In the world of digital products, we have the idea of “launch” all wrong. Most teams work toward “launch day” as though all of their efforts will suddenly pay off as a flood of new users who have anxiously awaited their product storm the gates and propel them to instant success.
It doesn’t work that way.
Launch is more than just a one-time event. Launching a product is a series of small actions and choices that begin, ideally, before you’ve ever written your first line of code. And, as we maneuver through the complexities of this extended process of learn → build → launch → repeat, we find ourselves in a universe of data, where every event, action, or outcome can be quantified, tracked, and analyzed. This is the power of metrics—a tool to not only measure what’s working but also guide us on our path to success. This blog post explores what metrics can have an impact on a product launch and why each of those metrics is important.
Understanding Digital Product Metrics
Before delving into specifics, let's define what we mean by digital product metrics. These metrics will help you and your team keep track of, monitor, and assess the success or failure of a digital product. They are the compass by which we navigate the product development journey, helping to identify the right direction, mark milestones, and course-correct when needed.
However, it's crucial to distinguish between metrics that look “good” but ultimately don’t mean anything (vanity metrics) and metrics from which you can derive insights and intelligence. Vanity metrics—such as the number of downloads—might look good on paper, but they don't necessarily translate into business value. In contrast, actionable metrics provide insights that can directly inform strategic decisions and drive growth. For example, instead of focusing on total downloads, look instead at monthly active users: how many of those downloads are actually getting repeat usage?
Key Metrics to Consider When Launching a New Digital Product
Our team at Apollo 21 finds that there are three distinct sets of metrics worth tracking when launching a new product.
Market Size and Potential
Understanding your target market's size and potential growth is essential. Knowing market size is the best way to validate if there are enough potential customers in the market to support your new product.
Customer Acquisition Cost (CAC)
Customer acquisition cost is the cost associated with turning a lead or prospect into an actual paying customer. It includes marketing and sales expenses and is crucial for budgeting and strategizing your go-to-market plan.
Customer Lifetime Value (LTV)
As the name implies, LTV is the total value of the customer to your business. Some people calculate LTV by net profit while others measure the total spend or gross. A higher LTV compared to CAC indicates a healthy business model.
Number of New Users or Sign-ups
A fundamental measure of initial product interest. A high number of sign-ups indicates successful marketing efforts and a potentially successful product.
Product Adoption Rate
This measures how quickly your target users start using your product. A slow adoption rate might suggest usability issues or market fit problems.
User Engagement Levels
Engagement metrics can include time spent on the app or site, the number of sessions per user, or features used. They indicate how much value users are getting from your product.
Net Promoter Score (NPS)
This metric gauges customer satisfaction and loyalty. A high NPS indicates that users are likely to recommend your product to others.
Customer Retention Rate
Retention rate reflects the number of customers who continue to pay for your product and continue to use your product over time. High retention suggests that users find your product valuable over the long term.
Daily/Monthly Active Users (DAU/MAU)
This shows how often users engage with your product. A high DAU/MAU ratio suggests strong user engagement and product stickiness.
Churn rate represents the percentage of customers that cancel their accounts or stop paying entirely. A high churn rate might point to issues with product functionality, usability, or customer satisfaction.
This is the increase in a company's sales when compared to a previous set period. Positive revenue growth is an indicator of a successful product.
Return on Investment (ROI)
This measures the efficiency of an investment. A high ROI indicates that the money spent to build, promote, and maintain the product is worth it relative to the amount of money being generated by the product.
Detailed Examination of Each Metric
Each metric plays a vital role and provides unique insights into your product's performance.
For example, Market Size and Potential shows how large the market of potential customers or users is for your new product. To estimate this, you can research industry reports, carry out surveys, or analyze competitor information.
Customer Acquisition Cost (CAC) and Customer Lifetime Value (LTV) go hand-in-hand for building a great business. If CAC exceeds LTV, you're spending more to acquire customers than they bring in value—this is unsustainable in the long term. However, if your CAC is far below your LTV then you are onto something good!
