End of funnel revenue has a 25x potential impact when using cross-selling optimization
AAARRR Pirate Funnel — Revenue
35% of optimization efforts are focused to yield 51- 100% when it comes to revenue
Upselling increases the revenue by 10 to 30% on average and 70–95% of revenue comes from upsells and renewals on average — SUMO
Why should customers pay for your service? — Revenue is the last Pirate Metric in the AAARRR conversion funnel. One of the most vital measures in the revenue phase is the customer lifetime value. The measure indicates the total revenue generated by a customer over their lifetime. Calculate the customer lifetime value like this:
Customer lifetime value = Average revenue per customer * (1/churn rate)
Understanding this enables very powerful strategic revenue decisions. Everything from what to segment and behavioral patterns.
Finding the optimal customer segments is the main goal. Although you will address several segments, not all will perform very well. Identifying those segments is the primary goal of using data to make revenue decisions. At the core of this is behavioral data that trigger decisions. Decisions like when, where, and how to place a purchase, and to continue to use the service. There are three primary measures to trigger decisions:
- How many customers become paying customers?
- What is the average order value per customer?
- How many repeated customers do I have and how often do they order?
This is an ideal high-level behavioral pattern to use to segment customers into the most optimal groups to target.
Focus on quality revenue, which is knowing who are your best customers and who not also pay for your services but continue to retain your services.
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ABOUT — Growth Thinking
Growth Thinking is a design methodology for growth hacking by the bestselling author of Ready Set Growth Hack, Nader Sabry. It has been applied as a book and a $1 million challenge known as the 10-day growth hacking challenge, which has generated $138m in revenue. This methodology has been adopted by universities like Harvard and Stanford, fortune 500s (Google/Microsoft), and unicorns.