My friend, David Vandegrift (Associate at Pritzker Group Venture Capital), just co-wrote a couple articles on SaaS metrics that he and his VC colleagues pay close attention to – Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV).
They highlight the importance of CAC and LTV, specifically, as VCs are looking for sustainable businesses that have shown good handles on burn rate and revenue economics. Gone are the days of “easy millions” for startups with just traction. VCs are wary of bubbles and downturns, and thus, are watching for investments that can weather storms.
CAC and LTV are great metrics to have good handles on, but can be difficult for early stage companies, as noted by the authors. Specifically, lifetimes of customers can be quite short while CAC can be hard to measure as companies iterate their acquisition strategies.
One metric I assess that is less focused on economics is engagement/ retention (i.e. D1, D7, D30). Engagement is a hugely telling figure, especially for early-stage companies. Engagement helps identify the stickiness and value of a product while also providing great insight into features and usage which can help determine direction.
Following engagement, I evaluate churn. Churn is inherently included in LTV, but can be more operational and easier to gauge for customers. I like to review churn, especially, because it measures the value of a product/ service with existing users. It can also underline a “hole in the bucket” issue where strategies to drive new customers can be for naught if existing customers continually exit.
Check out David and Sonia’s post to learn more about CAC and LTV. Then, check out four other metrics (in addition to the two I listed) that are key to success – “8 Metrics from Proper Instrumentation of a Business and Its Product”.

I received a question in response to last week’s post on Customer Discovery Surveys.

@TheDLu What’s your thought on split of digital vs verbal? There’s a LOT of value in in-person, but difficult to scale
— David Vandegrift (@DavidVandegrift) July 3, 2015

Fantastic question. My response:

@DavidVandegrift Great question! One I should tackle the next post, but in short, I’d say, “It depends”. #consultantAnswer. It’s about…

— Daryl Lu (@TheDLu) July 3, 2015

Digital surveys (SurveyMonkey, Google Apps, etc.) can be easily scaled and sent to a wide-range of audiences. Whereas, verbal surveys can be time intensive and expensive to scale – scheduling, logistics, etc.

As Don Pottinger, CTO of Kevy, points out, however: “[actual] conversations tend to go unexpected places and reap unexpected insights…something that is harder to do [with] digital.”

Assuming you get in front of the audience, thoughts on digital vs. verbal:

  • Depends on Phase of Customer Discovery. At the beginning, verbal is the quickest way to test and modify an initial hypothesis. As the pain-point and solutions become clearer, you may switch to digital for scale. Then, switching back to heavier verbal during solution build.
  • Consider who you are asking and your relationship. Do you know the audience or have the clout to motivate someone to take a digital survey? Or would verbal develop the relationship to get results? 
  • What’s the value of your offering? The higher the price of your offering, the more critical and appropriate it is for verbal communication. This is simply as sales cycles can be lengthy; thus, more involvement is required to foster trust and development.
Surveys are great direction tools, but not the end-all be-all. Mike Bivone (currently of Juice Analytics) recalls from his startups, “people often tell you one thing but behave completely differently.” At Body Boss, we built features given input from coaches that they would buy if said features were built. However, when we did build those features, coaches didn’t buy. Instead, we should have built lightweight versions and tested with prospects before full development.

Customer Surveys are another directional tool in your arsenal, but you never know till you make moves.

How do you mix verbal and digital customer discovery surveys? What are some tools and methods you’ve used to do customer discovery? How much do you trust survey results?