The business world has become increasingly competitive in recent years, and as a result, it has never been more difficult for businesses and their products to stand out. To survive in an unforgiving market, it’s crucial to have a competitive edge.
One way to make smarter decisions and outperform competitors is to harness the power of your business’s data. Companies that leverage data analytics often make better decisions, helping them become more efficient, cost-effective, and strategic.
That’s why, according to one survey, 99% of firms have invested in data initiatives.1 However, that alone isn’t enough to ensure success. Businesses also need to understand and implement best practices when it comes to data and utilise effective tools.
In this article, we’re going to focus on a data analytics technique that can help you drive long-term success through smarter product decisions — product performance analysis.
What is product performance analysis?
As the name suggests, product performance analysis is the process of using data to analyse product performance and subsequently glean actionable insights. For example, you might learn:
- Which customer segments your product appeals to most
- The number of customers who return time and again
- Which product details or features are being used and which aren’t
- How you can streamline in-product processes
Product managers can then use these insights to guide their decision-making process, allowing them to optimise product performance, improve the user experience, and drive towards product-related KPIs.
Why is product performance analysis important?
In ultra-competitive markets, gaining insights into your product’s performance and the way users interact with it can give you a competitive advantage and help to ensure success in the long term.
On top of that, data can also provide insights into how products are performing on affiliate sites. Data analytics can help bridge this gap with web scraping technology that provides insights with regards to share of voice (SoV), the customer journey and how customers are interacting with these sites.
Without these and other data-driven insights, you are left with basic performance metrics like product sales or the number of new customers acquired. These metrics are useful as a fundamental indicator of the success of a product or service, but they don’t provide any context as to why a product is successful or otherwise.
Product performance analysis allows you to drill down into the factors behind a product’s success or failure, providing the following benefits:
- Deep knowledge of how customers interact with your product: Understanding how your customers use digital products is critical to enhancing the user experience. With product performance analysis, product teams can see the processes customers follow to perform certain tasks – the buttons they click on and the pages they visit, for example. This allows them to pinpoint inefficiencies and make small adjustments that have a big impact on UX.
- Reduced user churn: Customers are the lifeblood of any business. And studies have shown that acquiring new clients is significantly more expensive that keeping existing customers, which is why businesses must do everything they can to reduce user churn.2 Improving their products is a great place to start. Product performance analysis gives you the insights you need to make products that are intuitive, beautiful, and relevant — products that understand user needs. If your customers are happy with your products, chances are they’ll stick around.
- A better understanding of who your ideal customer is: Using customer data, you can gain powerful insights into the type of people who are using your product. You can spot common characteristics that allow you to build an understanding of what your target customer looks like. With these insights, you can build products, features, and marketing campaigns that target the right people, allowing you to boost conversion rates and keep key customers happy.
- Understanding of what drives user engagement: Seeing which product features your customers are using is one thing. Understanding the factors behind that usage is another altogether. With product analytics, you can gain valuable insights into the way users discover and use certain features. This allows you to fine-tune processes within your product, and design your customer onboarding in a way that maximises product usage.
How does product performance analysis work?
Now we’ve discussed some of the benefits, let’s focus on how to conduct product performance analysis. Here are some key steps to understand before you implement them in your business.
Align data needs with business goals
This is crucial. Before you start thinking about results, it is critical that you understand and outline your business goals. This will help you define the specific metrics you need to track and the data sources you will use.
Build a data tracking plan
One way to ensure that your analytics efforts are coherent and in line with your wider business goals is to build a data tracking plan. Essentially, a tracking plan helps you to:
- Outline critical events and user actions you need to track in order to capture relevant data – examples include clicking buttons, making a purchase, loading a page, or performing a search
- Determine the methods you’ll use to track this data
- Ensure that your data tracking efforts are aligned with your wider business goals
- Prevent key details from being missed
- Keep everyone on the same page during data collection and analysis
Collect user actions
Once your plan is set up and you have determined the user actions you want to track, it’s time to implement the plan. This involves instrumenting your product to collect the relevant data. Make sure you understand which user actions relate to which key metrics.
You can then analyse this data to gain actionable insights that help you make smarter decisions about the direction of your product and marketing operations.
Ensure that you have the right skills and expertise
Like any branch of data analytics, product performance analytics is an esoteric discipline that requires the right skills and expertise to be successful. Data analytics is also a fast-evolving discipline, making it difficult to keep up with the latest trends and techniques.
A poorly executed analysis will likely lead to inaccurate or irrelevant data points. This can lead to false assumptions, which in turn leads to poor decision-making.
To reap the benefits of product performance analysis, you will need to make sure you have the right skills in-house. In many cases, this means hiring new staff or upskilling existing ones.
Alternatively, you can outsource your analytics processes to an external partner, allowing you access to all the benefits of product performance analytics without having to make major internal changes.
Use the right metrics and analysis techniques
There is a whole range of metrics and analysis techniques you can use when performing a product performance analysis. The approaches you choose will depend on your specific product and the business goals that are underpinning your efforts. Here are some examples:
- Funnel analysis: This type of analysis maps out the processes users take on your website to achieve a certain goal, such as making a purchase or signing up for something. Tracking the user journey through different phases of the funnel allows you to spot pain points and optimise the UX.
- Trend analysis: Using current and historic data, trend analysis provides you with insights into customer behaviour and changes in demand. It also allows you to see the customer segments that your product resonates with most. Ultimately, these insights provide you with a stronger understanding of your customers, allowing you to take a more strategic approach to product development and customer retention.
- Customer journey analysis: This process allows you to analyse the complete customer journey – from awareness through activation all the way to advocacy. At each stage of this journey, there are various touchpoints and actions that move customers on to the next. Customer journey analysis allows you to see which stages of this process are working and which aren’t, helping you to optimise the journey at all stages.
- Cohort analysis: Cohort analysis takes your customer data and divides it into subsets – or cohorts – based on shared characteristics. For example, users could be segmented into cohorts based on their behaviour within a product, their sign-up date, or whether they make repeat purchases or not. These cohorts can then be further analysed, allowing you to understand the motivations behind different groups’ decisions and behaviour. This helps you to target key cohorts and take a more flexible, strategic approach to meeting customer needs.
- Retention analysis: This process helps you to understand the percentage of customers that stick around, which is a vital metric for understanding product success. You can apply various timeframes to measure customer retention rates, depending on your needs.
Get the most out of product performance analysis
As we have already touched on, product performance analysis — and data analytics in general — is a complex process that requires a specific set of skills and expertise. Given the dynamic nature of this discipline, many companies have a skills gap that must be addressed if they are to successfully handle analytics in-house.
Fortunately, there are ways businesses can overcome this and benefit from the power of data analytics. For example, partnering with a trusted third party that specialises in data analytics allows you to maximise the potential of techniques such as product performance analysis.
At Jarmany, that’s exactly what we offer our clients. As one of the UK’s leading analytics specialists, we have the expertise, skills, and tools you need to turn raw data into actionable insights. We also work with outside partners to provide additional insights around performance on third-party retailer sites, giving you a full picture of product performance.
By working with us you can gain all the benefits of a thorough product performance analysis with none of the risk or hassle. If that sounds interesting, contact us today to find out more.