Mastering Product Analytics: A Definitive Guide to Metrics, Tools, and Practical Examples

Mastering Product Analytics: A Definitive Guide to Metrics, Tools, and Practical Examples

Elena Doynova

Jun 9, 2023 • 10 min read

Mastering Product Analytics: A Definitive Guide to Metrics, Tools, and Practical Examples

Building great digital products is tough – and only the toughest product managers survive in the competition. Right by their side, there is always one thing… A great stack of analytics tools. They’re the product manager’s best friend and, just like a real pooch, analytics tools stay by PMs on their daily ‘walk’ inside the product, bring them interesting sticks to check out, invite them to play to improve the experience, and protect them against unbeknownst dangers. Is this analogy far-fetched? Absolutely – but it’s cute. Back to the main topic today – as far as we know, PMs start their day with a strong coffee and a healthy dose of product analytics so let’s discuss these in-depth: for the PM who’s just starting their career, for the PM who needs a refresher, and for the PM who needs ideas. Let’s go!

What is product analytics?

In simple terms, product analytics is the process of analyzing how users interact with your product or service. It involves collecting various metrics and measurements related to user behavior, engagement, conversions, and more. These metrics help you answer crucial questions such as how many people are using your product, what features they’re using the most, and even how satisfied they are with the experience. By digging deeper into the product analytics data, you can uncover valuable patterns, trends, and opportunities, helping you make informed decisions on improving user experiences and driving product success.

What makes product analytics platforms important is their ability to provide actionable insights (if you know how to read the signs, that is). By using them, you can track user interactions, measure the effectiveness of marketing campaigns, and identify areas where the product falls short of the users’ needs and expectations. For instance, you can understand if users are dropping off at a specific point in the user journey or if a particular feature is underutilized – and then analyze the reasons why and solve the underlying issues.

Driving Product Success with Product Analytics

In a highly competitive landscape where user expectations are constantly evolving, product managers need as much data as possible to make informed decisions and stay ahead of the curve. Product analytics acts as a guiding light to illuminate hidden usability issues that may turn into bottlenecks, overlooked opportunities for improvement that are actually true golden eggs, and unexpected customer journeys that can turn into whole new features.

How to drive product success with product analytics

Empathize with users on a deeper level

First and foremost, product analytics can help you empathize with users on a deeper level. By analyzing their interactions with the product, you gain insights into how they navigate, engage, and derive value from it. This knowledge will empower you to make strategic decisions regarding feature enhancements, user experience improvements, and overall product direction. Without this understanding, you would be left in the dark, making decisions based on biased assumptions or guesswork.

Measure the impact of actions and initiatives

Moving ahead, product analytics enables you to measure the impact of your actions and initiatives: marketing campaigns, feature releases, and UI/UX changes. Did that new onboarding flow increase user conversions? Are users spending more time on our platform after a redesign? Product analytics provides concrete evidence, allowing you to assess the success of your team’s efforts and make data-backed decisions for future iterations.

Identify bottlenecks and opportunities for improvement

As mentioned, product analytics plays a pivotal role in identifying bottlenecks and areas for improvement. By analyzing user flows, funnel drop-offs, and conversion rates, you can pinpoint specific pain points in the user journey. This information will guide you in optimizing the product experience, reducing friction, and increasing user satisfaction. Without analytics, you would struggle to identify these roadblocks – leaving your users frustrated and potentially leading them to churn!

Prioritize your team’s tasks accordingly

Product analytics can assist you in making informed prioritization decisions. Let’s face it – with limited resources and countless potential features and enhancements to consider, every PM needs objective product data to guide their choices. By analyzing product usage patterns, feature adoption rates, and user feedback, you can identify the most impactful areas to invest your time and resources. This ensures that you focus on building features and functionalities that align with user needs and drive business value.

Facilitate communication and efficiency

Let’s also not overlook the fact that product analytics tools facilitate effective stakeholder communication. By presenting data-driven insights, you can demonstrate the impact of your product or service initiatives and get support from key stakeholders. Whether it’s executives, investors, or cross-functional teams, product analytics platforms act as a common language that bridges the gap between subjective opinions and objective evidence. This alignment helps build trust, secure resources, and gain buy-in for future product endeavors.

