Setting growth targets
November 2019
… is hard. Especially if you’re looking to base compensation on them.
Let’s look at three options, each with its own caveats, concerns, and fine print. Then let’s see if we can arrive at a healthy combination that can’t be gamed, avoids the Cobra Effect, and isn’t insanely hard to think about.
Target: Conversion rate
Problem: Too broad, and it can be gamed
Imagine your product is featured in a reddit post that goes weirdly viral. You’ll get a ginormous influx of social / referral traffic, but they’re mostly not coming to buy. Your conversion rate goes down, even if sales are up.
Not to mention the fact that you can raise your conversion rates by cutting your prices drastically. You’ll hit your target! And promptly go out of business.
Target: Organic conversion rate
Problem: Vulnerable to the vagaries of the media, too limited
Imagine your product is mentioned in a magazine or TV show. Not a bad thing! But as with the viral reddit post, you’ll get tons of less qualified traffic, driving down the organic conversion rate.
Even barring major offline publicity, this target has its problems. A gain in organic conversion rate is a Good Thing, period … but there are other good things, and they’re important too.
Specifically, if you focus only on organic traffic, you’re not incentivized to experiment with, and find, profitable new acquisition channels 😔
Target: Revenue
Problem: Not necessarily influenced by your growth efforts
More revenue, like a higher organic conversion rate, is a Good Thing. But how’d you earn it?
If a new affiliate marketer is totally killing it, that’s great! But it shouldn’t earn you a growth hacking trophy.
The same goes for the effects of seasonality, or shifts in the market. (Say, when a competitor goes out of business.)
It’s also possible that you can do amazing work but fall short of your revenue target due to a decrease in traffic. Tragic.
Ok so what do you do?
The best route is to combine multiple targets, and err on the side of celebration.
Have a site conversion rate goal, an organic conversion rate goal, and a revenue goal.
If you hit all three, throw a gigantic party. (And verify that your efforts really did contribute to your success.)
If you hit just one or two, throw a big party … and figure out what happened with the other metric(s). Once you reach an answer, you can update those targets and keep on growing.
How about you? Have you ever been burned by one of these targets, or another one entirely? Hit Reply and tell me all about it; the healing begins here.