On April 7, M13 partners hosted virtual office hours to discuss some of the most pressing challenges facing startup leaders today. As former founders and operators, our partners have successfully navigated periods of economic downturn, and wanted to share strategic approaches to finance, talent, data, digital marketing, and more.
Our Partner and Head of Data Strategy Rob Olson discussed how founders can use data to gain important insights into their businesses during an economic downturns. Read Rob’s insights below, and scroll to the end of the post to watch his office hours.
How should founders use data to inform the changes their businesses are experiencing now?
It’s no surprise that your historical data is likely less reliable now, so it’s more important than ever to identify the difference between fundamental changes and short-term nuances that are impacting how customers are using your products now.
Spend time focusing inward, and think about the core metrics that are really driving your business model. Think about the different customer segments and products within, and determine the aspects of your data that are evergreen versus those most likely to be impacted by crises. Focusing on what you have control over will help you determine the areas that are more flexible. This may enable you to pull the appropriate levers in order to drive sales.
How can founders gather insights on their businesses quickly?
You really need to zoom in during this time. It’s no longer about monthly cohorts. You need to be thinking in daily or weekly cohorts, and comparing the early behavior of your customers during crisis to those in the pre-crisis world.
You can do this by tracing individual customers across every different data sets that you have. With this information, build a narrative about what’s happening in those first few hours, days, and weeks of your customer base.
What source drove them to your site?
What pages or content did they view once they landed?
What questions did they ask your support team?
Start to question and drill down into that story. Is the anecdotal evidence you’re gathering following your assumptions? Are your customers behaving as you believed they would prior to the crisis? Are you finding interesting insights or unusual behaviors that are happening for the first time?
Make sure you understand what your customers traditionally do in their first session, before and after their first purchase, and during their first week of activity. Then compare apples to apples by looking at what early customer behavior looks like now versus what it looked like before the economic crisis. From there, you can start to quickly understand which levers to pull in order to drive business.
What are some of the KPIs that founding teams should focus on now?
There are businesses on all ends of the spectrum right now—those that are able to accelerate growth and those that have had to massively pause or operate without new revenue streams.
If you can’t grow your user base now, it’s really important to look into the behaviors that have historically drawn your most successful customers.
If you’re a recurring-revenue business, think about the different types of behaviors that lead to and then continue to sustain your super users. What are the profiles and data points for your top 10%-20% of customers?
Learn whether it’s upsell revenue, referral revenue, or just higher levels of engagement from those top users that are going to sustain your business while can't bring in new customers.
Identify your ‘super users’—the top 10%-20% of your customer base and use data to understand their behavior. For example, how did they land on your website, the pages they visit, the questions they ask your support team. This insight can lead to strategies that will sustain your business when you’re unable to bring in new customers.
Focus on the acquisition channels that have a higher cost per acquisition but help attract your ‘super users’ versus the lower quality, lower spend channels.
What’s the best way for founders to access these insights?
It depends on the scale of your business and how complex it is from a data perspective. If you’re using off-the-shelf tools, you’ll have access to high-level numbers. But at the end of the day, drilling down to a single customer and looking at all of the data points that are generating as they progress through your funnels will yield a lot of insight.
Drilling down to smaller scale data will help uncover changes in customer behavior during a period of uncertainty.
So again, drilling down is key. This could mean pulling exports of your raw data and looking at them customer by customer, or looking at your top decile customers across different attributes that can signal odd behavior. When you do find odd behavior, like customers who have checked out hundreds of SKUs instead of the traditional four, don’t be afraid to reach out to them in an effort to understand why they're doing this. Armed with this information, you could create sales.