Product Analytics KPIs: Your Go-To Guide for Measuring Analytics Success

This article will help you understand what KPIs are and their importance in the present product development scenario. You will also learn about some important KPIs that you can track across the various stages of the customer conversion funnel. Lastly, you will learn how product analytics tools help create precise metrics for a well-rounded business strategy.
The amount of attention to detail that companies place on their product performance can make or break their success in the marketplace. As time passed with building and inventing various products and services in an increasingly competitive world, businesses have realized that just keeping a tab of the general performance of the business will not cut it if they want to stand out, or even survive, for that matter.
Let’s face it. You have spent thousands of dollars and even more hours making and marketing your product. You need to reap the fruits of your work. But with products, it’s not as simple as making an overall profit or expecting profit within a particular time frame.
Basing analytics on KPIs is more important in today’s business space than ever before due to that very fact. Market analysts who look at budding business are of the opinion that companies should be aware of the pulse of the business at all stages without relying on dogmatic processes or entering a stage of inertia.
Product KPIs are therefore designed to measure and analyze your product’s success just as you would analyze your own. These indicators are specific measurements of business goals that will be valuable in making decisions for your business and product marketing.
You may look at KPIs as a scale to improve product performance. Or perhaps, look at it as a measure by which you can analyze the product’s market influence. Did you meet that target number of customers you wanted to sign up with a new campaign? Have you been able to predict a business outcome-based on customer behavior? Was your product’s performance in a specified target area up to your expectations? Just like you would analyze your work to measure its success, your development and marketing efforts for a product can also be brought to scrutiny based on the right metrics.
Simply put, KPIs are all your analytics efforts through which lens you can best understand how successful your past or ongoing product development is. You can then target the right audiences who are looking for your solution.
This brings us to the question of how to successfully measure KPIs that make them fit for analysis and their application.

How to Measure and Analyze KPIs

Using a product analytics tool in itself cannot bring you good results. When accurate measurements are missing in your product analytics, you will lose out on opportunities that guarantee profits within a shorter span of time.
Here are some questions that can help you to streamline your KPI selection process:

Are your KPIs related to your CSFs?

Measuring and running the right analysis on your KPIs involves thinking about the Critical Success Factors (CSF) of your organization. Any KPI that you plan to analyze should be related to these factors that are the foundations and indicators of success according to you. For example, if your CSF includes innovation in the product market, you could set a KPI that measures the number of users who utilized your new product feature.

Are they traceable?

Another point to keep in mind when you measure KPIs is to keep them easily traceable. Numbers do not make sense until you showcase them as rates, percentages, and ratios. These proportions highlight the value you generate for the company in easily expressible formats, which can then be communicated with effectiveness for a greater impact.

Are you aiming too high?

However, trying to overachieve right from the beginning with KPI analytics can also be a slippery slope. Setting KPIs that are too hard to track will prove to be a roadblock that can easily demotivate teams. Pick only the very few, crucial metrics to begin with in order to set off on a great start.

Pirate Metrics or the AARRR Metrics of Product Analytics

The pirate metrics or the AARRR funnel, was introduced by Dave McClure in his presentation for product managers to capture the stages of a customer lifecycle. Each funnel element represents the buckets into which your KPIs should fall.
Funnel Image

The stages in AARRR Metrics funnel

Even though the KPIs that each business wants to track will differ slightly from each other, we have listed some KPIs under each stage for your guidance.

Acquisition

The first stage in the funnel is ‘acquisition’. Of course, it is impossible to track any metric without having users for your product. The main agenda of any company is to track acquisition – what brought a user to your product website, how many registered, what went wrong… When answered in this stage, these are questions that will cater to improving the product.
Some of the major metrics that fall into this category are:
Number of new users: How many users came to you in the last week, month, and quarter? At what percentage have they increased? Such questions should get answered with this KPI. Moreover, you must also be able to ask and retrieve information about where your new users came from and how they found your product.
Number of users signed up for trial: Free trials are highly successful in bringing users to check out a new product. You can also switch this up by tracking the customer response with new promotions, giveaways, discounts, etc.
Percentage of users who logged back in: Acquisition can also be translated as the number of users who actually continued to use your service after a first visit. If users have stopped using your product or service on the first try, it is a good indicator that something may be wrong with the way your service is provided or how your product functions.
Bounce rates / Reduced bounce rates: A high bounce rate means that your brand’s value proposition has not come across to the users as it should have. The user might not have found the information or value that they were looking for in the case where they have visited your website and chose to leave.

