What should I be tracking? What are other companies in my space tracking? These are common questions you might ask when you think about your analytics.
There is no single set of metrics that works for everyone. Businesses and products are all unique and have different goals; even departments in the same company may have different ideas of success from one another. With those differences in mind, we’ve crafted a framework to help you find the right metrics for your product.
Here, we will use this framework to help you define your metrics and clarify the relationship among them so each team understands how their metrics connect to the overall product performance.
Types of Metrics
Most companies have a variety of metrics they use to measure overall product performance. In this group of metrics there is often one that is slightly more important than the others. We refer to your most important metric as the focus metric. The subsequent metrics that other teams or individuals spend their time on that help drive the focus metric are called Level 1 and Level 2 metrics.
Focus Metric - what matters most to your business
Focusing on a single metric can be limiting so we suggest a flexible framing with a focus metric, a metric that works with other key performance indicators (KPIs).
Focus metrics should be a top priority, not the sole priority, and you should not accomplish KPI improvement at the expense of harming other KPIs.
We usually recommend choosing a focus metric tied to active usage, such as Weekly (WAU) or Monthly (MAU) Active Users. These metrics do a good job summing up trends in other metrics, like acquisition, and retention by showing whether more people are using the product over time.
To know whether you have a useful focus metric, ask yourself this: “If we improve this number, will the product’s long-term performance improve?”
Level 1 Metrics
Level 1 (L1) metrics should either directly contribute to the focus metrics or act as a check to ensure the product is growing in a healthy direction. For example, if a product’s focus metric is WAU, a good L1 metric related would be 7-day retention. If users are being retained within 7 days, WAU will be on an upwards trend.
Level 2 Metrics
Level 2 metrics help contribute to the L1 metrics, and achieving these metrics ultimately help the company’s overall health and performance. You can add as many levels of metrics as you’d like, as long as each level is related and or acts as a check to the others.
Ensuring the metrics being added are done with purpose is paramount to a successful analytics strategy. Too many layers of metrics can create confusion, leading to scenarios where everyone has different ideas about where to spend their time to make the product successful.
Organizing your Metrics
Once set up, there should be an upwards relationship between your Level 1, Level 2 and focus metric, like the example below.
To see industry specific metric examples, download the full Guide To Product Metrics
Key Metric Categories
Users must show up in the product and perform actions to become active users. A user’s value is determined by the level of their engagement and whether they come back or stick long-term. Regardless of your product, there is a set of core categories that represent a typical user lifecycle: reach, activation, active usage, engagement and retention.
Reach is the total number of people who have used the product in recent time period. Reach represents the maximum amount of users who could reasonably become active, whether organically or through re-engagement campaigns.
For example, for consumer companies reach could be the number of paid accounts, or users who have made at least one purchase in the past three months.
Activation is a foundational step that primes a new user to become an active user.
Activation may be defined as completing the registration form, making a first purchase, viewing five videos, or making two deposits within a specific time period.
View the metrics a percentage of new users isolating it from natural user growth, to see if you’re more successful at activating users over time.
Active users are people who have taken a key action and received value from your product within a recent time period. Value can be defined as one action, or a set of actions. For a music playing service, activation can be when a user plays a number of songs. However, value can be perceived when a playlist is created or shared.
The exact triggers or definitions of “active” should be tailored specifically to your product.
Engagement accounts for frequency and pace of completing key actions.
Engagement could be defined as the number of key actions taken, minutes of video watched or number of transactions completed. Divide this by your active user count to measure the depth of engagement per user with your product. Otherwise, user growth might mislead you into thinking your product is more sticky than it is.
The exact trigger or definition of “engagement” should be tailored specifically to your product.
Retention is the metric that shows whether your product is sticky. When deciding a time frame for retention goals, pick a period that is long enough to capture the reasonable repeat cycle of your customers, yet short enough that teams can get feedback to iterate quickly. We generally recommend having 7-day retention as a leading indicator for 30 or 90-day retention.
If you have a metric in mind that wasn’t listed but is important to your product, then make sure to include it in your framework. Those metrics are business-specific metrics.
For example, a dating app would consider users who find a lasting relationship through the app and leave as a metric of “good churn”. While this involves losing users, it’s good for business because happy customers are more likely to spread the word and refer more friends.
Do-It Yourself Template
Setting up your framework is a crucial step, but only the beginning. Below is a blank template for you to apply the framework to your product. Fill out the blanks and either work your way down or define the L2 metrics to help determine your focus metric.
Once you've determined your goals and metrics, the next step is to set standards for your naming your events and properties. How To Name Your Mixpanel Data covers how to keep your data clean, concise and consistent.