Key Metrics in Product Analytics

To be successful in product analysis, PMs rely on a range of metrics tailored to their product and business goals. Learning how to set the objectives ahead is an art in itself – you can learn more about it in this article where we go deeper on goal setting and measurement. We curated a short list to get you started…

Product Management Metrics Cheat Sheet
Engagement metricsDaily active users (DAU)
Time spent on site or app
Pages viewed & Sessions per user
Activation metricsNumber of activations
Trial/Freemium to activation conversion rate
Number of drop-offs before activation
Acquisition metricsNumber of trial/freemium subscribers
Number of paid subscribers
Trial/Freemium to paid conversion rate
Monetization metricsCost Per Acquisition (CPA)
Monthly Recurring Revenue (MRR)
Customer Lifetime Value (CLV)

Product Analytics Tools for Your Stack

Various tools have been developed to help PMs gather and analyze product data effectively. Each of the product management analytics tools listed below offers unique features and capabilities such as visualization, segmentation, and reporting, allowing you to gain a holistic view of the product’s performance, as well as user and customer behavior. Which ones should you invest in? Depends on your goals and budget…

Mixpanel

Mixpanel is a powerful product analytics solution known for its event-based tracking and analysis capabilities. If your product or service requires detailed tracking of specific user actions and events, Mixpanel should be top of mind. It offers flexibility in custom event tracking but will require a decent amount of learning and manual instrumentation. Mixpanel’s segmentation features allow you to deep dive into specific user cohorts, making it ideal for understanding complex user behaviors and conducting A/B tests for conversion optimization.

Google Analytics

Google Analytics is a widely used and comprehensive tool that provides a wealth of data and insights for product managers. Although it may not fall strictly under the product analytics category, it offers a broad range of features, including user and customer behavior analysis, traffic sources, conversion tracking, and e-commerce analytics. Google Analytics is a solid choice if you prioritize a tool with extensive reporting capabilities and integration options.

What it truly excels at is tracking website metrics. With its recent upgrade to GA4 which enables some types of automatic event tracking, it also provides a robust foundation for understanding user acquisition, behavior, and overall website performance in one place.

Amplitude

Amplitude is a feature-rich product analytics platform designed to help PMs gain deep insights into user behavior from the beginning of the customer journey to its end. It offers powerful event tracking, funnel analysis, cohort analysis, and user segmentation features. Amplitude’s strength lies in its intuitive workflows, making it easier for product teams to extract actionable insights.

Unfortunately, just like Mixpanel, it may require you to spend some time learning how to use it efficiently (not to mention the fact that you need to tag everything manually). But if you value a tool that provides truly comprehensive analytics capabilities, Amplitude could be an excellent fit for your needs.

Heap Analytics

Heap Analytics stands out from the rest on this list with its automatic event tracking and retroactive analysis features. If you prefer a tool that simplifies data collection and analysis processes, Heap Analytics is worth considering. With automatic event tracking, you don’t have to manually tag events, saving you time and dev effort. Additionally, Heap allows you to define new events retroactively, which is useful for analyzing historical product analytics data (some events’ value becomes obvious only in retrospect). The tool’s funnel visualization capabilities aid in understanding user flows and identifying drop-off points, thus making it valuable for optimizing conversion rates.

In making a decision, consider the specific requirements of your product and the metrics you need to track. Evaluate factors such as event tracking flexibility, ease of use, reporting capabilities, and the ability to extract actionable insights. It’s also valuable to try out demos or free trials of these tools to assess their suitability for your unique product analytics needs. Speaking of cost, apart from the free Google Analytics platform, you will need to budget in advance for most of these tools as they can be costly depending on your needs and scope of business…

Can we also add a suggestion to amp up your game with a tool that combines product analytics, UX analytics, behavior analytics – and also a best-in-class Customer Success tool to complete the stack?

SessionStack

SessionStack Product Analytics

Who said that you can’t have your cake and eat it? SessionStack is a powerful digital experience analytics platform that provides both quantitative and qualitative insights into user behavior and technical issues within your web and web-based applications. Let’s see why SessionStack can complete your analytics needs – and even surpass them!

  • Session Replay

One of SessionStack’s standout features is its session replay functionality. It records and replays user sessions, allowing you to see exactly how users interact with your application. Its session recordings are event-based – meaning that you won’t get only a video replay of the session but also a complete log of the user environment. This capability provides deep visibility into your users’ behavior, enabling you to understand their actions, navigation patterns, and pain points. By watching session replays, you can identify usability issues, uncover areas for improvement, and optimize the user experience.

How about a built-in AI capability that allows you to summarize even the longest sessions into short and insightful summaries? Discover SessionStackAI 👉

  • Live Sessions and Co-browsing

With SessionStack’s live sessions and co-browsing features, you can watch user sessions as they happen – pair this with the options to track errors in real time, and you have a proactive approach to resolving issues before they become major bottlenecks, minimizing the impact on user experience and maximizing product performance. What’s more, you can provide your Customer Success team with a live co-browsing tool that will facilitate their job – real-time assistance can save them tons of time and frustration!

  • Error Tracking

Initially, SessionStack was created to be an error tracking and monitoring platform – and still remains focused on these capabilities at its core. It captures JavaScript errors and console logs, providing detailed information about the errors encountered by your users. With this data, your engineers can quickly identify and diagnose issues, prioritize bug fixes, and improve the stability and reliability of the application. The error-tracking capabilities of SessionStack help you maintain a smooth user experience and reduce user frustration.

