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What is Product Analytics? The Complete Guide

Apr 29, 2024

Successful product and customer teams need product analytics to understand their user journey and make truly customer-centric, data-driven decisions. Without them, you’re flying blind — and in a hyper-competitive landscape, simply shipping features and hoping for the best just won’t cut it.

But modern product analytics goes far beyond vanity metrics and basic reporting. It’s about asking the most relevant, incisive questions and using a wide range of data to connect the dots between product usage and business impact.

To drive sustainable product-led growth, today’s teams need deep, cross-functional insights that span the entire customer lifecycle. That means visibility into everything from a user’s initial experiences with your brand, to their first “aha moment” when they realize its value, to their day-to-day feature usage, struggles, successes, and multi-channel interactions. Product analytics should give you a holistic view of all the touchpoints that ultimately drive satisfaction, retention, and customer lifetime value.

That’s where next-generation product analytics tools are game-changers. By making it easy to unify, visualize, and model complex user and behavioral data across channels, warehouse-native tools like NetSpring empower product-centered companies with a 360-degree view of the customer experience.

This comprehensive guide will cover the fundamentals of product analytics, explore the evolution of modern tools, share real-world tips, and show how NetSpring’s future-focused approach takes product analytics to the next level — for everyone in the company.


What is product analytics all about?

In a nutshell, product analytics describes the practice of leveraging user data and behavioral insights to inform strategy, drive innovation, and optimize the customer experience. From unpacking granular user behaviors to uncovering the “why” behind churn, it’s about using data to drive deliberate, continuous improvement and growth rooted in facts — not hunches or gut instincts.

Why product analytics matter

Product analytics eliminate guesswork and empower data-informed decision-making across an organization.

Key benefits of effective product analytics include:

  • Validating product-market fit by analyzing activation, adoption, and critical “aha” moments
  • Prioritizing high-impact product roadmaps based on feature usage, stickiness, and revenue impacts
  • Optimizing the entire user journey by connecting rich product, marketing, sales, and support insights
  • Minimizing churn by identifying drop-off points and behavioral red flags leading to retention risks
  • Democratizing data-driven decisions with self-serve analytics available for all roles across an organization
  • Rigorously measuring the precise impact of every release, experiment, and growth initiative through cohort analyses and more
  • Enable effective product-led growth by tying product data to marketing, sales, support, and expansion metrics

Who uses product analytics?

Companies focused on product-led growth know that effective product analytics create value across the entire organization, not just on product teams.

Product managers validate hypotheses by mapping feature adoptions to downstream conversions and revenue. They prioritize roadmaps based on quantified impact metrics, measure every launch/release, and tie changes to strategic KPIs.

Growth teams attribute top-of-funnel marketing and acquisition efforts all the way through to activated product usage, conversions, and ongoing stickiness. They can model new tactics by exploring how channels correlate to product behaviors.

Product ops streamline flows like onboarding and implementations using insights from comprehensive customer journey analytics across product, marketing, sales, and support data.

Customer success teams gain visibility into churn and expansion risks by analyzing product usage cohorts in the context of other customer signals — and then drive timely nurture campaigns.

Marketing teams improve their campaign ROI by building advanced segments based on product qualification criteria and mapping ad spend to activated usage through the full funnel.

Executive teams set data-driven strategies, OKRs, and growth goals based on quantifiable impacts illuminated through unified product analytics.

By breaking down data silos and combining product usage and customer journey data, modern, warehouse-native product analytics can fuel smart, user-centric decision-making across companies.

Take a look at our breakdown to learn more about the convergence of product vs marketing analytics.

Key metrics for product analytics

For effective product analytics, teams need insights into key metrics that measure user adoption, engagement, retention, and more.

Commonly tracked product metrics include:

Adoption metrics

Activation rate

This is the percentage of new signups that experience core product value, taking a critical “aha” action. To measure activation, you’ll define a specific action, event, or experience relevant to your product. For a project management tool, activated users might be those who create and share their first board, while for a streaming audio platform, it could be listening to X minutes of content. Increasing activation rate is key for driving top-of-funnel growth and demonstrating product-market fit.

Time-to-value
This metric tracks how quickly users adopt your product and hit value milestones after signing up, indicating successful onboarding and activation. You typically measure time-to-value by setting up funnel analytics and tracking the sequence of events and time elapsed between signing up and activation milestones. A shorter time-to-value impacts downstream revenue metrics like trial-to-paid conversion, subscription upgrades, etc.

