Build, Measure and Iterate Using Actionable Product Metrics
In today’s business world, the success or failure of a product can make or break a company. With so much emphasis on the bottom line, it’s no wonder companies are always looking for ways to measure the success of their products.
Product success is the degree to which a product or service meets customer needs. It can be measured in terms of customer satisfaction, market share, sales or other metrics.
You can only improve what you are able to measure.
Product success is important because it allows companies to gauge whether they are providing value to their customers. It also helps companies identify areas where they need to improve their products or services. Without measuring the success of their products, companies won’t be able to tell if they’re meeting customer needs or if they need to change their offerings and make the right investments.
Approaches for measuring product success
There are two main approaches to measuring product success: Vanity and engagement metrics. Each has its own pros and cons, so it’s important that you choose the right one for your needs.
Vanity metrics
Vanity metrics are things like downloads or trial users, registered users. They’re easy to measure and track, but they don’t necessarily tell you how your product is being used or whether users are actually interacting with it.
These stats look spectacular on the surface but don’t necessarily translate to any meaningful business results. Metrics like page views, followers, downloads, views on a video etc make you feel good, these metrics do not accurately reflect an organization's key drivers and often aren’t actionable.
But the vanity metric approach is the most common way to measure the success of a product. This approach relies on numbers and statistics to track progress. This biggest drawback is it does not paint an accurate picture of how users interact with the product. For example, a product might have a high number of downloads but low user engagement.
Engagement metrics
Engagement metrics, on the other hand, focus on things like active users, retention, and conversion rates. They are harder to measure, but they give you a better idea of the true success of your product.
Some examples of actionable engagement metrics are trial to paid conversion rate, customer acquisition cost and customer engagement score.
If you are a Saas product the important metrics to consider are activation rate, monthly recurring revenue, customer retention rate and churn rate to measure the product growth and how to improve them. I will dig deeper in this in a subsequent article.
The Engagement approach is a more holistic way of measuring the success of a product. This approach examines how users actually use the product and whether they find it useful or valuable. The benefit of this approach is that it provides insight into what users think of the product and areas for improvement.
Measurement need to be used to iterate on the product
A product with 1 million downloads with low engagement versus a product with 100k downloads with active engagement. Which one would you like better? Context is very important. So we can measure and take the right action. What got 1 million users interested in downloading the product? Why was the engagement low? What is the reason for the low engagement? On the other hand, in the second scenario, what attributed to the engagement and what can we do to get more customers to download the product?
When measuring product success, it’s good to go back to the following 4 fundamental questions that help us fine tune and stay at the right side of the marker.
- Are we solving the right problem?
- Is that problem widespread (lots of prospects)
- Does our solution solve that problem in a good way?
- How is our solution better than the solution that currently exists?
Measurement and product improvements go hand in hand and it helps us also defend the product investment we are making to make things better.
Few things to be cautious about when looking at product success metrics and not to fall in to a trap
- Revenue by itself is not a good indicator of success. By the time revenue reflects the problem it will be too late. Be very careful about this single metric trap.
- Don’t just rely on overall logins. It’s important to measure the login frequency of the user logins. How frequently you want users returning depends on the purpose of your product, but usually more frequent is better. 10 to 20 times a month is a good number. Regency and frequency are important.
- Don’t let the volume spike clutter your insights. For example, let’s say there is a viral story that caused users to logon to your product. This is great but not useful if you can’t repeat it to expand on that success as it’s tied to an erratic external factor.
Conclusion
It’s important to measure your product’s success to make sure your product is on track.
There are two main approaches to measuring product success: Vanity and engagement. Each has its own pros and cons, so it’s important that you choose the right one for your needs.
Vanity metrics focus on numbers that make a product look great on paper, but don’t necessarily reflect a product’s performance. Engagement, on the other hand, examines how the user actually interacts with the product.
So which approach is right for you? It depends on your goals and what you want to know about the success of your product. If you are just looking for some quick numbers to show investors, vanity metrics will do the trick. But if you want a better understanding of how your product is being used and what kind of impact it has, engagement metrics are the way to go.
