Adjusting a growth model involves revising its initial assumptions and inputs based on real-time data and performance metrics.

This process ensures the model accurately reflects the business's current situation and future expectations, allowing for more accurate forecasting and planning.

Example:
Consider a New Delhi-based boutique fashion retailer. Initially, for the year 2023, it projected a Customer Acquisition Cost (CAC) of ₹1,500, an Average Order Value (AOV) of ₹3,750, and a retention rate of 70%.

However, at the end of Q1 2023, the actual figures were a CAC of ₹2,250, an AOV of ₹3,375, and a retention rate of 65%.

To adjust the growth model, the retailer should:

- Update the CAC to ₹2,250, the AOV to ₹3,375, and the retention rate to 65% in the model. [Note: we are assuming one channel of acquiring new users, and one cohort of returning users, for simplicity. For a more realistic scenario, we will consider the new data for each channel and cohort separately.]

- Re-calculate the projected revenue: New Customer Revenue = Number of New Customers × AOV; Retained Customer Revenue = Number of Retained Customers × AOV.

- Re-evaluate the marketing budget with the new CAC, ensuring feasible customer acquisition.

- Assess the impact on profitability and ROI with updated assumptions and decide on strategic changes such as optimizing marketing strategies or enhancing customer retention programs.

Steps to revise Revenue & Cost Projections:

1. Monitoring: Regularly review and compare actual performance metrics with the initial projections in the growth model.

2. Data Analysis: Understand the reasons behind any variances between projected and actual figures.

3. Adjustment: Revise the growth model to incorporate actual metrics.

4. Re-evaluation: Recalculate future projections based on updated data.

5. Strategic Decision-Making: Utilize the insights from the adjusted model to make informed decisions, adapting strategies and operations to better meet business goals.

This ongoing cycle of monitoring, adjusting, and re-evaluating is crucial in ensuring that a growth model remains relevant and effective, guiding strategic decision-making and efficient resource allocation in the dynamic business landscape.

How to revise growth model?

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