Daily/Weekly/Monthly active users

Stickiness metrics like DAU, WAU, and MAU measure recurring usage of your product. Stickiness is an indicator of product adoption, habit formation, and user loyalty, which are critical for driving retention and maximizing customer lifetime value.

Engagement Metrics

Session length

The average duration of a user’s session using your product or service helps you understand how users are engaging and whether they’re deriving enough value per visit to keep coming back. You measure it by tracking the time between user session start and end events, taking the average or median across your user base. Improved median session length metrics could also signal that new features or fixes are successful.

Feature usage & adoption

Insights on percent-wide usage of specific product capabilities, features, or modules are vital for validating your development efforts and product-market fit. You track them by instrumenting product analytics on key features and user flows of interest.

Funnel Conversions & dropoffs

It’s important to analyze the percentage of users who complete defined stages or an entire journey in your product, versus those who abandon a particular funnel stage. This helps you pinpoint areas where users are experiencing friction rather than moving smoothly through critical product flows so you can optimize their journey. You measure conversions and dropoffs through funnel visualization and analytics, tracking the process from entry point through each step to final conversion.

Retention/Churn Metrics

Customer Lifetime Value (CLV/CLTV)

These are projections of the total revenue a customer will generate during their full engagement with your product or service. The most common models factor in gross revenue, churn rate, and overhead costs. Increasing CLV is a constant goal for any company focused on product-led growth.

Churn rate

The rate at which customers cancel subscriptions or fail to renew their paid plans (i.e. “churn”) is a make-or-break metric that directly impacts your growth potential. You measure churn both by number of users (logo churn) and percentage of recurring revenue (revenue churn).

While these product metrics are important diagnostic tools, truly driving product-led growth goes beyond reporting on out-of-the-box events and numbers.

Product-focused teams need to understand product metrics in the full context of constantly evolving business performance indicators and customer journey insights.

That might mean thinking about product usage patterns next to account revenue, connecting specific product experience or user flow with high vs. low retention rates. Or it could involve combining customer acquisition source and cost data with product usage, so you can understand exactly which marketing channels and segments yield the highest quality activated users and identify patterns across cohorts. It’s also valuable to understand how customer success and support touchpoints — like chats, tickets, or call volumes — link with stickiness, churn, and expansion revenue.

These are just a few examples of the possibilities for modern product analytics.

The key is having the flexibility to ask incisive questions by slicing and dicing different data sources, something made possible by composable, warehouse-native analytics platforms.

For that, you’ll need a next-generation product and customer analytics tool like NetSpring.


Beyond the basics: Evolving product analytics tools

Let’s take a look at the main trends in product analytics tools.

Traditional business intelligence (BI) tools like Looker and Tableau were designed to provide analytics from data warehouses containing ERP, CRM, and other structured business data sources. However, they’re limited in terms of product analytics because they weren’t built to handle high-volume product usage data from event streams and they rely on technical analysts to run complex queries, creating bottlenecks.

First-generation product analytics tools like Heap, Amplitude, and Mixpanel emerged to fill this gap, allowing teams to finally analyze rich user behavior data with capabilities like funnels, cohort analysis, and segment building.

However, these legacy tools have a key drawback: they instrument and capture product usage in “black box” data silos. To go beyond basic product usage data and gain context around business metrics like revenue, conversions, and acquisition sources, teams have had to duplicate and move data from the tools into data warehouses for separate analysis.

In the words of Yali Sassoon, Co-founder of Snowplow:

“First-gen tools allowed us to understand behavior in new ways, but they start hitting ceilings as the user journey gets complex and we ask deeper questions across multiple data sources.

New, warehouse-native analytics platforms solve this by running directly off a composable-CDP warehouse that acts as a single source of truth. Next-gen tools like NetSpring empower companies to explore rich first-party product, customer, and business data.

NetSpring’s powerful self-service data modeling and visualization includes a wide range of pre-built templates and easy-to-use blocks that make it accessible to all stakeholders. But crucially, it also allows teams to run ad-hoc explorations, pivoting to investigate emerging questions and slicing and dicing the data at all levels. That gives unprecedented access into the full, 360 customer journey.


5 key tips for effective product analytics

Getting the most from your product analytics takes a holistic, strategic mindset and some key best practices. Here are 5 tips for maximizing the value and impact of your insights.