Activation

Acquisition does not indicate success at all times. That is why you must take users to the next stage of engagement, which is ‘activation’. Activation indicates that your customer has successfully realized the value of your product; Which means that they have used it for its true business intent, whether it be a purchase, payment, or making a connection.
The number of users who visit your web or product page does not mean much until you discover which of them will take your business forward. The below KPIs can help you begin to assess how your users perceive your product’s value:
Percentage of users who used a feature: Were your customers able to successfully use the main feature of your product? If they did, it indicates that users have interacted with your product well enough to make them understand its value.
Activation through feature usage could be as simple as adding an item to the cart, subscribing to a newsletter, or making a successful transaction. For example, Facebook determines the activation of users as adding a friend, and Twitter defines it as posting the first Tweet. Users should be able to see potential with your product in their first few visits for them to want to stick with you and move to the next stage.
Time to checkout / Rate at which users checkout: Depending on your business type, a user might get activated in a matter of a few days or through many weeks. The moment a visitor becomes your customer, they have entered the activation stage. Tracking the amount of time it takes for a user to arrive at the activation stage will speak volumes about the product’s value and performance.
Subscription rate: If your user has subscribed to regular services by paying a subscription fee or registering to receive updates, you have a high chance of retaining them. You can also track the number of users who converted from a trial version to getting a paid subscription to your services.
Churn rate: Learning how and where your customers are losing interest in your product by measuring the churn rates is a great way to keep developing your product’s functional deterrents. Identifying the deterrents in a customer’s journey will help them stay loyal to your services, leading them to the next stage of the funnel, explained below.
overview

An Overview tab from a product analytics tool that displays basic user metrics

Retention

Retention is the stage where most products fail because it requires consistent efforts to capture your audience by not losing them to your competitor. According to a study by Bain & Company, increasing customer retention rates by just 5% increases profits by somewhere between 25% to 95%. And 82% of companies that participated in an eCounsultancy study agreed that retention is cheaper to execute than acquisition.
Customer loyalty, which is a key indicator of retention, can be measured through some important KPIs:
User retention rate / Cohort retention: Analytics tools can help you determine how long a customer has been part of your success. Basing your measurements on cohorts will tell you which group of users are most valuable to your organization.
Users who upgraded / Renewal rate: Usually, users who upgrade their product or pay in a subsequent period are satisfied with the product’s performance and are most likely to move on to the next stage.

Referral

When users like your product very much, they are likely to refer it to somebody else. When a user refers your product to a friend, their lifetime value as a customer increases, while you have a great KPI to track progress in the market.
References received: References can be measured through forms, personal contacts, or referral links that are trackable. Intelligent statistics and analytics help you streamline brand promotion strategies deriving lessons from past failures and successes.
NPS®: Net Promoter Score® is a great way to measure brand loyalty and product references. NPS is a formulaic method that calculates the customers’ likeliness of referring products to their friends and family. NPS surveys collect ratings from 1 to 10 on how likely they are to recommend a product, based on which the NPS score is calculated.
Consequently, scores can range from a scale of -100 to 100, which shows whether the detractors or promoters are in the majority. NPS scores are a telling sign about how well your product will fare in the near future.

Revenue

It is not enough to just look at the revenue figures as they are. Comparing revenues with targets can only go so far when growing a company. The revenue generated by the company or which comes from a user can be effectively measured through these KPIs:
Monthly Recurring Revenue or MRR: This shows the monthly recurring revenue of new deals on a monthly, quarterly, and annual basis. A higher figure indicates a higher-revenue client list, which means that each individual client is bringing great value to the business.
New revenue: New revenue is separately calculated as a measure of the value that new users bring to the product, and it’s measured across from quarter to quarter. When studied in relation to the number of new customers and MRR, the new revenue is a good indicator of changes in business success.
Revenue per cohort: To know which cohort of users bring in the most value to your organization, start measuring the revenue per cohort.
Customer acquisition cost (CAC): The cost of acquiring one customer is an important topic since you need to know where your resources are utilized. The resources a be the marketing costs, setup costs, and sales costs from quarter to quarter, by the number of customers acquired over the same period.
Average revenue per user (ARPU): Quite self-explanatory, this KPI will be calculated as the total revenue (monthly or quarterly) divided by the total number of user accounts that will get you the ARPU.

How product analytics helps you create better, more precise, and realistic KPIs

Most organizations have found immense success by measuring KPIs through product analytics tools and reports. Analytics tools make tracking KPIs easier by converting simple numbers and figures into actionable insights across the board.
Through the process of experimentation and review, you can refine your KPIs to eventually make them a standard of reference for years to come. Eventually, these measurements will help organizations achieve:
  • Reduced bounce rates
  • Rapid innovations and feature upgrades
  • Greater retention
  • Improved NPS® scores suggesting brand loyalty
  • Increased revenue
The benefits of measuring KPIs through product analytics however extend to many other branches within the organization than those listed. KPIs also bring together employees and organization heads to find common ground from where they can start to discuss and tackle roadblocks.
This is true for startups that are trying to find a working business model, as well as older companies that want to go back to the drawing board to deal with stagnation. Thus, we can say that understanding the proper implementation of product analytics is even more important to us today.

Check out more Countly articles on our blog and academy.

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