single frame, or (my favorite) start playing an entirely different video!

I'm on Chrome 34.0.1847.131 m (Win), FWIW.

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napoleond
I had similar issues in Safari 7.0.3 FWIW

