Using Data to Inform Key Business Decisions During Crises
On Tuesday, April 7th, M13 partners hosted virtual office hours to discuss pressing challenges facing startup leaders today. As former founders and operators, our partners have successfully navigated periods of economic downturn, and have been sharing 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 on their businesses amid an uncertain climate. 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 during this time?
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 consuming your products during this period of time.
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, that may enable you to pull levers in order to drive impact.
How can founders gather insights on their businesses faster?
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 signals of your customers during crisis to those in the pre-crisis world.
You can do this by tracing individual customers across all of the different data sets that you have; 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 push on that story. Is the anecdotal evidence you’re gathering following your assumptions? Are your customers behaving as you believed they should prior to the crisis? Are you finding interesting insights or odd 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 about what that customer in that early behavior looks like now versus what it looked like before. From there, you can start to quickly understand which levers to pull that will drive impact.
What are some of the KPIs that you’re advising founding teams to focus on now? Has there been a shift in which ones to focus on?
There are businesses on all ends of the spectrum right now — those that are able to opportunistically accelerate growth, and those that have had to massively pause or have no new revenue streams.
If you can’t grow your user base now, it’s really important to look into the behaviors that were historically driving 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 really like for your top 10-20% of customers? Gain that understanding, and really derive whether it’s upsell revenue, referral revenue, or just higher levels of engagement from those top users that are going to help sustain your business while you may not be able to bring in any new customers.
“Identify your ‘super users’ – the top 10-20% of your customer base – and use data to understand their behavior, for example, how they landed on your website, the pages they visit, the questions they ask your support team. These answers can help sustain your business while you’re unable to bring in new customers.” – Rob Olson
On the flip side, if you are able to accelerate the business in this climate, think about how you double down on acquisition channels that may have a higher cost per acquisition but tend to drive those super users. This tactic can ultimately pay dividends in the ways that your super users can drive a network effect or referral effect for your business.
“Focus on the acquisition channels that have a higher cost per acquisition but help drive your ‘super users’ versus the lower quality, lower spend channels.” – Rob Olson
What’s the most optimal 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.
“Distilling down to smaller scale data will help uncover changes in customer behavior during a period of uncertainty.” – Rob Olson
Businesses that have expensive BI software set up to track their metrics run the risk of glossing over and not honing in on some of the underlying behavioral changes that are going to take a few months to appear in the top line numbers.
So again, distilling 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 start to signal odd behavior. When you do find that odd behavior — for example, customers usually check out with four SKUs but these customers have checked out with hundreds of SKUs, don’t be afraid to reach out to them in an effort to understand what they’re doing and understand how you might be able to act on that information.