To calculate these, you need to account for all costs involved in acquiring a customer (marketing, sales, etc.) and estimate the total revenue you expect from a customer throughout their lifetime, respectively.
The Number of New Users or Sign-ups is a straightforward count of how many users have registered for your product. However, it's important not to mistake this for success—these need to convert into active, engaged users.
Product Adoption Rate can be measured as the number of new users divided by the total number of users. A slow adoption rate may suggest a need to revisit your product's usability or value proposition.
User Engagement Levels can be quantified in various ways, depending on your product. For example, an online tool might measure the number of tasks completed, while a social media app might look at likes, shares, or comments.
Net Promoter Score (NPS) is calculated by polling users for their opinion of your product. Through NPS surveys or interactions, users or customers can express how likely they are to recommend your product. NPS is scored on a scale from 0 to 10. Those who respond with a score of 9 or 10 are considered 'promoters', while those who score 0-6 are 'detractors'. NPS is expressed as the percentage of customers who would recommend or “promote” your service less the percentage of detractors.
Customer Retention Rate is a powerful indicator of long-term product value. It's calculated by identifying the number of customers you have at the end of a period, minus any new customers, divided by the number of customers you had at the beginning of the period.
Daily/Monthly Active Users (DAU/MAU) provide insights into habitual use. A high DAU to MAU ratio suggests that users are regularly engaging with your product, which is a strong sign of product-market fit.
Churn Rate is the inverse of retention, showing the rate of those that are intent on cancelling. It's calculated by dividing the number of customers you lost during a specific period by the number you had at the start of the period. High churn can be a red flag for issues with user experience, customer satisfaction, or product-market fit.
Revenue Growth can be calculated by subtracting the revenue from a previous period from the current period's revenue, then dividing the result by the previous period's revenue. It's a direct indicator of your product's financial success.
Lastly, Return on Investment (ROI) is calculated by subtracting expenses like marketing and maintenance costs from the gain from the investment, then dividing the result by the cost of the investment. A positive ROI indicates a successful product launch from a financial perspective.
How to Effectively Use Metrics for Success
Setting realistic and measurable goals for each metric is the first step towards making them actionable. Next, constantly monitor and iterate on your product based on these metrics. Your product is a living, evolving entity—don't be afraid to pivot or make changes based on what the data tells you.
Remember, metrics are not just about measuring success—they're about learning and improving. Use them to uncover insights, drive decision-making, and ultimately, create a product that resonates with your users and succeeds in the market.
If this all feels overwhelming then don’t worry. Many startups choose one or two “North Star” metrics that can be directly tied to success. For example, if you are launching a new platform for fans of a certain sport you might choose to track daily average users as your North Star. Sure, more downloads and reduced churn are important. But isn’t a growing number of DAUs a healthy indicator of overall success and growth?
Using Metrics to Light Your Path Forward
Launching a new digital product can be a daunting task, but armed with the right metrics, you can navigate the process with confidence and clarity. The metrics discussed in this blog post provide a comprehensive framework for assessing your product's performance and
position in the market, from the pre-launch stage through to the critical post-launch period.
Our experience in helping companies like Bank of America and Teton Ridge launch new products informs that settling on a few key metrics early can help keep all parties aligned during the build, launch, and promotion phases of a new product. Even more, highlighting specific metrics early on can help garner more support inside the building for the product itself.
Each metric serves a specific purpose and, when used together, they offer a holistic view of your product's health and potential. It's important to remember that while these metrics provide invaluable insights, they are not a crystal ball. They should be used as tools to guide decision-making and help inform strategies, not as the sole determinants of your product's success or failure.
Remember, every product is unique, and so is its path to success. The metrics that matter to you might be different from those of others. The key is to understand what drives your product, what it means for it to succeed, and how to measure that success in a way that aligns with your unique goals and vision.
In the end, the most critical metric is the value your product brings to its users. Whether it's making their lives easier, solving a pressing problem, or simply bringing them joy, the ultimate goal is to create a product that your users love and depend on.
If you are considering launching a new product but eager to use data to inform your decisions, our team at Apollo 21 is here to help. Contact us to discuss which metrics matter most to your new venture.
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