1. Ask the right questions

The best product analytics come from clearly defining the key objectives or challenges you want to solve.

Here’s how Yali at Snowplow puts it:

“You always want to start with: what is the question we want to be answering? 80% of the value is unlocked if you just ask the right questions. The best product managers are the ones that use the data to ask the most interesting questions.”

While the questions you ask will depend on your unique organizational needs and goals, good questions to start could include:

“Which onboarding flows lead to the highest product activation rates and shortest time-to-value?”

“What are the key user behavior differences between customers who renew at premium tiers vs. those who churn after a year?”

“What are the top reasons customers contact support in their first 60 days, and how does that impact their long-term retention?”

“How do product usage patterns differ between inbound SQLs who used sales marketing vs trials from a specific paid advertising channel?”

Effective product analytics isn’t just surfacing metrics: it’s about diving into the “why” through progressively smarter follow-up questions. That’s why ad-hoc exploration allowing you to continuously pivot between reports and slice-and-dice data is so important in finding answers.

2. Instrument comprehensively

To drive robust product analytics, instrumentation must capture all meaningful user interactions and behavioral data points across your websites, apps, servers, and other digital interfaces.

We recommend taking a composable warehouse-first approach to instrumentation.

NetSpring partners with best-in-class instrumentation tools like Segment, RudderStack, and Snowplow. This empowers data teams to collect, transform, and load granular event streams alongside other sources into the warehouse.

With a composable CDP architecture, all your first-party data becomes a unified, secure asset for product analytics and exploration.

3. Collaborate cross-functionally

Breaking down organizational silos enables richer product insights tied to real business impact.

For example, in an ecommerce company, collaboration between product analytics, marketing, sales, and customer success teams can uncover blockers like increased drop-off for customers using a specific payment method — something that would have been difficult for teams to catch in isolation.

Implement processes like weekly cross-team data review sessions, Slack channels for sharing findings, lunch & learns showcasing use cases, open sharing of data models/dashboards, and more. This is easier to do if every team is working with data from a single-source-of-truth data warehouse.

Using tools with clear self-service data visualizations also helps with sharing key insights in a compelling, easy-to-digest way to a range of different shareholders.

4. Continuously monitor key metrics

Automated monitoring and alerting for critical product KPIs lets you proactively intervene before you end up putting out fires. It’s also a good way to rapidly spot positive trends and opportunities.

Within NetSpring, you can build production data models and set continuous monitoring with notifications based on defined rules, customizable thresholds, and noise reduction controls.

For example, get alerted if a new feature’s adoption metric dips below forecasted ranges, allowing quick testing and rollback if needed. Or spot the moment when a new activation flow starts outperforming the original.

Continuous monitoring keeps you connected to your product, surfacing both risks and opportunities in real time.

5. Choose the right tool

Of course, all of these product analytics best practices require having the right tool to surface trustworthy, meaningful, and actionable insights efficiently.

In general, look for flexible tools that can combine event data with other sources, enable self-service ad hoc data exploration, and avoid creating more data silos.

NetSpring’s warehouse-native platform includes all of these capabilities — and has helped many companies to deepen their product analytics.

For example, game-based fitness company Ergatta replaced legacy digital product analytics tools with NetSpring’s next-gen solutions. This let them easily blend their connected app usage data with marketing, demographic, subscription, and support ticket insights — improving time-to-market & adoption of new programs/features as well as reactivation and re-engagement of inactive users.

“NetSpring is the Holy Grail of product analytics. You don’t have to move your data anywhere. It sits directly on your data warehouse, looks across all data sets, and supports both traditional BI analysis and modern event-centric product analytics. It is also self-service, so you can expand the reach and impact to everyone in the organization, not just technical teams.”

— Chang Yu, VP of Product at Ergatta


Future-focused product analytics

As companies double down on product-led growth, having best-in-class product analytics capabilities has become mission-critical. Traditional tools and fragmented data sources simply won’t cut it.

To truly understand your customers, optimize their experiences, and sustainably grow, you need analytics tools built off a future-focused data stack.

That’s exactly what NetSpring’s composable, warehouse-native approach delivers. By empowering any team to flexibly analyze the full customer journey through self-serve data exploration, NetSpring is revolutionizing how product-centered companies drive growth.

If you’re ready to take your product analytics to the next level, request a demo today.

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