In this Mucker Growth Session, David Jesse, Senior Product Advisor & Coach at Prodify with prior product leadership experience at DoorDash, Groupon, and eBay, focuses on aligning your product metrics to be actionable and measurable towards improving customer and business value.
In the world of startups, product metrics are crucial to success, yet many founders and product teams struggle with identifying and measuring the right ones.
The Importance of Product Metrics
It's critical to determine what is truly important for your product and how to use that understanding to define key metrics. This is not just applicable to companies that have already found product-market fit; it's also highly relevant for early-stage startups that are still refining their value propositions and go-to-market strategies.
The primary goal for any product team should be to define and measure the value that their product delivers to customers. Without this foundational understanding, teams risk building random features that may serve individual customers but fail to create a cohesive and scalable product. It's important to focus on customer value as the cornerstone of all product development efforts.
From Vision to Execution: A Product-Driven Approach
A "product-driven approach" can be a helpful framework to follow. This framework begins with identifying and quantifying the value your product provides to customers. From there, it’s about translating that value into a clear vision, setting milestones to achieve that vision, and creating a roadmap that aligns with these objectives.
The adage "vision without execution is hallucination" applies here, as it is necessary to connect high-level vision to day-to-day execution. For early-stage startups, this might involve frequent adjustments as they iterate towards product-market fit, but having a guiding framework is crucial for staying focused and avoiding the trap of chasing every new feature request that comes in.
Takeaways:
Create product metrics. Product metrics are essential for understanding the value your product delivers to customers.
Take the long view. Startups often focus on business metrics like revenue, which can lead to short-term gains but may not align with long-term product development goals.
Center the value to customers. A product-driven approach involves identifying and quantifying the value provided to customers and translating that into a vision, roadmap, and execution plan.
Identifying Key Outcomes and Metrics
Identify Your Target Persona: This is more than just demographic data. It involves understanding why customers are interested in your product and what specific problems they are trying to solve.
Define the Key Outcome: At the top of your product metrics "pyramid" should be a single, overarching key outcome that reflects the value your product delivers to customers. This outcome should ideally be both qualitative and quantitative, providing a clear benchmark for success.
Break Down the Outcome into Pillars: These are the critical components that drive the key outcome. In e-commerce, for example, pillars might include product selection, value for money, and convenience of delivery.
Develop Product KPIs: For each pillar, define specific, measurable product KPIs that will help you track progress and make informed decisions. These KPIs should be actionable and provide insights into whether your efforts are moving the needle in the right direction.
Build a Pyramid of Product Metrics
The concept of a "pyramid" of product metrics, where the top represents the broad, overarching key outcome, and the bottom consists of specific, actionable metrics that can be measured and tracked is a useful approach:
Top of the Pyramid: The key outcome that reflects the overall value your product delivers.
Middle of the Pyramid: The pillars that support the key outcome. These are broad areas that need to be optimized to achieve the key outcome.
Bottom of the Pyramid: Specific product KPIs that are directly tied to features or components of the product. These are the actionable metrics that teams focus on to drive improvements in the higher levels of the pyramid.
Case Study: Groupon’s Early Days
To illustrate his points, Jesse shared a case study from his time at Groupon. In the early days, Groupon’s business model involved offering a single deal per day to subscribers in a given city. While this model worked well at small scale, it quickly became clear that it was not sustainable as the company grew.
The key outcome for Groupon was to deliver great experiences to customers by offering deals that were relevant and valuable. However, with just one deal per day, most customers found the offerings irrelevant, and merchants struggled to manage the influx of customers when their deals were featured.
The solution was to expand the selection of deals while improving their relevance. Jesse described how Groupon began experimenting with deal targeting, initially by manually splitting subscribers into groups based on their location and sending them deals that were closer to them. This simple experiment provided a positive signal that led to more sophisticated targeting and ultimately helped Groupon scale its operations dramatically.
By focusing on improving relevance through better targeting, Groupon was able to increase conversion rates and expand its offering to include more deals, which in turn drove growth. This approach of starting with small, manageable experiments and scaling based on positive signals is a key lesson for any startup looking to refine its product metrics.
Aligning Metrics with Growth
It is critical to align your product metrics with your overall business goals. Startups should regularly revisit their key outcomes and ensure that their product development efforts are directly contributing to these goals.
It's also important to meet the challenge of managing competing priorities, particularly for small teams. For this, it's helpful if teams focus on a few key areas at a time, rather than trying to tackle everything simultaneously. This focused approach not only helps in making meaningful progress but also ensures that resources are used efficiently.
Key Strategies:
Focus on a Few Key Areas: Instead of trying to tackle everything simultaneously, startups should focus on a few key areas where they can make the most impact.
Prioritize Based on Leverage: Determine where your team can have the most significant leverage in delivering value and addressing growth constraints.
Use Metrics to Guide Decision-Making: Metrics should inform decisions about what features to build, which ideas to prioritize, and when to pivot.
Avoiding Common Pitfalls
When dealing with product metrics, beware of these common pitfalls:
Overloading on Metrics: Tracking too many metrics can lead to analysis paralysis, where teams are unsure which numbers really matter. Focus instead on a small set of key metrics that directly impact your product’s success.
Chasing Vanity Metrics: Metrics like page views or app downloads can be tempting to track because they are easy to measure, but they don’t necessarily correlate with customer value or business success. Focus on metrics that reflect real value for customers.
Becoming a Custom Development Shop: For startups, especially those in B2B, there’s a risk of becoming a custom dev shop for large enterprise customers. Maintain a balance by aligning customer requests with your product vision and avoiding features that don’t fit into your long-term strategy.
Implement and Validate Product Metrics
To successfully implement and validate product metrics:
Use Metrics on the Front End: Set quantifiable goals before launching a feature. Ask, "What would success look like?" to validate if a feature is worth building.
Short Feedback Loops: Focus on metrics at the bottom of the pyramid where feedback loops are shorter, allowing you to iterate quickly and adjust based on real-time data.
Complement Metrics with User Research: Metrics alone can’t provide all the answers. Complement them with qualitative user research to understand why certain results occurred.
Review with Cross-Functional Teams: Regularly review metrics with your entire team, including engineers, designers, and analysts, to ensure everyone is aligned and can contribute to data-driven decision-making.
Conclusion: A Disciplined Approach to Product Development
For startups looking to build and scale products that truly matter to their customers, it's important to stick to the roadmap. By focusing on the right product metrics and maintaining discipline in their approach, startups can avoid common pitfalls and set themselves up for long-term success. Whether you’re in the early stages of development or scaling a more mature product, the principles outlined above are applicable across the board, providing a clear path from vision to execution.
Key Takeaways:
- Define and measure the value your product delivers to customers.
- Build a pyramid of product metrics, with the key outcome at the top and specific, actionable KPIs at the bottom.
- Align your product metrics with your overall business goals to ensure that your efforts are driving meaningful growth.
- Avoid common pitfalls like tracking too many metrics or chasing vanity metrics.
- Use metrics to guide decision-making, but complement them with user research and regular reviews with your team.
For startups, the journey of refining and perfecting your product metrics is ongoing, but with a structured approach, you can ensure that every step you take is a step towards delivering greater value to your customers and achieving your business goals.
Thanks to David Jesse for sharing this information.
