Comparing your product’s growth metrics with those of your competitors is an essential tool for measuring progress, spotting your position in the market, and identifying areas for improvement. However, this method comes with some caveats.
One of the biggest pitfalls of comparing metrics is the potential for misleading results. Even products that are in the same category can have different mechanisms working behind their metrics, making direct comparisons difficult.
The key is to go beyond metrics and focus on the processes that they represent. Only after having a clear understanding of the problem that your product and your competitor are solving can you start determining which metrics (if any) are suitable to compare their performance.
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Same product, different problems
In the world of product management, it’s easy to fall into the trap of comparing metrics without fully understanding the underlying mechanisms behind them. This can lead to poor decision-making, as in the case of Milkshake shops A and B.
Shop A wanted to increase its sales figures, so it looked to Shop B, which was doing much better. Since both were selling milkshakes, Shop A did an examination of Shop B’s product and assumed that Shop B’s superior sales were due to its greater variety of flavors and decorations in their packaging. In response, Shop A decided to copy Shop B’s product range, hoping to attract more customers and increase sales.
However, to Shop A’s dismay, the time, energy, and money it spent to copy Shop B’s product strategy failed to increase sales substantially. What Shop A failed to recognize was that the two shops were solving entirely different problems for their respective customers. Shop A’s customers were business professionals who needed a quick and convenient breakfast option, while Shop B’s customers were parents looking to treat their children after a day of recreation.
Shop A failed to recognize the underlying mechanisms behind their metrics, and as a result, made a poor decision that did not address their customers’ unique needs. Adding a wide range of flavors and colorings can be appealing to children, whose parents want to reward them with something fun and nutritious.
But working people who are in a rush to grab something to eat on their commute have different things on their minds. They might be looking for speed, convenience, and better packaging that can avoid spills. In this case, Shop A might have explored options such as preorders that are ready to be picked up as soon you enter the shop and can save you time. Or they might have explored loyalty programs for customers who would buy from them every morning.
This example highlights the importance of going beyond metrics and understanding the unique value proposition of your product. By recognizing the problem that your product solves and the specific needs of your target audience, you can focus on improving the areas that truly matter and avoid making the wrong decisions based on misleading metrics.
Choosing the wrong metric
The pitfalls of comparing metrics without fully understanding the underlying mechanisms can be just as consequential for online products as they are for brick-and-mortar businesses.
For example, let’s say you’re running Product X, a personal finance manager app. You are currently tracking progress based on the minutes users spend on the app. You notice that your competitor, Product Y, has 1.5 times more minutes spent on the app than you do, and you begin to worry. Is Product Y encroaching on your market share?
However, upon closer examination, you discover that Product Y has a finance-sharing feature that enables users to share and compare their expenses with friends and family. It turns out that users spend a lot of time on that feature to pool savings and plan shared events with their loved ones. For them, the shared event is the problem they want to solve, and they work their way backward, creating a team, creating expense items, assigning it to team members, and tracking savings to pay for the expenses.
On the other hand, the users of Product X are using it for pure personal finance to track and cut expenses. In this regard, Product X is doing a better job with personal finance, providing savings tips and categorizing expenses more effectively than Product Y. Despite the fact that Product X has fewer minutes spent on the app, it may be more effective for users who are looking for personal finance management tools.
In this case, if the team behind Product X started with the problem that users solved, they might have chosen a totally different metric, such as “total savings per month” or “average savings per user,” which is the key value proposition of their product.
By recognizing the problem that your product solves and the unique features that make it stand out, you can focus on improving the areas that truly matter and avoid making the wrong decision based on misleading metrics.
Look behind the metrics
Don’t forget that metrics represent processes, and those processes describe how your product creates value for your users by solving specific problems. Even products that are in the same category and track growth by the same metrics might be solving different problems.
When product managers focus too much on comparing and optimizing metrics, they lose sight of these problems. Consequently (as we saw with Milkshake Shop A), they make misguided decisions of choosing the wrong metrics for comparison (as we saw with finance management product X). Consequently, they learn from their mistakes the hard way.
All this said, metrics will continue to be one of the most important ways to compare your products with your competitors. However, before comparing metrics, you must make sure that you are solving the same or similar problems. By doing so, you can avoid the pitfalls of misleading metrics and make informed decisions that drive growth and success for your product.