Analytics can be a powerful way to propel a startup’s early growth. It gives you a clear understanding of your business, product and customers, and a no-nonsense view into product-market fit.
But analytics is a broad topic, and can be pretty overwhelming for a company that’s just getting started. Here’s the quickstart guide.
Mastering your metrics
Any company, no matter how young, can benefit from the objectivity analytics provides. But where should you be focusing?
While you’re still seeking validation for an early product, you should focus on three key points in the customer journey - acquisition, engagement and monetisation. Take language-learning platform Duolingo as an example:
- Acquisition: How many new users are signing up?
- Engagement: How many users are taking French lessons?
- Monetisation: How many users are upgrading to a paid premium account?
Now that you’ve decided which metrics to look at, you can start to measure them against specific time frames to create a simple tracking plan. For example, how many people continued with their French course this week versus last?
Have you found your market?
You may have built a product, but do you know if people actually want to pay for it? Analytics can help.
Too often, companies put all their resources into developing and promoting a product that nobody actually wants to pay for. In fact, according to CB Insights, the biggest reason why startups fail is because there is no market need for their product, with 42 per cent of startups failing because they are not solving a market problem. Analytics is your friend here, and can help you spot a lack of product-market fit before it’s too late to rethink your offer.
Retention cohorts are the most important metric for understanding product-market fit, and track the same cohort of users to see how many are using your product week after week.
Duolingo might look at a cohort of sign-ups to see how many return for their French classes each week. If they keep coming back, they must be deriving value from them. But if that figure drops to zero as time goes on, there’s a problem, and the platform hasn’t yet found product-market fit.
A cohorted retention chart visualises all of this to help you see whether you’ve hit the mark, or whether there’s a big drop-off point in your customer journey. Over time, you’ll also be able to see how new products or changes to the customer experience impact customer retention.
Choosing the best tools for the job
One thing’s for sure - early-stage startups should steer away from building their analytics stack in-house. Doing so could be a huge sink of time and resources, especially for your engineering team.
Building tools in-house can also be expensive - and that’s something to avoid if you can, as the same CB Insights study found that a dwindling cash supply is the second most common reason for startup failure. From basic analytics and diagnosis tools to email, marketing and data governance products, there’s already a wealth of affordable options out there, so it should be easy to find a good fit for your company without breaking the bank.
Always test-drive tools before buying them, and remember that the running cost will go far beyond the advertised price. To speed up the process, try installing similar tools at the same time to run head-to-head comparisons.
When starting out, an analytics tool like Mixpanel, Heap, or Amplitude is the best way to build your first cohorted retention chart - all have retention reporting capabilities. Drift and Intercom are great live chat tools that can help you get quantitative feedback from your early customers, as you seek validation for your product.
Actioning your insights
Your metrics are only valuable if you’re using them. Put together a real-time dashboard to share key metrics with team members - as these update automatically and can be accessed via a simple hyperlink, they’re a smart option for focusing your team around a shared KPI. Remember that team members will only engage with a product that works for them, so if you’re not seeing the benefits you’d intended, you might need to look again at your choice of dashboard.
A regular email to stakeholders and investors is another way to operationalise your metrics. Try sending a high-level update on key metrics every month, to highlight your wins and show accountability. This gives your backers a clear view of what’s working well, and where their support is most needed.
Growing your company with data
Today, even the youngest startups need to meet ever-increasing expectations from the customer experience. Preparing a solid analytics infrastructure up front will mean that you’re able to deliver better products, services and experiences to your customers across areas of your business as you scale, whilst also respecting user privacy and preferences.
Ilya Volodarsky, Co-Founder and President, Segment
Image source: Shutterstock/ESB Professional