Product Analytics Guide: What is it, Best Tools & How to Implement
How product analytics enhance the user experience
What determines the success of a digital product? There's no simple answer to that question. Several factors can affect your product's performance, and to ensure that your product performs well, you must have insights into how users interact with your product. This is where product analytics comes into play.
The traditional way of understanding user behavior was qualitative – conduct surveys, interview customers, and collect customer reviews. With advances over the years in event and user tracking, we now have a better, quicker, and more reliable way of tracking users, understanding how they interact with products, and quickly answering questions around core product KPIs. This is more quantitative, and the data tells you exactly what your users are doing. That way is called product analytics.
What is product analytics?
Product analytics allow product teams to assess digital products' performance by providing critical insights about their usage, retention, engagement, and feature set. Product managers can use this information to optimize product performance, improve the user experience, and drive KPIs like retention.
Who uses product analytics?
Anyone looking to assess their digital product's performance and learn ways to make it better benefits from product analytics. Mainly product managers and product teams use product analytics to gain valuable insights into what experiences of the product are performing well, why, and what features need improvement. The data is then used to improve existing products and improve the product strategy for future efforts.
Product managers are always looking for ways that will allow them to study users' behavior to increase not only user acquisition but also user retention. The in-depth product analytics data helps product managers get real-time insights into how users interact with their product, which features of the product see more usage, and which features are causing users to walk away.
Product analytics enables product managers to understand usage, track performance, and answer questions independently without requiring a data team to fulfill every business intelligence request. The usage data and product data, in general, can help product managers come up with creative solutions that not only drive results but are also a hit with end-users.
Marketers & growth teams
More companies want to embrace marketing decisions based on data instead of "gut decisions." The user interaction data provided by product analytics tools help marketers understand which marketing strategies contribute to user engagement, user acquisition, and user retention the most and which campaigns aren't working.
UX designers and researchers
Product analytics allow user experience (UX) designers to holistically look at the customer journey and do a funnel analysis of the user experience to see how they interact with different product features. This allows UX designers to improve feature adoption and the core customer experience to ensure a product free of problems and obstructions.
Why does product analytics matter?
Product analytics is the key to improving product-related metrics like conversion rate, activation, retention, referral, and revenue generation. These metrics are the lifeblood of a product team’s efforts – they define a product’s success. A product analytics platform helps you measure performance and figure out the factors that affect them.
See how customers interact with your product
With path analysis and funnel analysis, you can learn how users move through your product and what steps they take to perform a key action in your product. This allows you to see the stages at which they succeed and the steps they fail, thus giving you a better understanding of the digital experience. By providing granular, event-level user data (like what buttons they clicked on, not just what pages they visited), product analytics help you understand users' behavior at the micro-level and enable you to make precise improvements in your products.
Find the channels that drive the best user engagement
It’s great if your product’s features are being used, but what drove the growth in the first place? When you use a product analytics tool, you can learn why users started interacting with specific features. You can view how sign-ups and feature activations were achieved, and make decisions accordingly.
This allows you to improve your products for maximum growth. For example, if the data shows a strong correlation that Feature B is activated when Feature A is used first, you can customize your product onboarding to highlight these features.
Reduce user churn
Any business's profitability depends on its ability to keep customers coming back for its products and services. Increasing product retention rates can contribute a great deal to the profitability of a business. On the flip-side, customer churn or the loss of customers can cost a great deal.
This happens because businesses spend vast sums of money on customer acquisition, and each customer lost is a waste of that money. Product analytics can help you increase retention by giving you access to valuable information that you can use to understand which features lead to high retention, improve user experience, and focus on shipping more valuable capabilities within your product.
Conversion rate optimization: Get more paying customers
Getting people to sign-up for your product is in itself a success, but it does not bring much value to your business unless the sign-up is converted into a purchase or an active user. Many digital products offer free plans or free trials for a limited period to acquire customers and get users hooked.
