How do you leverage data to build a great product? Well, that's what we’re going to get to the bottom of in this article.
Product managers often use the wrong metrics to measure the value of their product. How do you find the right metrics? More importantly, how do you put your finger on the real value of your product?
Let’s break down our agenda here:
- How do you value a product?
- Product management: getting started
- Two goals to aim for
- A strong product point of view
- Tracking your progress
- Product at the center of the tech space
How do you value a product?
Firstly, I’d like to introduce the subject with an anecdote. We like to talk about product in quite a binary way: products that have successfully leaned into data and those that haven’t leaned into data. Let me give you an example of this.
Some products generate a lot of buzz, but ultimately end up failing because very few people have used or bought them. What’s happened here is that product people have miscalculated the value of their product.
In the case of this product I’m talking about, it was super expensive, and it was a massive investment for the organization, but they didn't realize that it wasn’t bringing value to customers. These are the wrong measures of a successful product, and you need to be able to locate the value so that you know how to position your product.
Real value comes from problem-solving
The question you need to ask yourself is: what is the real problem that you're solving for the customer? It’s not about what you think is cool or fancy, it’s about what your customers are going to respond to.
In the case of the product I mentioned, it wasn’t just a privacy or security risk, it ended up posing an actual physical danger to customers. In the end, our mission is to create a delightful experience for customers.
This is quite the opposite of what we saw with the product I described to you. In this case, those in charge were putting their own needs and interests front and center rather than that of the customer.
Product management: getting started
With product management front and center in the technology space, we see this product-led movement becoming essential. The act of around the product itself has become an essential tenet for success.
It’s all about bearing in mind the fact that what’s important above all else is the relationship the customer has with the product. Here’s a hot tip: the relationship they have with your brand is forged through the relationship they have with your product. The product experience is important above all else.
It starts with data
To really pull something like this off, you have to align all functions within a company, that includes all stakeholders aligned with the product itself. So, at the foundation of any successful product-led company is data.
That data shouldn’t just be a bunch of figures on a screen, it should be indicative of a real need that people have. This will indicate whether there’s a demand for your product.
It starts with a ‘why?’
Why questions are always the key to establishing whether a product is going to satisfy some need that people have. The next question that comes from that is, why should we be investing our time and money in it?
Let's look at the example of Peloton, for example. They came up with the idea of enabling people to engage in full workouts from the comfort of their own homes. They built a Kickstarter campaign to test their idea. In this way, they were able to roll out a kind of prototype of their idea before full launch.
And from this data, they modified the bike a little. They were able to build the optimal product from the data they gathered through testing.
Two goals to aim for
Your goals should be split into two categories: operational and customer.
Within each of these sections, there are some key questions you need to be asking yourself.
Customer goals
Like I said, your product can only succeed if you’re able to establish that it will create a delightful experience for the customer.
How do you know if you’re customer-centric? Here are some key questions to ask yourself:
- Who is your target audience?
- Is there a pain point that we’re addressing?
- Is the product a ‘must-have’ or simply a ‘nice to have?’
- And what's the desired outcome for the product?
Operational goals
These are the broader business concerns that you have to bear in mind. You should be thinking exactly about what the product is going to do for your brand. Some other concerns you should have are:
- Are you looking to save costs for your business?
- Are you looking to increase revenue?
- Are you trying to mitigate any type of risk altogether?
- What will it cost to delay the launch?
Cost of delay is something that product teams use a tonne. Delaying a product launch is always going to be costly, but you have to determine whether it’s going to be worth it. Is it going to truly optimize and improve your product as a whole?
A strong product point of view
What’s ultimately important is that the risks that you take are guided by a strong product point of view as you build your case. In the early days of Pendo, we made an unpopular decision that was a really big risk.
The decision was to build a really broad product that provided both analytics and the ability to take action on the data. Lots of folks challenged us on that, and that's okay.
We truly believe that product teams need both capabilities, and we’ve stood by that mission statement all the way through.
What does your market need?
Of course, this strong point of view is often driven by what your market needs. You’re not just running off into the dark with no light whatsoever. You’re guided by the light of what your market needs.
And this really goes back to pain points, but it’s often not just a single pain point, but some collective pain that helps us get to a result.
How do we get closer to what the customer needs?
Get up close with customer needs
Understanding your customer needs is no easy task, but there are a few practical strategies you can put in place to get started with it:
- Shameless plug time: Pendo provides qualitative feedback on customer experience. This is equally important as quantitative feedback gives you insight into the unique specific problems that individual customers are having.
- Very often teams are all hearing feedback and receiving data from customers, but we can’t necessarily do anything with it unless we can put it all together in one place. The whiteboard platform Miro can help with cross-team collaboration. You can go through key customer pain points and prioritize the most crucial ones.
- Empathy maps are another method and it puts you a bit closer to the customer and gets you inside their mind a little bit. It gets you into their environment in a way that helps you understand how they're operating and thinking to get to their end goal.
Tracking your progress
What’s the point in moving forward if you don’t even know if what you’re doing is going to benefit you, right? Tracking success is so crucial for us to remain agile and adaptable. What value are you bringing to your market and your customer base?
For this, you need to be looking at your KPIs.
KPIs to measure your success
Some fairly obvious KPIs to measure are things like:
- Product adoption
- Usage rate
- Retention rate
- Overall revenue rate
- Impact on NPS
These are all pretty standard metrics that are always going to be of relevance for pretty much any organization. You can think of these as your foundation. If you don’t have these in place you’re going to be in a very unstable place.
Quality of product shipped
Now, we’re gonna dig a little deeper and look at if you want to get super nuanced with how your product is performing:
Looking at the quality of products shipped rather than the number of features shipped can get you deeper into what we call qualitative data. Qualitative data allows you to look at whether the product is performing the function that’s required.
Product at the center of the tech space
Product management has shifted to the center of the tech space, and it’s one of the most booming career paths for someone to take.
We’re seeing product people who are having a palpable impact on broader c-suite aims, and they’re driving bottom-line metrics and setting company goals. It takes a tonne of courage for product teams to hold themselves accountable for these true business metrics that people are putting in front of them.
This is what is expected of us today in more modern product organizations. We earn influence and authority in shaping the direction of a company when we're able to tie our business metrics like revenue or customer acquisition costs into the big picture.
Speaking of the bigger picture, you can’t just look at those metrics that are going to have an immediate impact. You have to look at….
Lagging metrics
These are metrics that may take a long time to present themselves. Things like:
- How sticky is your product - You might be getting a lot of adoption, but are you able to maintain trust in your product over time.
- Product engagement score - The thing is, it isn’t always apparent when a product first launches how successfully customers can engage with your product over time. And this can be a key indicator of its quality. This encompasses both positives and negatives: how much retention you're getting and whether your churn rate is on the rise.
- NPS score - This is a great measurement of success. It tells you what your customers are feeling after a certain amount of time after they've used the product. How are they feeling about the product X amount of months down the line?
Final word: the benefit of these metrics over time
Firstly, they allow you to take action as soon as you see things start to take an upturn or a downturn. They allow us to be agile and adaptable. We’re able to address issues as they begin to arise.
Conversely, they allow us to plan long-term. We measure metrics as they develop against our KPIs. They give us a goal to aim for and allow us to see how well we’re measuring up to this over time.
They allow us to get aligned. It’s very difficult to get the whole team united behind a common goal without targets. We have to get there together!
