Data-Driven Product Management: How To Become an Insight-Driven PM
This article discusses how data-driven product management can help you use the right data, to uncover the right insights, and ultimately build the right product.
The Buzz Around Data-Driven PM
There’s been a lot of talk lately about “Data-Driven Decision Making” (DDDM). Before that, the conversation was about “Data Lakes”, “Data Mining”, and “Big Data.” While the topic has been getting a lot of ink (electrons?), what does it really mean to Product Managers?
The funny thing is, Product Managers have been doing DDDM for a long time. We know that to build the right product to really satisfy customers, we have to deeply understand the customer’s needs, and make sure there are enough customers that have this need to make a market worth addressing. We have to be sure that our product offers superior value in some way compared to the competition. And we have to be sure we can build and properly support this product profitably, otherwise it will drive our company out of business. How do we figure all of this out? Yes, that’s right – the answer begins with, “by having the right data.” But it doesn’t end there. It’s not enough to have a ton of data about these issues. What’s really needed is insight – “a deep understanding of a person or thing.” Once we have an insight, we must also be able to act on it – determine the real actions you need to take to build the right product, and market it successfully to your customers.
Data, Data Everywhere!
Much of the reason the topics mentioned earlier are being discussed so much is because there is so much more “data” available today than there was even five years ago. Software products are now instrumented to observe how customers really use them. Cloud-based services can measure usage behavior and performance patterns. Physical products increasingly include a service or software component that then can allow for measuring usage. At the very least, most consumer products include some sort of digital touchpoint – an online game for breakfast cereal, online warranty registration for an electric drill, a feedback email for a new pair of shoes, a discount code for a future online purchase.
In fact, there is often too much data to wade through to try and find the real insights needed to make the right product or marketing decision. What is a Product Manager to do?
Data-Driven Product Management – Where to Focus
To find the right areas to focus on, we must first define the problems we want to solve, or the goals we want to achieve. For a Product Manager, these goals can typically be defined in three broad categories:
- Delivering the right value to our customers
- Having differentiation against our competition
- Meeting the company’s financial and strategic goals
For each category, the Product Manager must determine what are the most important key performance indicators (KPIs) to track. Your KPIs should include a mix of both tangible and intangible indicators – see the box below for more of a discussion about this.
Broadening your data-driven product management KPIs
Intangible metrics? Seems like an oxymoron, right? Not really. Tangible metrics are those that are typically easy to quantify – cost savings, percentage increase in production rate, 0-60 acceleration time. But how to do you measure intangibles like customer satisfaction, quality, beauty or aesthetics? These are certainly harder to measure, but not impossible, and it’s important to measure some of these to get a wider perspective of what really matters for your product. Customer satisfaction can be measured with a Net Promoter Score (NPS), quality, beauty, and aesthetics can be measured through questionnaires, focus groups, and interviews with prospects and customers.
At first, this can be a daunting task, but here are a few questions to ask to help dig into each category:
- Customer Value Questions: This is most important, and where you need to start. What do your customers value most about your product? What needs does it fulfill, problems does it solve, jobs that it does, joys that it delivers? For each of these, find metrics that matter to your customers and incorporate them into your KPIs. For example, with mascara, the metric that could matter most could be how waterproof it is, how much longer or well-defined it makes her/his eyelashes, or how smudge-proof it is.
- Competitive Questions: Starting from the dimensions of value that matter most to your customers, which of these do you have an advantage over the competition that you can exploit further? Where is your product weak against the competition, and how could you improve it? Don’t fall into the trap of measuring only what your competitors are talking about against your product, when these metrics may not be what matters to your customers. For the answers to these questions, find a way to measure improvement, set goals, and track progress. Use competitive analysis effectively to investigate your competition.
- Company Questions: What are the key measures of financial “success” for your product? Achieving a target profit margin? Reducing operating costs by a particular percentage? Improving customer loyalty? For each of these, there are underlying metrics that you can start watching and set goals against to start measuring progress.
Triggers and Serendipity
It’s important to note that if a Product Manager is working on a product that is already shipping, he or she may already know the answers to the above questions, but still may not know where to start when it comes to trying to measure where to make incremental improvements to the product. In these cases, it will take some additional sleuthing, which your “data lake” may help you with. Here are some examples of questions to consider:
- Is there a particular activity or moment in your application where customers seem to get stuck or slow down? Would improving this stumbling block bring a meaningful improvement that would either increase your customer’s productivity, or reduce your operating costs?
- Has there been a recent decrease in customer satisfaction for your product? Is it because of a competitive product that is meeting customer needs more effectively? Is it because of rising expectations from customers (say, with battery life in a smartphone)? These are triggers that you need to be looking for. Look for either a market or competitive driver that is pushing against your product, then find ways to measure that dimension of your product to improve it.
- Watch your customers. Are they using your product in an unexpected way? Or are they encountering a problem that you hadn’t anticipated? These kinds of observations, moments of serendipity, are a boon to finding new ways to better satisfy your customers!
Call a Plumber
A good data-driven Product Manager will use the techniques above to identify the kinds of metrics that matter for their product. Once these are identified, it’s time to call in experts to help establish these metrics. How do we gather the data? How do we analyze it? How do we visualize it in a meaningful way that leads to the insights we want? These are questions to be answered by your IT team, or a data science team. The Product Manager needs to bring the desired goals and insights to the conversation, but then you need the expertise of the rest of your team to be able to really measure what needs to be measured.
Want to Learn More?
In this article, we’ve started the conversation on how to practice data-driven product management and how to focus on what matters for their product. We’re going to dive deeper on this subject later this month in our webinar, Becoming Expert: From Data-Driven to Insight-Driven Product Management – A Critical Key to Your Product’s Success.” Join us on June 28, 2019 to learn more on analyzing data for real insights and using reports to convey the key findings.
NOTE: This webinar has passed, you can view the slide deck below to learn more.
About the Author
Roger Snyder is a Principal Consultant/Trainer, and VP of Marketing at 280 Group.
Roger has worked in the field of Product Management for over 20 years, with experience in startups, growth companies, and various technology sectors. He specializes in improving product strategy development, implementing full product lifecycle processes, and roadmap development and evolution.
280 Group is the world’s leading Product Management training and consulting firm. We help companies and individuals do GREAT Product Management and Product Marketing using our Optimal Product Process™.