A genuinely successful sign-up is when the customer stays for the product after the trial is over. Product analytics lets you understand your conversion rates, what drives purchases and upsells, and gives you vital insights into growing revenue.
Find common customer characteristics
The best customers are the ones who stay and also bring others to your product by referring it to others. With product analytics, you can learn which type of customers are engaging more with your product and then use that information to segment your userbase. This helps track different KPIs for different users and focus on targeted product and marketing efforts for each segment.
You can also use product analytics to gain insights about customers that are not likely to stay. Using those insights, you can create a user experience that prevents those customers from churning.
Product analytics metrics & examples
Product metrics are different aspects of product performance that can be quantified using product analytics tools. Product metrics tell you how your product performs and indicate how performance can change in the future. Using the right product metrics, you can become aware of your customers' problems using the product, even if your customers do not directly provide you with feedback.
Funnel analysis is a way of mapping out each step a user is required to take to get a goal action or outcome like a purchase or a signup. It's called a funnel because each step typically has some drop off of users, creating a visualization that looks like a funnel.
Trends analysis is done by using past and present behavioral data related to your product. This data indicates the shifts in product demand over time and reveals the popular segments where your product is in popular demand or is likely to lose users. Product managers use this information to understand their users, build new features, and improve user retention.
Customer journey analysis
A successful customer journey starts with the customer becoming aware of the product and goes on until the customer becomes the product's ambassador and begins referring it to others. Many stages come in this journey, and each stage requires some strategy to keep the customer moving from one stage to the next. A customer journey analysis lets you understand the different paths users take in their journeys, see precisely where your strategies are working and where they are failing.
Adoption and new user activation analysis
Activation is getting the user to experience the "aha" moment or the first moment of value as quickly after the sign-up as possible. Teams use email, onboarding, and targeted messaging based on past behavior or current cohort to do this.
A cohort indicates the segment of users who have performed the same events in a given duration. For example, let's say a cohort analysis shows that the number of sign-ups peaked at a particular point in the month. Product teams can then analyze other metrics to identify what happened at that specific point that might have led to increased sign-ups.
This is the ultimate KPI for product health. Retention analysis is used to understand what percentage of acquired users become regular or recurring customers. Customer retention is vital as the cost of new customer acquisition is far higher than the cost of retaining customers. One way to conduct a retention analysis is to see how many customers acquired at the start of the month came back during the last 30 days. 7-day, 30-day, and 90-day retention rates are all common metrics to track for product teams.
The best product analytics tools
Product analytics tools are a great resource to provide visibility into user behavior for digital products. A good product analytics tool can track user interactions, identify pain points, identify behavioral patterns, and provide dashboards that help product managing teams gain insights about product performance without much engineering effort and for a reasonable amount of money.
Freshpaint (shameless plug) allows you to easily collect customer data and integrate that data across hundreds of tools. This includes all the major product analytics tools. It enables you to get a comprehensive picture of customer data by standardizing it across multiple analytics and marketing tools. Freshpaint makes it dead simple to set up and start using the tools below in minutes. You can collect behavioral data and integrate it with all the major product analytics, plus 100’s of other growth tools with one click.
Mixpanel is a product analytics tool that allows you to find data trends quickly and conveniently. By providing real-time data on how people are using your product, Mixpanel lets you build better products and innovate the existing ones to meet user demands. Freshpaint makes it easy to collect and send data to Mixpanel.
Amplitude is a product intelligence platform for web and mobile optimization. Amplitude allows businesses to personalize product experiences to drive engagement and conversion. Amplitude stands out from other analytics software because it allows companies to gain immediate insights into their campaigns' impact and provide the product teams' visibility. Freshpaint makes it really easy to collect and send data to Amplitude.
Heap is a product analytics tool that makes it simple for non-technical team members to understand their users. Heap’s robust self-serve analysis gives everyone at your company the power to use analytics and make informed decisions based on those analytics. Freshpaint integrates with Heap in one click.
