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Tag: saas

How Sticky Growth Models Work

by Santosh

What really matters is not the raw numbers or vanity metrics but the direction and degree of progress. – Eric Ries, ‘The Lean Startup’.

Most online services can be cast as having a sticky engine of growth. At it’s heart is the question – “Is the experience rewarding enough for new users to return?”. A model built around this question can help you determine the direction and degree of progress for eCommerce services, creative communities, Saa’Services and many more business models.

Three measures come together in this model – Retention Rate, New Customer Rate and Growth Rate. Each measure has it’s own story to tell. If you’ve read ‘The Lean Startup’, you’ll also learn that the model can reveal if your venture has figured out how to leap forward consistently.

With this honest a metric at hand, you won’t lose your way. I’ve found the model handy in most of the projects that I’ve worked on. Below is an interpretation of the model and how the three measures are derived.

Sticky Growth Model (Image)

With the model above,

1. Retention rate: “Customers Retained in Current Period” by “Total Customers”.

2. New Customer Rate: “New Customers” by “Total Customers”.

3. Churn Rate: “Customers you failed to retain” by “Total Customers”.

4. Growth: is the difference “New Customer Rate” – “Churn Rate”.

5. Total Customers: coming into a period are the Customers Retained in the previous period and New Customers you will engage in the current period.

Key scenarios shown in the test sheet (Google Docs Worksheet) that will help you grasp how the model works,

* When Retention Rate is 100%, Churn Rate is zero.

* When New Customers Added = Customers Retained in the same period, Growth is 100%.

* When Retention Rate is zero, Growth is negative for that period.

* When New Customers Added is zero, Growth is less than or equal to zero depending on the Churn Rate.

Thanks to Mitesh Bohra, CEO at Savetime.com for lending his time to whet iterations of the model. Do leave your feedback in the comments, especially if you have a different interpretation to share.

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3 Innovations in Payment Technology

by Santosh

Payment technologies are at the heart of the Internet economy. From the consumer’s perspective, the simpler you make it for me to pay, the more likelier I am to open up my wallet. Ever since Paypal and Amazon’s one-click checkout, there have been several innovations (or iterations) on the idea of making payments.

In India, Indian consumers are used to cash-on-delivery, pulling out a credit card, or logging into their net banking accounts to make a payment online, here’s a different take on how US consumers are paying up.

Amazon Global Payments. Amazon get the importance of simplifying payments online. Their first attempt at solving this problems is to offer a global payment system that allows you to accept payments securely in any currency wherever in the world the end-user might be.

Their approach also exposes an interesting payment gateway feature – an escrow service to app developers. It’s a  simple and old idea, payments are ‘held’ by the provider until a set of conditions are met. Only when the conditions are met is the payment credited to the merchant. The idea has been around for decades but has only recently been exploited by an innovative business called Kickstarter. On Kickstarter the average consumer can donate $5 and upwards for a project that he would like to fund to completion. Project owners only receive the money after they’re minimum required funding amount is achieved. In the middle of all this, Amazon is responsible for holding the money, and refunding it back to the donors if the project requirements are not met. With this technology, Kickstarter is able to ensure that the best projects get the money they deserve and efficiently utilize the resources of the community.

Square. So maybe you aren’t an Amazon, or maybe you believe that only Amazon can change how payments are made. Square is the one startup on this list with a grand vision based on a single innovation.

Square.com

Accept credit cards with your mobile.

Square’s technology makes it possible to turn any smart-phone into a credit card swiping machine. Sound’s obvious right? All you need to do is jack in this small magnetic strip reader into your 3.5mm earphone jack on your phone.

Now consider this – with Android, you can have the Square app installed on a smart phone that costs you less than Rs. 8,000 (or ~$200). Once you are setup, you can accept payments wherever you may be. Still think this is small? Square recently received $100Mn investment, which I think will be used to go global.Their competitors include Intuit who realized, if only a little too late, the impact this could have on small and medium sized businesses across the world.

So any bets on when cash-on-delivery will change to card-me-on-delivery?

Bill Me Later is another single-innovation based service that enables a post-paid billing option for customers. While I would like to try this out myself, I am not a stranger to the idea of ‘book me now, but pay later’. It can be especially powerful if you consumers to purchase from their mobiles, or in a public place without having to pull out a credit card and go through the works of filling out 4 fields.

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