Almost anything can be measured these days, but not all data metrics are helpful and valuable. Some are great to show off in front of friends or in marketing materials (at first glance, they are awe-inspiring and delightful but do not bring any business value). Second, they allow you to make decisions that affect the direction of the company's development and the product's success.

It is worth focusing on the valuable metrics defined for the business. We must remember that each business is different but always has at least one key metric that defines it. The key metric is at the top of the pyramid and is part of all the other numbers representing the product's individual processes. As a rule, this metric is consistent with the "work" we want our product's users to do.

So, it's worth considering:

• How to choose metrics that are valuable for your product?
• What are vanity metrics and success metrics? How are they different?
• What to measure to achieve success?

Where to start?

It is scarce to find successful products immediately after their market launch. It usually takes many iterations to create a successful product. It is worth conducting iterations by the Lean Startup methodology and the Build-Measure-Learn loop (build, measure, learn). Each iteration of this method ends with releasing a fully functional solution fragment to the market. One of the essential tasks in each iteration is to be able to measure the work done and then draw appropriate conclusions.

Difficult questions inevitably arise during the measuring phase:

• Are we measuring the correct data?
• Are we measuring them the right way?
• What data should be tracked to determine if we are going in the right direction to achieve our business goals?
• And many others that product manufacturers ask themselves every day.

It is difficult to answer these questions, but making many mistakes in this respect is effortless. After all, we will make wrong decisions based on incorrect data. Choosing the wrong ones, however, will not necessarily bring anything valuable to building a successful product. Therefore, measuring the correct data is essential.
However, before we start measuring anything, we need to determine the most important values/functionalities of the product we want to measure.

Value Proposition

How do you improve the quality of life of your customers? This is a crucial question that every online store owner should ask themselves.

Not understanding your customer value in-depth immediately puts you at a disadvantage. Every element of your business will likely suffer, from website design to SEO and marketing.

The Value Proposition Canvas tool can help you determine your value proposition. A VPC is a template that helps you understand and write down the right value proposition. It allows you to focus on your value proposition and the customer segments that will benefit from that value.

Value Proposition Canvas, Source: strategyzer.com

By creating a Value Proposition, you determine, among other things, the values ​​that your product provides to the user. If you don’t — you will never know what you want to measure and how you want to measure it — let alone whether the metrics you use affect the success or failure of your product.

Value proposition examples (I took them from my previous article):

👉 Uber — The Smartest Way to Get Around,
Uber is an expert in highlighting everything that sucks about a traditional taxi by showing what is good about its service. Only one tap and a car come directly to you, your driver knows exactly where to go, and payment is cashless. Everything contrast with the typical experience of using the traditional taxi.

👉 Unbounce — A/B Testing without Tech Headaches,
As you may expect from companies specialized in CRO, Unbounce value proposition is clear from the moment you enter the homepage. Which is the ability to build, publish, and test landing pages with any IT supports. For many companies, the technical costs of AB testing are a stop sign. What makes Unbounce’s value proposition very strong on the market?

👉 Slack — Be More Productive at Work with Less Effort
Slack is straightforward to use but robust enough for big companies. What set Slack apart from other messaging and productivity apps? Make users “working lives simpler, more pleasant, and more productive.” But it may be a self-evident value proposition. What makes Slack so special? I don’t know another productive app with that many integrations. It’s a 99% chance that it will fit the company workflow.

How are the Value Proposition, USP, Slogan, and Mission Statement different?

There is a lot of confusion around the terminology related to this topic (not only this one). Terms such as “mission,” “slogan,” “USP,” and “value proposition” are related and complement each other. However, there are no exact definitions. Let’s take a closer look at it.

USP — Value Proposition is not the same as a Unique Selling Proposition (USP) that addresses a specific unique feature of your online store. But your USP will be included as part of your value proposition in terms of the exceptional value it provides. For example, one of Amazon’s USPs is a one-click purchase. The customer value of this feature is ease and convenience.

Mission — This statement describes the company’s goals, and philosophy addressed to the client. It explains what you want to achieve in the industry and how you would like to do it. For example, Microsoft’s mission is “To help people around the world realize their full potential.”

Slogan — This short slogan, often in one sentence, summarizes your value proposition as concisely as possible.