  • User Flow Analysis with Funnels

SessionStack offers insights into user flows with the help of easy-to-build funnels, allowing you to analyze how users navigate through your application (even retroactively). By visualizing the paths users take, you can identify popular and problematic flows, optimize conversion funnels, and enhance user journeys. Understanding the typical user flow helps you make informed decisions about feature improvements, A/B testing, and overall usability improvements.

  • Collaboration and Reporting

SessionStack provides collaboration features that facilitate communication and knowledge sharing among your product team. You can easily share session replays, highlight specific events, and collaborate on issue resolution. Additionally, SessionStack offers reporting capabilities that allow you to generate customized reports, track key metrics, and share insights with stakeholders. The Trends dashboards are a source of valuable daily insights that can help you monitor the health of your product at a glance.

We saved the best for last. SessionStack offers flexible pricing based on the number of sessions you need to record – starting with 1500 free sessions per month. You can try it now – get started in under two minutes (no credit card required)!

Product Analytics in Action: Real-World Examples

A/B Testing for Conversion Optimization

Example: Optimizing landing page conversion rate

You can use product analytics to drive the optimization of landing page conversion rates through A/B testing. This workflow would involve creating two variations of the landing page, tracking the key performance indicators using a product analytics tool, and analyzing user behavior to identify the variation that yields higher conversion rates. By leveraging product analytics, you can gain insights into user preferences, measure the impact of design changes, and make data-driven decisions to enhance the landing page’s effectiveness. 

Funnel Analysis for User Journey Optimization

Example: Reducing Cart Abandonment in an E-commerce Platform

You can leverage funnel analysis to optimize the user/customer journey and combat cart abandonment in e-commerce platforms. The primary goal is to identify pain points and bottlenecks within the purchase process whose resolution will lead to increased conversion rates and revenue maximization. By meticulously defining the funnel (or funnels) and tracking user interactions at each stage, you can pinpoint the areas ripe for improvement, and implement targeted strategies to streamline the user experience.

Through data-driven optimizations, such as simplifying the checkout process, reducing friction points (dead clicks or rage clicks, for example), or implementing new payment options, you can successfully minimize cart abandonment rates for a significant uplift in conversion rates, increasing revenue in the long run.

Cohort Analysis for Retention Improvement

Example: Enhancing User Retention in a SaaS Company

Your primary objective is to understand the factors that contribute to user churn and devise targeted interventions to increase user engagement and loyalty. Through comprehensive user analysis, including cohort analysis, behavior tracking, and customer feedback, you can gain insights into your users’ preferences, pain points, and patterns of interaction with the product.

Armed with this knowledge, you can implement personalized onboarding experiences, optimize feature usage, and deploy targeted retention campaigns to foster a deeper connection with your users. By continuously monitoring the key metrics you set and analyzing user feedback, you can adapt your strategies to maximize long-term customer satisfaction. 

User Segmentation for Personalization

Example: Implementing Personalized Recommendations in an Online Marketplace

With this exercise on user segmentation, your objective will be to leverage product analytics, more specifically user behavior data, to deliver tailored product recommendations that cater to individual preferences (the ultimate goal being to increase the number of purchases per customer). By analyzing user interactions, purchase history, and browsing patterns, you can extract insights into each user’s unique tastes and interests, then pool users with the same tastes and interests together.

Armed with this information, you can create a recommendation machine that delivers relevant and personalized product suggestions (via the product itself, or an email campaign, for example), creating a delightful and curated shopping experience. Through continuous monitoring and optimization, you can refine the recommendation algorithms to ensure accuracy and effectiveness. The result? Increased user engagement and customer satisfaction – and a boost in sales!

Best Practices for Effective Analysis

Best Practices for Effective Product Analysis

Implementing product analytics software begins with defining clear goals and objectives, selecting the right metrics for measurement, ensuring data accuracy and consistency, and establishing a feedback loop with stakeholders. It’s an iterative process that demands continuous monitoring, analysis, and adaptation to maximize its value. Print this short checklist and stick it to your monitor for a quick reminder (we did that, and it’s working):

  • Define clear goals and objectives
  • Choose the right metrics 
  • Ensure data accuracy and consistency
  • Establish a feedback loop with stakeholders
  • Continuously monitor, analyze, and iterate

To recap…

No matter if you’re just starting out in product management or are in your fifteenth year running stellar digital products, product analytics software is probably the first thing you take a look at in the morning (after that quick Slack catch-up, of course). Choosing the right tools, keeping your goals crystal clear, and using data to make informed decisions will set your product up for success. In this article, we outlined the key WHYs and HOWs, now it’s your turn to start measuring and strategizing!

See what SessionStackAI can do for your business