Key Metrics to Justify Product Decisions and Prove Business Value
Tracking metrics is an essential part of successful product development, but one that is often overlooked or misused. Metrics and key business results are essential communication tools to align teams toward a common goal. They help inform teams about what is working and are key indicators of what to build next. Metrics help shape the definition of success for a product, feature, or business.
There are many popular frameworks that teams use, but the most common are objectives and key results (OKRs). Key results are standalone metrics that are quantifiable goals for the project while objectives provide directional context about what you want to accomplish. When used properly, OKRs complement each other and are powerful tools for guiding teams to justify decisions and prove business value. Read on to learn how to choose the right metrics for your organization so you can track the success of your product and business.
How to Choose Your Metrics
It is important to note that there is no one-size-fits-all approach to choosing key metrics for your teams. They should be nuanced and tailored to fit your specific business and industry. But there are several frameworks such as Google’s HEART framework (which stands for Happiness, Engagement, Adoption, Retention, and Task Success), AARRR (also known as Pirate Metrics which stands for Acquisition, Activation, Retention, Referral, and Revenue), and GAME (which stands for Goals, Actions, Metrics, and Evaluations) that help to determine the best way to measure your goals.
At Crafted, we believe that it is important to take a holistic approach to measure your product by balancing metrics that represent user experience, application performance, and business indicators. We were inspired by the framework designed by Sol Mesz called the Full Loop Analytics Framework, which combines Key Experience Indicators (KXIs) with Key Performance Indicators (KPIs) and Key Business Indicators (KBIs) to evaluate your product. It gives decision-makers a holistic perspective of how their product/feature/business is performing.
We leveraged this framework and modified it to more closely represent all three disciplines of a Balanced Team. Let’s break it down further:
Key Business Indicators (KBIs): Measure the health of the business and are indicators that the product team most closely measures. These metrics are generally related to revenue and growth rates such as total revenue, increase year over year, and increases in customer growth.
Application Performance Metrics (APMs): Measure the overall performance of the product. These metrics represent the technical arm of the product but can also manifest as Key Experience indicators in the long run. The goal with KPIs is to determine if the product is stable and if the functionality is performing as intended. If the product is performing as expected, then that should result in a positive return for the business. Technical metrics include uptime, response times, error rates and bug rates.
Key Experience Indicators (KXIs): Measure the overall user experience and are generally the focus of the design team. These metrics include retention and conversion rates. High NPS scores as well as high conversion rates indicate happy customers and ultimately impact profitability. Qualitative results from in-app surveys are another great way to garner insights to help determine next steps.
When choosing the metrics that are right for your business, it is also important to balance quantitative data with qualitative user research. The numbers don’t always tell the team the whole story, and a lot of the context around user behavior comes from qualitative data. The balance of these two also gives you a holistic view to help decipher what is working for the product and business and what needs to be improved.
How Do Metrics Prove Business Value?
KPIs attach measurability to what matters most and provide a North Star for the entire organization to rally behind. Each of these singular outputs or metrics should roll up to entire company outcomes so that everyone is pulling in the same direction and the overall goals can be met. This is where the true business value is met.
Output It’s also important to define what an output and an outcome are when determining which metrics to use. An output is something that is delivered, like a product release or feature (e.g., we launched an e-commerce portal).
Outcome An outcome is a change resulting from an output. Successful product teams track product outcomes, not business outcomes. A business outcome is a metric that moves the business forward (e.g., reduce churn/increase retention), while a product outcome is a metric that helps the team understand if the product is moving the business forward (launching an e-commerce portal made it easier for users to pay for our software).
When teams get into good habits of measuring their products, it becomes an easy filter for feature prioritization. Depending on the outcomes that the company is trying to achieve, product teams can easily hone in on the levers to pull to drive the desired metrics. It becomes clear when areas of the product are performing well and conversely, what areas need improvement. The hard numbers eliminate bias when the team is making decisions and keep teams focused on the most important issues. They also help determine when to shift gears from one initiative to another.
Use Case: Key Metrics In Practice
When using metrics to justify decisions and prove business value it is important to look at the whole picture and not just focus on one metric. Let’s look at an example scenario and see how metrics can help inform decisions and eventually prove business value:
You are about to enter planning sessions and need to build out a roadmap for your product. Inevitably, you have to balance releasing new features with improving existing features and tech debt. How do you decide and defend your decisions for where to allocate your valuable time, money and resources so that you can hit the overall business goals set for the company? Let’s look at how the Full Loop Analytics Framework can help:
What are the goals of the business? Where is the company focused and how does your product fit in? Once we determine that, then we can use KPIs and KXIs to help justify our product decisions:
OPTION 1: Are they looking to grow the business through acquiring new customers or new revenue streams? If so, we will need to evaluate…
Gaps in the current customer experience
Application performance to determine if/how the application can scale
To evaluate the overall stability of your application, consider the following: What are your uptime and error rates? How often are your teams bug-squashing vs. working on new functionality? This will help you to determine how much tech debt needs to be a priority.
If the company is looking to acquire X amount of new customers, can your platform support that? Are you tethered by legacy systems that need to be modernized? If so, then prioritizing tech debt to allow for future growth and scalability will be important.
OPTION 2: Is retention of existing customers the focus to improve revenue? If so, then we need to evaluate…
The current customer experience
Where are customers not converting in the application and falling off the happy path?
Or conversely, where and why are customers spending most of their time? Are there new features that can enhance that product functionality?
Does application performance need to be improved to provide a better overall experience? What is the uptime and response times of the application?
We used a version of Teresa Torres’ Opportunity Solution Tree to sketch out the decision-making process of this scenario:
When the right decisions are made based on data and are aligned with the overall company objectives, then it is easy to track these metrics and prove the business value of the initiative. Alternatively, it is important to note that not every initiative will be a success and bring value. In that case, it is imperative that the data speaks and that you’re able to fail fast and pivot so that you can stay focused on the overarching business goals. Pivoting is a decision to be justified in and of itself and will require metrics to do so.
Tools to Consider
There are a lot of great tools to consider as you start to prioritize metrics and use them to help justify decisions and prove business value. Here are some favorites from the Crafted team:
Google Analytics: Free way to track up to 200 different metrics to measure how your application is performing. You get a very robust analytics platform with a fairly lightweight implementation.
Pendo: Product experience platform that helps quantify qualitative feedback. They offer analytics to evaluate product usage, along with in-app surveys to garner feedback around customer experience.Amplitude: Analytics platform that focuses on behavioral cohorts and product usage. Helps you understand the behaviors of your customers and predict which events lead to business outcomes.
Mixpanel: Another option for analytics on user behavior and product usage.
Conclusion
The strongest product development teams are closely aligned with each other and stakeholders. Tracking and sharing key metrics is crucial to fostering productive collaboration and driving transparency across the business. If you’re looking for some other great resources about metrics and how to implement them, here are a couple to check out:
Measure What Matters by John Doerr
Continuous Discovery Habits by Teresa Torres
Talk to Crafted! We’ve helped organizations of all sizes implement metrics to drive product strategy and business results.