Both the mission and the tagline are essential. Both stem from your value proposition but are not value propositions in themselves.

Vanity metrics vs. success metrics

When selecting metrics, it is essential to distinguish between success metrics and so-called metrics. Vanity metrics because then our product’s path to success may fail.

Vanity Metrics vs. Success Metrics — cover photo

Vanity metrics

Data that are ideal for publication in articles or other marketing materials. It isn't easy to draw conclusions from them that will help define or achieve the success of our actions. The increase in these metrics makes us feel better, we can boast about family and friends, but they do not help us make the right business decisions. One such metric is the number of followers on your Social Media profile.

Why is the number of profile followers on Social Media one of the vanity metrics? Well… The number of followers in no way generate revenue for this company or help it achieve its goals, which is to reach the most significant number of recipients. Probably most of us have seen profiles on Instagram, Facebook, etc., with ~ 500k followers and 1k like on the post. It means that engagement on that profile doesn’t perform well. For a company, the measure of success may be the reach of a single post — the more significant, the better.

Examples of other vanity metrics include:

• A number of social media followers — Having many followers can make many people interested in your product. Still, metrics focusing on traffic or engagement among those users can be more valuable. Worth considering: What percentage of your followers interact with your brand? How many people go to your website and become customers?
• Page views — Page views can be a helpful metric, provided you can use them in some way to meet your business goals. It would help if you also focused on success metrics, i.e., bounce rate, user time on the page, number of pages viewed during one session, or click-through rate (CTR) in the case of CTA.
• A number of customers — Analyze data such as the amount customers spend when making an order, how many customers re-execute the order, ratio of new to returning customers. We cannot forget the number of active subscriptions or the time spent on the application. In the case of metrics for SaaS products, it is worth paying attention to LTV (LifeTime Value), CAC (Customer Acquisition Cost), Churn, or MRR (Monthly Recurring Revenue).
• The number of products purchased or the number of app downloads is a metric that is abused by software or mobile app companies. The total sales or number of downloads of an application are metrics that keep growing but do not reveal the whole story — because what if we have a million downloads when the number of uninstalled applications is 850,000 (no one ever mentions the second metric)? It is also worth paying attention to the information, i.e., the trial conversion rate, the time after which the user uninstalls the application or the purchase rate of a higher package in the product.

Success metrics

Help to answer questions about the future of the company or product, but also say something about (potential) customer behavior. They are closely related to the increase in the product's value for the customer.

Every time you start measuring something, ask yourself two questions:

1. Will the measured data help me make business decisions that will drive growth?
2. Will the measured data show me what next steps I should take to increase the value of my product?

What to measure to achieve success?

👉 Revenue — You need to know everything about paying users for your product (a good CFO should be one of the first people in your Startup):

• Total revenue generated on average by a single user since the product was first used (Lifetime Value, LTV),
• Customer acquisition cost (CAC),
• The average length of a user subscription,
• Monthly, recurring income, i.e., the amount of income your company can expect each month. (Monthly Recurring Revenue, MRR).

For more metrics, check out this article for a list of metrics.

👉 Conversion Rates — To scale your business and product, track your conversion rates on each of the steps below — experiment and increase your conversion.
When an internet user visits your website, they are a prospective customer for you. When a visitor gives you his e-mail address, completes the contact form, or creates a trial account — he becomes your potential customer (lead). In the last step, a potential client buys a paid package and becomes your client.

👉 A / B testing gives the most valuable information of all metrics because they refute or confirm a specific hypothesis.

👉 Funnels (various types) — A funnel refers to a company's existing process. It is usually broken down into steps that differ depending on the process we want to measure in the funnel. You can find and correct weaknesses in virtually any process by tracking each step in the funnel.

👉 Cohorts (customer segmentation) — To understand how these groups behave, you need to use cohorts. They divide customers into groups, so you can easily find the trend in the data.

Summary

The most important thing is to focus on a limited number of metrics that matter to your product. They are related to the main goals of the organization and business results.

Metrics should be objective. When choosing metrics, remember that the metrics you choose should have a clear cause-and-effect relationship. Metrics should be understood by those who the decisions will influence. Remember, it usually is if something seems too good to be true. The success metrics show the truth.