Most small business owners and marketers have very limited time and bandwidth to analyze their data. As one business owner puts it, “using data is like trying to rescue a piano from a burning room — it’s nice to have but I have higher priorities.” This is because it takes a lot of time and training to turn data into actionable business insights, i.e. to answer business questions and support business decision-making. This brings us to the concept of vanity and actionable metrics.
Vanity vs Actionable Metrics
Vanity metrics are metrics that make you feel good about your business, but don’t actually help you make decisions (they’re not actionable). Aggregate metrics like “new sessions” on your website, for instance, can obscure more than they reveal. For example, if your number of new sessions goes up, is this a good thing (getting traction with new users), or a bad thing (retention with returning users is going down)?
On the other hand, actionable metrics are focused on business outcomes. They help you understand trends, identify gaps or things moving in your favor. In short, they make you ask more questions about your strategy and approach.
How to identify the right Actionable Metrics?
It starts with understanding who the user of your product is and their journey using your product. Mapping the user journey creates a timeline of all touchpoints user goes through right from when she becomes aware of it, evaluates it, starts using it a and in fact becomes advocate. Here I am showing the basic phases of the journey (awareness, acquisition, retention etc), yours can vary depending on the type of product, business model etc.
Rise of Conversion Metrics
We will focus on metrics belonging to just 1 lifecycle stage today and that is acquisition. The type of metrics that we are going to talk about are conversion metrics. As the name suggests, it helps us measure the rate of conversion from one point to another in the user journey, it can be the rate of web visit to lead creation or user sign up to paid customer conversion measurement.
From the moment a user interacts with your product, they are trying to get from point A (aware of their problem and whatever the desired solution or outcome is that they perceive your product to offer) to point V (the VALUE that they hope this outcome will provide for them). Well-designed products simplify and smooth the path the user takes to get to point V, sometimes even delighting them along the way and reassuring them at certain points of the journey to keep them going through the funnel. As a Marketer or Product Manager, it’s your job not only reach product-market-fit and build something that provides that value, but also to refine the path the user takes to reach their goal, removing friction and testing optimization ideas.
Here, you will see a conversion funnel example of a B2C company. I have simplified it as you will see. These are the key distinct, critical events that a person takes to move from sign up to purchase. Measuring the conversion from one step to another provides key insights into how your product is performing in the eyes of your user.
Now, conversion funnels can vary depending on the lifecycle stage, type of product or service, audience/persona profiles, basically it depends on what types of questions do you want to answer as part of your product launch
The conversion funnel where you are trying to identify how easily people are able to post images through your app is different from an onboarding funnel when you want to see how easy or difficult are you finding people to complete their registration, a key milestone in your product journey.
I am sure you must be thinking that we talk about user journey stages, importance of identifying the key events to move from point A to point V as part of creating your conversion metrics but what answers can these metrics provide me. Let us look at some applications of these conversion metrics:
- At which point or stage, are people dropping off? (Drop off Rate, Bounce Rate)
- The number of sign ups are consistent month by month but the product usage is reducing continuously. Why?
- Are new customers using our product differently from existing ones?
- Which features or products do customers keep coming back to use or buy?
- How “sticky” is your product for new users?
- Are free trial users who submit support tickets more likely to convert to customers?
Measuring Conversion Metrics – Funnel Analysis
There are different analysis approaches that you can use to visualize and monitor these conversion metrics. Today, we will look at Funnel Analysis as an approach.
Funnels help us visualize how customers are navigating a defined path in your product and helps us understand where the drop off is. Basically, it help us identify the friction points and the areas with highest impact in your product performance.
Let us look at the conversion funnel for people who signed up and purchased in the month of June.
It is basically an aggregation of the key events across all your users over a defined period of time. Through a simple calculation, we can find out the conversion rate from one key event to the other as part of this purchase funnel.
So, when you look at this funnel in isolation, what do you get? Is it good, bad? This is not helpful.
Now, when we break this funnel and look at the weekly performance of this funnel, it opens up this door way of many more questions and more insights. What happened in the 4th week that people who signed up never purchased? Why was there a sudden drop in people not doing the key activity?
This is just to show you how segmenting your funnel (slicing and dicing your conversion metrics) through a key attribute (be it your join date or a key feature of your target customer/persona characteristic) can help you get a much better understanding of how the product is performing, and in fact, give you actionable insights on what needs to be done next or in the future (which eventually feeds into your pre-mortem for the next release).
Hope you find this article helpful in building the conversion metrics for your product launch.