“Without data on how the user is moving through your product, you won’t grasp where they’re unlocking the most value. Without those insights, your team and product devolve into conjecture and building for the vocal minority. Once you’ve started that, it’s impossible to scale.” — Sam Richard Director of Growth, OpenView
I like to tag it the blind leading the blind, and we all know what will happen. Startups thrive in flexibility and being adaptive. But you need analytics to help you adapt or pivot to the right direction and also to help you scale your startup. At the end of this article, you will have an understanding of how you can build better products and scale up your startup using Analytics.
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Metrics that matter
While it is good to know your numbers, it’s also important to avoid focusing on vanity metrics. You need to focus on the Metric that matters, also called the North Star Metric (NSM) and the Metrics that matter which are the metrics leading to your NSM
A North Star metric is the one measurement that’s most predictive of a company’s long-term success. To qualify as a “North Star,” a metric must do three things: lead to revenue, reflect customer value, and measure progress. If a metric hits those three points, and every department contributes to improving it, the company will grow sustainably. — Mixpanel
Your NSM should:
- Be easy to measure
- Have a high correlation with success
- Have clear communication with the company’s strategy
- Provide an objective view on the performance of the company
Why do we talk about knowing your north star metrics? The answer is quite simple, it’s Alignment.
It’s easy for the Marketing, Product, Engineering and Design Team to be busy, but at the end of the day busy with activities that will not affect the bottom line of the business. Your north star metric shows the metrics that signify growth, so if it’s not growing it means the company is not growing.
A startup experiences true growth when the team comes together to align on meeting the north star metric for the company.
Does that mean other metrics don’t matter? Not really. Having your NSM helps you work backwards in identifying the metrics that matter.
“It is better to work backwards when looking at the metrics that matter, than to assume metrics from each department”
When you work back from the Metrics that matter you can begin to see the other input metrics that your team should be focused on to improve your overarching goal.
How do you measure these metrics for your startup?
Now that we’ve seen the importance of having metrics that shows growth, the next is how do you actually measure these metrics. How do you answer questions like;
- What’s my acquisition conversion rate?
- What acquisition channels are driving traffic?
- What’s my retention rate?
- How am I growing MoM/YoY?
- What’s my overall traffic and where are they coming in from?
- How many minutes does it take users to complete the onboarding process?
- What action does a user take within the product before performing a key action e.g purchase?
- What’s my best-performing feature in your product?
- Who are my power users?
- Of the x users who entered my marketing funnel how many did not convert?
And of course, the metrics that will lead to your NSM.
That’s where you need analytics. Analytics helps you to measure and answer questions like those and more, and of course help, you make an informed decision.
At Founders factory Africa’s growth team, we share with our portfolio companies the 4 different stages of the Product analytics maturity curve a startup can be in their analytical journey.
- Stage 1 — Measuring traffic coming into their website/product: The focus is on simple traffic data.
- Stage 2 — Identifying acquisition channels, and going deeper to know which channels generate conversions.
- Stage 3 — Measuring Engagement + Conversion: A deeper analysis from page view to user behaviour, which answers what specific actions are users taking on your product.
- Stage 4 — Measuring Full Customer journey: This is tracking all events alongside your users’ journey from awareness to conversion.
Unfortunately, most startups in Africa are in stage 1 or 2, just having basic data and not digging deep into user behaviour along the product journey.
For a startup measuring full customer journey with tools like Google Analytics and Mixpanel, you can analyse the marketing activities/awareness channels that brought in users to your platform and the events/actions that lead to those users making an important conversion, which most likely will be metrics leading to your NSM.
(Outside the product) Touchpoints that brought in users. Image credit: Data from Google demo store
(Inside the platform) Actions/Events users did before conversion (purchase). Image credit: Data from Mixpanel demo music finder
With this information, optimization opportunities from marketing to product are massive. This basically is a summarized story of how analytics can help you build better products and scale your startup.
Next week I will touch on Marketing analytics vs Product Analytics and why you should do both.
Let me hear from you, how has analytics helped you build better products or scale up? Let me know in the comment section and don’t forget to share to help a founder/startup.
Read up the next article in the Startup Growth Marketing series – Product Analytics Vs Marketing Analytics