The second Red Gate million dollar challenge | Hacker News Reader

The second Red Gate million dollar challenge

blog.businessofsoftware.org

32 pointsdawson9 comments

I found the requirement of conversion rate of 10% quite funny. The conversion rate is never an absolute metric to worry about. It depends on so many different variables: product type, intended usage, sales and marketing effort, etc.

In fact, you can artificially push up this number by having a team of sales people profiling potential customers and then persuading users to try out the product. Even though this will result in a large cost of customer acquisition (remember: you have actively persuaded potential customers), conversion rate will be much higher than 10%. On the other hand if you are relying on SEO and get lots of passive and active interest in the product, your conversion rate will be much lower. (But you paid close to nil for each additional potential customer)

Ultimately what matters is if a company can make cost of customer acquisition less than life time value of the customer. Hard to measure as compared to conversion rate, but that's what really matters.

If you want to measure something related to conversion rate, measure how much you can improve it. Not how much it currently is.

A very high conversion rate with a very low total influx of potentials is also a way to 'beat the system', but if you'd play that trick in a corporate setting you'd be out of money and closing the doors pretty quickly.

Conversion rate is not something to tune for, turnover/profits are, and if you can increase your turnover without increasing costs in such a way that your profits suffer then it is perfectly ok to see a drop in conversion rate.

The way they count the conversion rate is not from people coming over to the page but instead the conversion rate of people buying the software after having downloaded a trial version...

That's my original point. If you are sending relevant users to download the trial (albeit with a high acquisition price) your trial -> paid conversion rate will be higher.

It makes even less sense to rigorously enforce that metric without factoring in price point or the size of the market that can feasibly be reached.

Enforcing an artificially high conversion rate is almost a disincentive to actively market the product (or even permit trials) once you've gone beyond the exact niche you've designed the product for, not to mention an incentive to offer "first year" prices well below market value.

Conversion Rate can be anything: lead, newsletter sign-up, sale, contact form send.

So I suggest to beak down your site to the following levels (example figures but not far off from typical web-starter):

100% unique visitors 30% saw registration page 21% signed up for trial 30 days 19% logged in 11% did 3 key tasks (made project, setup 1 test, checked 1 report) 5% logged in 3x within first month 2% upgraded to paid service 1.5% is still with us after 1 year

So you have these metrics and then you monitor them day/week/month whatever you feel like. And every percentage has to increase otherwise non of you technical improvements, bug fixes, marketing effort or support is working.

This isn't so much a challenge as a "sell your (successful) software to us".

It is still interesting, but it needs a more accurate title.

Definitely. It is actually dishonest of then to call this a challenge: I couldn't for the life of me find out what the actual challenge was when reading the article and when I came to their list of requirements I was scratching my head.

If it was an actual challenge they would accept prototypes or they would have a list of specs to build matching software to.

"@neildavidson Just had the first #redgate million dollar challenge entrant. Wow - that was fast." http://twitter.com/NeilDavidson/status/20137466241

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