By Vinod Kumar
Analytics frameworks can help you organize your data to give you a better understanding of how your digital commerce business is functioning. In this post, we’ll take a look at Pirate Metrics as one framework to consider for interpreting your data.
Pirate Metrics, a term coined by venture capitalist Dave McClure, gets its name from the acronym of for 5 distinct elements of building a successful commerce business: AARRR. McClure categorizes the metrics you need to monitor into 5 categories:
Though this framework was originally modeled to measure and report on the growth of a SaaS start-up, there are many parallels between this framework’s core premise and a digital commerce business. Self-service consumer-oriented SaaS products (e.g., Evernote, Wunderlist, Tweetdeck) heavily rely on user acquisition and retention to grow their business, similar to a digital commerce business. As a result, this framework can be easily repurposed to measure digital commerce health.
To do so effectively, assemble a dashboard (perhaps with a Geckoboard style dashboarding tool, in a spreadsheet or in Google Analytics) with metrics organized into each category used in this framework. Within the dashboard, align your metrics with each stage of the framework to look for correlation between the various phases of a shopper’s lifecycle.
In the chart above, I highlight some examples of raw metrics that are relevant to a digital commerce business at each stage of the shopper journey in the Pirate Metrics framework. I also include a sample list of derived metrics, which are performance indicators typically calculated and reported.
The importance of seeing both side-by-side ensures you can effectively track the raw metrics to be able to report on derived ones. For example, at the risk of gross simplification, ‘Churn’ is the inverse of net new customers, which is derived by subtracting the difference between newly acquired customers and customers lost. You will not be able to calculate this derived metric unless you are tracking both acquired and lost customers.
Next we will look at a framework that closely mimics a shopper’s lifecycle, the ABC Framework.