I’m the CEO of Bunny Inc., but I also work as product manager of one of our products: VoiceBunny and one of my responsibilities is to determine the effectiveness of our acquisition channels. There is a big challenge to this: How do you fairly compare the channels to each other?
Two common tools are Google Analytics and Kissmetrics, however, they don’t properly measure some very important acquisition channels. First, and foremost, they don’t measure word of mouth, arguably, the most important acquisition channel for many companies. Additionally, when a user types your brand name into a search engine and clicks the link, these tools attribute the acquisition to SEO, even though these users probably learned about your company in some other way; for example, via a press article.
Another tool used by some is sign up surveys. When users sign up, they are asked how they learned about the product using a drop down menu. Unfortunately, many times, visitors will pick any answer from the menu in order to quickly continue with the registration. This gathers a significant amount of false data. Additionally, the results will be biased by the list provided. You may actually have more acquisition channels than you think, but if users don't see them in the list, they won’t ever get the credit they deserve.
What to do, then? Here is the solution we have been successfully running: After our visitors register and continue using our site, we ask them this open-ended question: "How did you learn about us?” We have learned a lot of information this way and have been be able to compare apples to apples.
Here's a step-by-step guide to this process:
- Using a tool like Qualaroo or doing some basic hacking, show all registered users of your site the following question: "how did you learn about us?” Next to it, show an open field for them to submit the answer. As a reference, around 20% of VoiceBunny clients answer this question.
- Every month, you'll have to manually check the answers and “normalize them” in a new column in your database. For example, if the user wrote “Google,” you then type in the new column the code “SEM”. Sounds time consuming, right? Don’t worry. It takes less than three seconds to process each answer. Here is a list of some answers I’ve seen and the codes I like to use:
- “Google," “Internet search," “Yahoo!” For all of these, I use the code “SEM."
- “Techcrunch," “New York Times," etc. For all of these, I use the code “PR” (for Press Relations).
- “Friend”, “Coworker”, “John Doe," etc. For all of these, I use the code “WOM” (for Word of Mouth).
- “AdTech Conference,” “Games Developers Conference,” etc. For all of these, I use the code “CON” (for Conferences).
- “Email from you," “You called me," etc. For all of these, I use the code “OUT” (for Outside Sales).
- Query your database to determine how much revenue you have gotten from all users that answered the survey and compare the result to total revenue.
- For example, if your monthly revenue was $5,000,000, and $1,000,000 came from users that answered the survey, then your ratio of revenue from user that answered the survey to total revenue is 5x.
- Query your normalized database to find how much revenue each channel brought. Compare it to the revenue from all users that answered the survey to find its percentage.
- For example, the revenue from users that answered the survey and belong to the channel code “PR” is $45,000. Since the revenue from all users that answered the survey is $1,000,000, then the revenue from the PR acquisition channel was 4.5%.
- Then, extrapolate the data and compare all channels.
- For example, if 4.5% of the revenue from users that answered the survey came from the PR channel, you can assume that 4.5% of all revenue came from that channel as well. In our example, the total attribute revenue for PR would be $45,000 x 5. That means: $225,000.
- Be surprised!
We started running this survey eight months ago. The first month we ran a report we found that only three out of the 10+ channels we were investing time and money on were seriously working (sorry, I can’t publicly tell you which ones as that information is strategy for us at the moment). They accounted for 94% of our user acquisitions. The other channels, including press relations, were almost irrelevant. We also discovered that there were some power users referring tons of new clients to us. We have since reached out to them to maximize our positive relationships with them.
There is one drawback, though: Most users don’t differentiate between SEO and PPC when answering the survey. As such, this method will mashup both SEO and PPC together.
The benefits, however, are great. Now, we can fairly compare all of our acquisition channels and properly measure their ROI. You can even determine the lifetime value for each channel. When I mentor other entrepreneurs, this has become the most common technique I share with them. I hope you enjoy and find it useful as well.
Questions, ideas? Please let me know.