Sadly, automation is a vast and often confusing umbrella, so what type should you invest in? On the other hand, if you're in a data-focused field (like banking and securities, media and entertainment, and so much more) and have a solid line of products you want to stand out, product analytics is critical. So read on if you're looking for a comprehensive but friendly introduction to it and its KPIs.

What is Product Analytics?

Product analytics is a process where you use automation to collect and analyze data and information for valuable and actionable insights. And today, you have a myriad of software like Google Analytics and Trymata that you can use to track and visualize data. But, unfortunately, it all looks so appealing on its package. This is what typically happens: people read about what product analytics is and how beneficial it can theoretically be for their product. Then, they spend valuable resources acquiring an analytics tool without acquiring enough knowledge and understanding of how it can drive results.

To optimize the benefits of this tool, you need first to get a friendly introduction to product analytics KPIs. What are KPIs, anyway?

Product Analytics Key Performance Indicators

You've probably heard of the term or its popular abbreviation, KPIs. In a digital-first world, this has become one of the first things businesses use for success. But, ironically, the more people throw this term around, the more they realize that there are numbers and numbers of those who don't know what it means. So let's walk you through it.

KPIs measure the success of a business objective. They are the metrics, criteria, or checkboxes used to calculate your results next to your goals. And they're essential because not only do they keep track of things, but they also move your projects forward toward completion.

There is one thing you should remember: product analytics KPIs are more than just numbers. Beyond the data, you get the valuable and actionable insights you need to understand the performance of your product and what you can do to improve it. In other words, the hard part isn't measuring KPIs; it's choosing the right ones. And if you succeed, you can:

●1. Set your product roadmap

●2. Improve product strategy

●3. Forecast revenue

●4. Improve the impact of different product features

●5. Get user behavior insights

Product analytics KPIs are complicated, but we’ll try to simplify them by walking you through the AARRR Framework. This means acquisition, activation, retention or engagement, revenue, and referral. So let’s discuss them one by one.

Acquisition KPIs

A primary marketing funnel would include awareness, consideration, and conversion. Acquisition KPIs belong to the awareness bracket and help introduce your product to your prospects. In addition, acquisition metrics help ensure that future clients and customers know that you and your product exist even though they still haven't figured out if they need it. After all, it's easier to market a product to a group of people who already know you, especially if they still need to figure out if your offer can address their pain points.

Acquisition metrics include customer acquisition costs. These cover your spending for marketing, sales, and even equipment used to get a paying customer. To calculate CAC, divide your total expenses to acquire customers by the total number of customers gained over a period. This answers the question: is the cost needed to convince a customer to buy the product worth it?

So the main goal is to get low CAC or reduce it. And you can achieve this by:

●Understanding the wants and needs of your target market

●Launch early product engagement

●Create a positive customer experience

Activation Metrics

Going back to the primary marketing funnel, once your target market becomes aware of you and your product, they also become aware of whether or not this type of product addresses any of their pain points. And if it does, the next step is whether or not they choose you among your competitors. Again, activation metrics such as Customer Activation Rate tracks this development.

Activation can be different for different products, so before you look at the numbers, you need to define what it is for you. This could be subscribing or getting a new feature. And you can calculate CAR by dividing the number of users who reached the activation milestone by the number of users who signed up. Then, multiply the result by 100.

You can improve your CAR by

●Investing in a solid product analytics tool like Trymata for tracking

●Mapping out your ideal customer flow

●Studying the activation steps that need the most work

Retention Metrics

Once you've climbed the top of the conversion hill, the next challenge is keeping your users there. You want them to come back for more. And one way to do that is to understand what keeps them on the product or turns them away. And one of the most critical metrics in this category is the Customer Retention Rate. This is calculated by first counting how many customers you had at the end of a given period minus the number of new customers you've acquired over that time. Then, divide the result by the number of customers you have at the beginning of the period before multiplying it by 100.

To know how many users have used your product over time, you need to look at the numbers under CRR. These also give you a glimpse into the current loyalty level you may be enjoying or missing out on. You can achieve these metrics by

●Providing excellent customer experience

●Boosting your online presence

●Offering competitive product price

Revenue Metrics

How much of every dollar in sales goes to your bottom line? You want to set your revenue metrics to measure your product's profitability. Unfortunately, the only way to tell if you're on the right track based on these metrics is if there is enough left after paying all your expenses.

One essential metric that falls into this category is Customer Lifetime Value, or simply, Lifetime Value. This lets you know the total worth of your user to your business over the whole period of using your product. This answers the question: how much income can your business expect from a typical customer?

To calculate CLV, you need to determine your average order value. Set that number aside and calculate the average number of transactions per period. Then measure your customer retention. Once you have the three numbers, multiply.

CLV = Average Transaction Size x Number of Transactions x Retention Period.

You can improve your CLV by

●Providing engaging and rewarding customer loyalty programs

●Investing in a great customer relationship management system

●Create targeted content

Referral Metrics

How much influence does your business have over your customers? How likely will they promote your product and bring other customers in? Referral metrics give you a glimpse into these numbers, and if you get them right, you open a whole bag of tricks that improve your other KPIs. For example, great numbers under the Referral Metrics can help improve your CAC scores.

Take Referral Rates, for example. This gives you an idea of the customer loyalty you currently enjoy. You can calculate RR by dividing the number of referred purchases by the number of total purchases. And you can get this number up by:

●Analyzing your referral through effective tracking

●making referring as easy as possible

●Encouraged the referred to become referrers themselves

The AARRR framework refers to 5 significant metrics that help measure your product success: acquisition, activation, revenue, retention, and referral. There are two purposes for these metrics. First, these help narrow down the metrics that affect your product and the overall health of your business. And second, these enable you to gather and analyze the correct data that accurately measures your success. Now, we could end this discussion here; but we’ve decided to give you some bonus content:

Engagement Metrics

Product engagement gives you data and information on how users interact with your product. For example, are they having a pleasant time? What are the areas that need improvement? These metrics help you determine whether users gain value from using your product. For example, Feature Usage is a metric that shows the feature used the most and for how long. It also lets you know what profiles among the users are involved and even allows you to find a pattern to see if there are seasonal trends in the usage.

To calculate this metric, divide the number of feature monthly active users (MAUs) by the number of user logins in a given period, and multiply it by 100. These numbers can help you determine whether you should retain, improve, or remove a feature, depending on whether or not people are using it and getting value from it.

You can boost product engagement by

●Using a tracker for user engagement with personalized flows

●Segmenting users according to the engagement level

●Using gamification strategies

Now that you have better ideas on product analytics KPIs. What's the next step? It's time to choose which KPIs suit your product best. And you can do this by

●Defining your business goals

●Asking the right questions

●Avoiding common mistakes like measuring data for data's sake

●Investing in product analytics that gathers, analyzes, and visualizes data

Product analytics KPIs are business- and customer-oriented. And if there is one thing you can take away from this piece, it's the fact that metrics are relative. It depends on your business and different contexts. More importantly, these metrics go beyond the numbers they represent. So remind yourself that all the data you can gather from your KPI numbers is only as good as the insights you can get from it.