Indicative is a product analytics platform with a unique selling point in that they connect directly to your data warehouse in addition to connecting to a CDP like Freshpaint. Indicative makes it easy to do cohort analysis, segmentation, build dashboards, and more without writing a single line of code.
How to implement product analytics
Product analytics is an essential resource that can help your business grow but to make the best of it, you must implement product analytics the right way. Aligning your business goals with your data needs is the first thing you need to get yourself on the right track, and the second is to make a tracking plan that will help you stay focused and keep you from missing out on essential details.
What are user events?
User events are the tracked actions users take during a session. These actions can include clicking buttons, performing a search, loading a page, or even making a purchase. In other words, user events are about what a user does. These actions provide valuable information about their behavior. They can be used to understand how people use your product, what features keep them coming back, and what problems the user is facing.
Apart from using user events to get useful statistics, you can also use them to group users and trigger automation. For example, if a new user that just signed up doesn’t complete a specific action in their first sessions, you can use this event to trigger an automation that will send an email reminding them to pick up where they left off, helping to drive an increase in your activation metric.
How to collect user actions
There can be countless user actions that you can track and put to use, but before you collect user actions, the important thing is to figure out which user actions are the most relevant to your goals.
The best way to go about this is to create a tracking plan and list all the critical user actions you'd like to track. It is crucial that the tracking of these actions align with your business goals so that your time is not wasted on things that are of little use to you.
Once you have set-up a tracking plan for collecting different user actions, you should start implementing that plan by instrumenting your product to collect the data. The data obtained from user action collection can then be used in various ways depending on the collection goals. Freshpaint automatically instruments your site or app, so you don’t have to spend developer time doing this.
When to collect user actions
If you intend to study your customers’ behavior and understand your product’s performance better, you should start collecting customer data from the very beginning. Apart from correlating specific user actions to metrics like retention and conversion, you can also collect user actions to personalize marketing efforts.
Using this data, product teams can target marketing and figure out ways to make their product better for a maximum number of users.
Did you forget to write code for tracking user actions? With Freshpaint, we autotrack every event from the moment it’s installed. If you decide an event needs to be tracked, you can backfill the event data with just a few clicks.
Freshpaint makes it easy to identify users (in addition to individual events), so their activity isn’t anonymous. You can see specifically which users are doing what, and you can attach contextual information to their identity as well like what pricing plan they're on, which company they belong to, and more.
Product analytics FAQs
Product analytics can sometimes be tricky to understand. Below, we have answered some frequently asked questions about product analytics to help create a better understanding.
Why are product analytics tools important?
Product analytics tools help you understand your product's performance better and help you understand your users’ demands and requirements. If appropriately used, product analytics tools can have an immense effect on the growth of the business.
What is product performance analysis?
Product performance analysis analyzes how well the product is doing, what features of the products are problematic, how many customers are buying it, and how many keep coming back.
Which product analytics software is best?
There are plenty of product analytics tools available. Some of them include Amplitude, Indicative, Heap, and Mixpanel. The software that works best for you matches your analysis needs, budget, and engineering bandwidth. Freshpaint automatically instruments your site or app to collect customer data and integrates with any of these tools in one click.
Our team has worked in this space for a long time, both helping build companies like Heap and as paying customers of tools like Mixpanel in the past. If you want a bespoke recommendation based on your business, stage, budget, and other requirements please reach out to us – we love to help!
What is product performance?
Product performance is a measure of how well the product is doing. This can include both the popularity of the product or specific features with users and its impact on the business.
To keep up in a highly competitive world, the only option is to work smart. Qualitative customer research and interviews no longer cut it. If you want to succeed, you also need to layer in quantitative, data-driven tools and processes. If used properly and in line with your business goals, product analytics tools enable product managers to make data-informed decisions. One crucial factor contributing to the successful use of a product analytics tool is finding the tool that best suits your needs and resources.
Freshpaint is a leading data platform that collects event data and provides one-click integrations with 100+ analytics and marketing tools. Freshpaint is a fast, modern, and flexible solution for developers, product teams, and growth teams.