Experiment prioritization for Product Growth
Spoiler alert: It still starts with the goal.
I’m often asked this question: where do you start, and how do you prioritize which experiments to run?
My answer is: Well, it depends on what metric you are trying to optimize for. I still get blank stares when I say this, so let’s dive deep into what this means.
As a Growth PM, you are in a unique situation where you primarily try to optimize for the business metrics by optimizing the value delivered to the user in-app. In SaaS businesses, you are often trying to optimize the overarching goal of increasing Net Revenue Retention (NRR).
𝗡𝗥𝗥 is defined as:
Another very commonly used term is increasing Average Revenue per Account or 𝗔𝗥𝗣𝗔.
In B2B SaaS businesses, these definitions basically target increasing monthly recurring revenue, expansion revenue, and reducing downgrades and churn.
There are numerous ways you can increase MRR. What you prioritize depends on what metrics are a business priority or those that could be performing worse.
𝗠𝗥𝗥 can be increased by:
1. Increasing free to paid conversion
2. Increasing more paid conversion
3. Increasing expansion revenue (upsells and cross-sells)
4. Better pricing models and packaging
5. Reducing downgrades
6. Reducing churn
When times are good, companies generally focus more on price increases and acquisition, whereas when times are conservative, companies focus more on maintaining customer retention and driving adoption.
Once you’ve prioritized a 𝗴𝗼𝗮𝗹 to improve, you can explore multiple tactics or bets, which may or may not be an experiment. At any given point, you want to implement a portfolio of bets to diversify risk and maximize return in the same period. Always have a larger bet peppered with multiple smaller experiments.
For example, I’ve listed some 𝘁𝗮𝗰𝘁𝗶𝗰𝘀 that can be explored under each area, but there can be many more depending on your product and the goal. In some cases, a deeper impact assessment or revenue forecast might be valuable depending on the size of the bet and the revenue target. This is just a starting point.
I hope this helps provide some structure to thinking about experimentation and prioritization.
#growth #plg #productmanagement #startups