How to Build a Better Product With the Right Metrics

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How to Build a Better Product With the Right Metrics

MELINDA ELMBORG • AUGUST 23, 2021

Imagine you have just launched the beta of your product. Maybe you have a couple of users, or maybe you have hundreds!

No matter how many, you HAVE to know what these users are doing. You need to know if users are doing what they’re supposed to do with your product. You need to know if the product you’ve built is working, doing what it’s supposed to do.

This is a crucial time for your startup, because this is when you have to figure out if you have product-market fit or what needs to be done to get to product-market fit. If users are doing what they should do with your product - it means you have found the beloved product-market fit. Without product-market fit, you won’t be able to scale into a big business.

So how do you find out what your users are doing with your product?

Depending on your product, some of this information can be found in your database. If you’re not a developer, let me explain what this means.

In the database, information gets stored about users. It is typically information that:

  1. Is needed to perform a task
  2. Is needed for the next time your user comes back to use your product
  3. May be shared with other users


For example, it can be a message that you send on Slack, which is first sent and stored in Slack’s database and then sent to the receiver. In the database, you can find the ID of the sender, the receiver, and the time when it was sent. With this information, Slack can see which users have been active and at what frequency.

But, in the database you lack some depth. Adding tracking data to the database is probably not what your developers want to spend time on as your product is still filled with bugs and lacks some essential features! It’s like changing a recipe before you have figured out how to make the meal.

What you can use instead is a product analytics tool. There are plenty of these out-of-the-box tools available on the market. This type of tool is something that you as CEO, product manager, or any other type of business role can work with, without depending on developers.


I can recommend Amplitude or Mixpanel, both of which have startup offers so you can use the full product for free for your first year of operations. Being able to use them at no-cost for a whole year is a huge boon! 

Setup

First, a product or business manager decides which events to track. In other words, you need to figure out what you want to know about the user. Usually, it ends up being a lot of clicks on different buttons that you want to track. When your team has decided on that, you hand it over to a developer.

A developer takes 1-3 hours to do the set up. This makes it possible to track events and inputs as they happen and the information is sent to your product analytics tool.

After that, the events show up in Amplitude or Mixpanel. Now, you’ll be able to follow WHO is doing WHAT and WHEN. Those are the keywords when it comes to tracking.

This is what it can look like inside Amplitude:

Metrics

But what next? What should be the first charts in our first dashboard? Let’s talk about the type of metrics that you will want to look at on a weekly and monthly basis.

Growth

I assume that growing your number of users or revenue is a high priority for your startup. This is especially important if you want to raise capital. Investors only want to invest in growing startups, since that’s how they get their money to grow. Their priority isn’t to save failing startups, but to join them for the ride!

So a growth chart should be the very first chart that you put on your dashboard. Your growth can be measured with 3 different metrics:

  1. Revenue -- either from transactions or subscriptions.
  2. Number of events -- this can be any activity that is important in your product. For example, if you’re Spotify, it would be the number of songs played.
  3. Number of active users -- this is the sum of all users who were actually activated. If you’re Spotify, this would be the total number of users who played a song. 

Play around with the alternatives above. You’re free to choose the chart that best fits with your objectives.

What’s certain is that you cannot do an accumulated chart and call it growth! Many founders make the mistake of looking at the total number of registered users - however that chart will always be pointing upwards. It’s a typical vanity metric that you want to avoid, since it will only fool you into thinking that things are going well, when they are not! You don’t want to realize something is wrong when it’s too late. 

Funnels

This is such an important chart to get up on your dashboard next. I imagine that with your product, your users are supposed to click through a few steps to get some kind of result. This can be for onboarding. It might be expected of the user daily/weekly/monthly, every time they use the product. That’s what a funnel is!

You need to know if the users are actually following suit and going through the different steps to get to the result. Essentially, you need to know if they convert through your funnel. This is the key to knowing if your product is actually working! If you find out that you have a big drop off between certain steps in your funnel, you discover what needs to be fixed.


Retention

You don’t want users to activate just once! Typically you want users to come back and get hooked to your product. This is called retention. It’s super easy to measure and visualize with a product analytics tool. 

With retention, you want to analyze the activation over time, to see the rate at which users come back. If users actually do come back over time, you know that your product helps them solve their problems. Your product works!


There you have it! It doesn’t have to be more complicated than this. That’s the last recommendation I want to make. Don’t overdo this. You could easily spend hours and hours digging through data and creating hundreds of charts. At an early stage where the data volume is low, it will only be a waste of time.

Get the basics and you’ll quickly be informed to make better product decisions for your startup. With better product decisions, you’ll quickly be on your way to find product-market fit!


PS: 👉  Join us in the incubator for only 1€! You will join a community of founders, get answers from me in to weekly calls and get access to a library of packages like the customer acquisition package, the investment package, the product market fit package…

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About the Author: 

Melinda Elmborg was a Venture Capital Investor at the French VC firm Daphni. To help founders build, grow and raise capital to their startups, she switched careers to become a startup coach. In 2018, she started Startup Action. 

Based on her learnings, she has developed The Startup Action Framework that guides startups from launch to exponential growth.

So far, over 400 founders have already joined one of her workshops and thousands of founders have taken advantage of her templates and guides to succeed with their startup.

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