Startups have a bunch of things to worry about when launching.
While talent and funding are critical, the most important thing by far is to establish a clear, needed value proposition that addresses real customer pain points. Achieving this clarity is only possible if the startup has an accurate idea of what customers want, and this can only be achieved by paying attention to relevant data.
In today’s real-time, connected world, this can only be done effectively by using analytics. Increasingly powerful and able to process large data sets, analytics tools can help startups gain a clear understanding of exactly what their customers and prospects need.
However, with thousands of tools in the market today, analytics can be pretty daunting at first for most companies. Here’s a quickstart guide for any startup looking to get its analytics infrastructure in place.
Establishing your metrics
In the early stages of a startup, entrepreneurs should focus on the three key components of every customer journey: acquisition, engagement and monetisation.
- Acquisition: How many new users are signing up?
- Engagement: How many users are using our product?
- Monetisation: How many users upgraded to the paid version of our product?
Once you’ve chosen your metrics, you can create a simple tracking plan that measures them within certain time frames. How many users signed up this week when compared to last week? How many users continued to use our product this week? Questions like these are what you need to be able to answer.
Finding your market
There is no point bringing a new product or service to market if demand doesn’t exist.
All too often, a new startup will invest significant time and money into the development and promotion of a new product — only to find that demand is low or even non-existent. In fact, according to CB Insights, failure to find product-market fit is the most common reason a startup fails. How could this have been avoided? And how can you know if people truly want to pay for your product?
The answer is retention cohorts.
This metric helps a startup understand how a product might be received by following a single cohort of users over a period of time. A cohort that keeps coming back does so because they are deriving value from your product. But if return visits decline, there could be a problem, and it is likely that platform hasn’t yet found its product-market fit.
The great thing about this metric is that it can be represented visually. You can use tools like Intercom or Mixpanel to quickly create charts that show how any new products are faring and the impact of any marketing campaigns or sales promotions.
Metrics are only valuable if you’re using them. After all, you can’t fix what you can’t measure.
To ensure that your metrics don’t simply become another report that sits on the shelf and is never used, it’s worth creating a real-time dashboard that will allow them to be easily accessed by all staff. When linked to live data sources, these metrics can be constantly updated, giving everyone an insight into what is going on and giving them clear KPIs to unite in working towards.
You can also make metrics available to stakeholders or even partners. A brief monthly update that contains key metrics can be a powerful way to highlight wins and provide a clear picture of what is happening in the market.
Growing your company with data
Even the smallest startup needs to have a clear and ongoing understanding of its customers and prospects. Analytics allows you to have a no-nonsense view into your business, so you can understand customers and focus on what’s most important strategically.
By building a solid analytics infrastructure as a first step, you can be confident that your offerings will find a strong market demand both now and as you continue to grow.
- Ilya Volodarsky is co-founder and president of customer data infrastructure platform Segment.