Will you marry me? Why engagement is the key to maximizing LTV (Lifetime Value)

Presented by: Brent Chudoba, SurveyMonkey FirstMark Online Marketing Summit October 23, 2013

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• VP, GM of SurveyMonkey Audience

• @SurveyMonkey since Apr. ’09 • Schoology BoD member

@bchudoba brentchudoba.com in/brentchudoba

Hi, I’m Brent

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•  If there was one metric I could increase, at every company where I am an equity holder, it would be engagement

• Engaged users: -  Convert at higher rates -  Stick around longer

•  Because they are getting value •  Because they develop higher switching costs

-  Tell you about their needs -  Tell others about your product

Conversion & engagement optimization

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•  Pure conversion optimization strategies and tactics are incredibly useful, and well defined -  Quick to test and simpler to measure -  There is often a ceiling on tactical conversion gains

•  You don’t typically use conversion to drive engagement •  But you always use engagement to:

-  Increase conversion -  Increase ARPU (average revenue per user) -  Increase retention

•  And I want to show you why introducing engagement metrics can drive outsized gains

Presentation goal

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• Provide you with some useful examples and ways to measure and factor engagement into your product, marketing and business intelligence roadmap

Engagement philosophy

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•  If customers get value from your product they will pay you, stick around and grow -  If they don’t, they’ll eventually leave

•  Engagement is a tool to get users across a set of customer success milestones that translate to value -  If a SurveyMonkey customer sends out surveys every year

and gets enough responses to help them make better decisions, they are getting value. How do I help get them to that point?

Conversion optimization example

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8

2008

9

2013

Tactical Improvements •  “Most Popular” badge •  Above the fold, simple

feature call outs •  Highlight key package

differences •  Feature differentiation by

package •  Tiered package naming •  Simple CTAs •  Comparable monthly

pricing shown

Why does engagement matter?

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An engaged user is more likely to convert to a paid user, increase their spend over time, and less likely to cancel their usage of your product than an inactive, unengaged user.

• Do you agree or disagree w/ the statement above?

So, engagement matters

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But, how can we quantify how much engagement matters?

And, how can we impact it?

Quantifying engagement benefits

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•  An example shows highly engaged users convert at 4x the rate of less engaged users -  Essentially all highly engaged users convert

•  Heat map of conversion rates by engagement level:

More

LessLess More

#  of  Surveys  Deployed

#  of  Respo

nses  Collected

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•  Introducing more features and use cases for products creates additional value

•  For SurveyMonkey customers who sign up for a paid account, every additional paid feature they use results in a drop in their churn rate

1 M

onth

Chu

rn R

ate

Number of Paid Features Used in First Month

High

Zero Zero Many

How do you drive engagement?

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Driving engagement

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• How do you integrate engagement campaigns into your metrics and roadmap? -  Identify: figure out what defines an “engaged” user - Optimize: increase the % of users that “engage” -  Activate: cherry pick top prospects and help them

succeed

Identify

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What are your engagement milestones?

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• Start at the end - When has a customer gotten value from your

product? • Now figure out how they got there

- What are the critical actions that customers go through to reach a full engagement milestone?

Finding your end point

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• When does your customer… -  Login, smile and say, “Wow, this is

awesome. This just saved me a ton of time. This product was worth every penny, and I might even +1 or Like this company and tell a few colleagues how great this is. Yes SMB SaaS product, yes I will marry you!”

Engagement variants

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• Singular Objective Success Point -  1 main use case, or 1 main user type -  “Success” looks similar for nearly all users -  Ex: Nearly all SurveyMonkey users are trying to

create a survey and get responses • Variable Objective Success Points

- Multiple user types, varied “success” definitions -  Ex: Schoology (students, teachers, administrators,

parents) all have different “success” definitions

Example: SurveyMonkey engagement funnel

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• What does it take for a user to engage? • We identified that sending out a survey and

getting responses was when a user derived value from our product - We decided that more than just a few test responses

was important • And then we worked through the experience to

figure out how they got there

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• Sign up for an account

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• Create a survey

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• Add a question

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• Begin collecting responses

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• Gather responses

Whoa! Awesome. I had no idea over 80% of my team had smart phones

Optimize

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Establish baselines, measure results

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•  A metrics driven product agenda starts w/ a baseline understanding of the status quo

•  Then tests w/ various experiments to see where it can drive measurable impact

•  Lather, rinse, repeat

% o

f New

Use

rs

Time

Reach Engagement Stage 1

Reach Engagement Stage 2

Reach Engagement Stage 3

Reach Engagement Stage 4

Con

vers

ion

Rat

e

Time

Conversion Rate

Something worked here

What works?

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• Long term engagement wins are rarely easy • Engagement needs to be a success metric that is

factored in to product and marketing goals • Features designed with engagement in mind can

increase engagement

Engaging onboarding experiences

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•  Are designed to get users through the engagement process •  Checklists, gaming elements like profile strength are useful for both users

and your business intelligence

Engagement shortcuts don’t exist

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• There aren’t nearly as many tactics to better engage users as there are to convert them

• You need to earn your engagement, shortcuts lead to red herrings that don’t materialize in conversion

Activate

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Are all users created equal?

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• We all know, the answer is no • There are big fish swimming in your pond, and

with the right engagement strategy, they will be massive customers

Do you optimize for big fish? Or all fish?

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• Your best customers might be worth 10x your average customer

• Are you activating your 10x’rs to make sure they stick around?

How much are your best customers worth?

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• Certain models necessitate cherry picking top customers to ensure engagement

•  If 10% of your customers have the potential to drive 10x+ annual revenue value, you can replicate (or exceed) subscription economics

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•  SurveyMonkey Audience customers transact differently than monthly subscription customers

•  They buy projects, so some of them don’t come back •  But those who do, are incredibly valuable

1 2 3 4 5 6 7 8 9 10 11 12

Cum

ulat

ive

Rev

enue

Month

Avg. Year 1 Revenue from Repeat Customers

Avg. Year 1 Revenue from ALL Customers

* Actual numbers are confidential, this chart is intended to show the relative impact * Repeat customers includes any customer that purchased in month 1 and any successive month •  `

How do you activate your best customers?

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• The million, or maybe billion $ question • Engagement for 10xrs has even bigger

implications -  Special programs to ensure they move through the

engagement funnel are critical -  Resourcing to ensure customers w/ $20k+ potential

are successful will often pay huge dividends -  And the knowledge of what success means is critical

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Thank you!

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Acknowledgements •  The SurveyMonkey Business Intelligence team provided all the important

data for this report •  They provide all the data and insights that help SurveyMonkey make great

decisions, and they are abnormally cool people, which means we get to have quite a bit of fun while we are at it

•  Thank you BI, you rock