"Without data, you're just another person with an opinion." - W. Edwards Deming
As a product person or founder, you know how important it is to make data-driven decisions to optimize your product's success. But with so many metrics to choose from, it's easy to get lost in the maze of data and end up feeling perplexed.
In this article, we'll delve into seven common mistakes that people often make when it comes to selecting and tracking product metrics. By identifying and avoiding these pitfalls, you can rise above the common confusion and make informed decisions that propel your product forward and help you achieve your business goals.
1. Focusing on vanity metrics instead of actionable metrics
This is probably the most common mistake that product people & founders make; focusing on the wrong metrics. Vanity metrics are metrics that make you feel good but don't necessarily translate into business success. Examples of vanity metrics include social media likes, page views, and downloads. While these metrics are easy and fun to track, they don't provide any insight into actual the success of your business. Instead, focus on actionable metrics such as customer acquisition cost(CAC), customer lifetime value (CLV or LTV), and retention rate. These metrics provide valuable information about the success of your business and can help you make data-driven decisions.
2. Overlooking the power of leading and lagging metrics
This is a mistake that can leave you scratching your head in confusion - ignoring the relationship between leading and lagging metrics. Leading metrics predict future success while lagging metrics measure past success. It's crucial to track both leading and lagging metrics to get a comprehensive understanding of your business. For example, if you're launching a new product, you might keep an eye on leading metrics like website traffic and email sign-ups to forecast future success, as well as lagging metrics like sales and customer feedback to gauge direct impact. Remember, both types of metrics are intertwined and influence each other, so don't overlook either one.
3. Drowning in a sea of metrics
It's easy to get carried away and track an avalanche of metrics in an attempt to get a complete picture of your business. However, this can leave you feeling overwhelmed and perplexed. It's important to focus on a select few key metrics that align with your business goals, rather than drowning in a sea of numbers that may or may not have a real impact on your product performance. For example, if your objective is to boost revenue, hone in on metrics such as conversion rate, average order value, and revenue per customer.
4. Getting lost in the fog of context
Metrics can be misleading if they're not viewed in the right context, leaving you scratching your head in confusion. For instance, a high conversion rate might seem like a cause for celebration, but if the traffic to your website is low, it may not be as impressive as it initially appears. It's crucial to consider the context in which your metrics are measured. For instance, if your goal is to increase website traffic, it's important to track metrics such as organic search traffic and referral traffic in addition to conversion rate, so you can see the bigger picture.
5. Forgetting to set benchmarks
Setting benchmarks is like having a compass that helps you navigate through the fog of uncertainty. Without benchmarks, you have no idea whether your metrics are good or bad. Set benchmarks for each metric you track and regularly compare your performance against them. For example, if the industry standard for customer acquisition cost in your region is $100 and your cost is $50, then you know you're on the right track. If it's higher, then you know you need to dig deeper and figure out what's going wrong.
6. Getting stuck on 'one-way' metrics
Another mistake that people often fall into is fixating on "one-way" metrics. You know, the kind of metrics that only move in one direction, like the number of users. The number of users will only increase so is it really valuable to focus on it? Is it really worth all the fuss? Instead of getting stuck in this mindset, why not focus on metrics that provide a more nuanced view? Take, for example, the number of Daily or Monthly Active Users. It's like navigating through a maze of data that requires a bit of head-scratching, but it can reveal much more about how your business is truly performing.
7. Not tracking metrics over time
Lastly, metrics are not something to track just when you’re running campaigns, metrics are also not a one-time snapshot, but rather a dynamic representation of your business/product performance. Tracking metrics consistently over time allows you to identify trends, patterns, and changes in your product’s performance. It helps you uncover insights and make informed decisions based on historical data. By neglecting to track metrics over time, you may miss out on valuable insights that can guide your product strategy and drive your business forward.
In conclusion, as a product person or founder, it's essential to choose and track the right metrics diligently. Avoid the common mistakes of focusing on vanity metrics, ignoring leading and lagging metrics, tracking too many metrics, neglecting context, not setting benchmarks, focusing on 'one-way' metrics, and not tracking metrics over time. By doing so, you can gain valuable insights, make informed decisions, and optimize your product's success to achieve your business goals.
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