How to Choose the Best Product Analytics Tool for You
Product analytics helps you make the experience of your users into your product’s differentiator. Think Calm, Peloton, or Netflix. They all operate in competitive industries, but they stand out thanks to their user experience. According to analytics trends, even marketers today need to embrace the digital experience as a core value driver. And it’s with the help of a product analytics tool that you discover how you can improve the experience.
In today’s article, we’ll help you choose the tool that’s best for you. We’ll cover:
- What is product analytics?
- Key features of a tool
- The most important metrics
- Pros and cons of 6 tools
- Criteria for choosing a tool
What Is Product Analytics?
Product analytics is the practice of measuring and analyzing how users interact with the product, including events, visits, and interactions. This helps teams create product experiences that lead to conversions, subscriptions, higher retention, and increased revenue.
Key Features of a Product Analytics Tool
Let’s take a look at some key features your teams can take advantage of.
- Tracking: Users leverage different channels to engage with your brand. Since the user journeys are long and non-linear, you need a tool that’ll enable you to track and identify customers across various devices and touchpoints.
- Ability to add or analyze events: Your product analytics tool needs to be able to manage events or create triggered events. You’ll be able to use those to generate automated and personalized interactions.
- User segmentation: When your tool gives you comprehensive cohort data, you’ll be able to create tailored experiences and resonate with your audience.
- KPI dashboards: Dashboards summarize key metrics and reports in one single location. It’s even better when your tool makes this customizable and shareable, so you can easily communicate key information within your organization.
- Funnels: Funnel reports in product analytics provide insights into how users are navigating your product. You’ll know where they dropped off, and you’ll be able to test for why.
- Integrations: Your product analytics tool may not lead to data silos. Instead, it should be able to exchange data both upstream and downstream.
What Are the Most Important Metrics in Product Analytics Tools?
The product analytics metrics you’ll care for the most will be based on the team you’re working with. Different teams have different needs, and their needs influence the choice of metrics they’ll work with.
Metrics for the Marketing or Sales Team
The marketing team focuses on customer acquisition. Often, the same metrics are also applicable in the sales team.
These metrics include the following:
- Customer acquisition cost (CAC): the average amount of money you spent to convert a customer.
- Acquisition rate: the volume or speed at which you acquire new customers.
- Conversion rate from trial to paid: the % of people who advanced from trying your product to actually paying for it. Closely related to the adoption rate.
Metrics for the Product Customer Success Team
Product customer success teams focus on the retention and growth of customers. Here are the metrics they need to get the job done:
- Monthly Active Users (MAU) and Daily Active Users (DAU): Determines whether your user base is growing and whether long-term users are actively interacting.
- Net Promoter Score (NPS): This metric measures how likely customers are to recommend the product to other prospects. Determined based on “On a scale of 0 to 10, how likely are you to recommend this product or service”.
- Recurring Revenue: The predictable revenue your product will generate per month (MRR) or year (ARR).
- Churn rate: Represents the number of customers or users that terminated their subscription or didn’t renew it in a long time.
- Retention rate: Represents the number of users that continue using your product or service over a given period of time. Churn rate and retention rate are two of the main metrics contributing to customer lifetime value (LTV).
Metrics for the Product Development Team
The development or design team wants to know how the product is being used, whether it's engaging customers, and what can be improved:
- Product and Feature Usage: Which features lead to higher engagement or retention, which features help form habits, etc?
- Usage Funnels: Which steps or interactions cause the users to drop off before they complete a flow, such as an in-app purchase?
- Dead Ends: Where did users run into errors or other unexpected hurdles that can be fixed?
What Are Some of the Top Product Analytics Tools?
Implementing tools for clients is a core focus of our tech consultancy. Sharing knowledge about tool comparisons such as Mixpanel vs Amplitude is one of our favorite blog formats.
📊 Check out our comparative list of 16 best marketing analytics tools for 2022 📊
At this point, you already know the basic features and metrics you can measure with product analytics tools. So, let’s take a look at some of the top product analytics tools that should be on your radar:
Amplitude offers a wide range of features product teams need to understand their customers, analyze their behaviors, and identify personas. Teams can integrate sources and track user journeys across their products and devices. There are also a plethora of charts and report types such as event segmentation, funnel analysis, or stickiness.
Amplitude has a very generous free plan with core analytics, unlimited data retention, and unlimited user seats. More importantly, you can use it to track up to 10 million actions per month. In spite of its generous free plan, the solution does not have a middle-tier plan, so its premium plans are the best fit for large companies.
Mixpanel has most of the capabilities of Amplitude, with small differences that add up. We prefer Amplitude’s identity tracking capabilities because of how good it is at connecting historical data. But unlike Amplitude, Mixpanel’s pricing is based on your desired monthly tracked users. They also offer custom enterprise plans.
However, Mixpanel’s free tier has limited functionalities. They have unlimited data history and seats, core reports, and monitoring capabilities—but you have to pay for advanced analytics features. Another downside is its interface which can get somewhat cluttered and harder to use.
Matomo (formerly Piwik)
Matomo is a product analytics tool with a forte in customer data protection and privacy. The open-source solution lets companies track personal data in line with privacy laws. You can also track user journeys and generate insightful reports.
Matomo, however, offers fewer visualizations compared to Mixpanel or Amplitude. Though it has a free plan and an affordable Cloud plan, its more advanced features are only available through an Enterprise plan. These include custom reports, custom domain, SAML integration, and LDAP integration.
Heap’s automated data aggregation lets you can gather real-time information on every action that users take and identify a plethora of events.
However, Heap is harder to use compared to other tools, and the insights can get hard to parse out. The automatic data collection gets messy and requires a lot of storage space, so integrations usually have to be custom.
Heap seems to have peaked in the past. Amplitude and Mixpanel have surpassed it.
Pendo is a pure product analytics tool. The shareable product planning tool lets teams collect comprehensive product data and create product-led strategies to accelerate growth and product adoption.
🚀 Learn what is product adoption and how it accelerates business growth 🚀
While Pendo is great for product analytics, it is not useful outside of it. It’s not the ideal tool for associating marketing and sales efforts with the product life cycle. While tools such as Amplitude are great product analytics tools that also have a lot to offer for marketing analytics, Pendo doesn’t do that.
Google Analytics 4
Google Analytics 4 is a free tool with product analytics capabilities such as journey tracking, events, and views, as well as reporting features. While used primarily in marketing, its events-based tracking is well suited for product.
Unless you pay for the 360 suite, you’ll find major disadvantages such as a very limited number of custom events and properties, and the inability to retroactively change these events and properties. Moreover, the 360 version is $150k per year, so you’re either on a free and basic plan, or you’re all in, and there’s no middle ground. We also see issues with Google’s data aggregation and sampling, and the limited ability to drill down to individual users.
Overarching Criteria for Choosing Product Analytics Tools
There are additional criteria that you should consider for valuable insights, or adoption within your team.
- Equipped with the right metrics. While most tools cover the basics, they may lack the fringe metrics that matter to you.
- User-friendly interface. Tools that require a technical background make it hard to include more of your team members in acting on your product data.
- Identity management. Tools that are good at connecting data about the user journey enable you to personalize interactions and improve the experience.
- User onboarding. Check if the tool has a free trial or a free plan that lets you explore its features, or whether it has a training program for your team.
- Ability to receive data. Connecting with upstream tools is crucial. Manually importing ad spend data just to analyze CAC gets cumbersome.
- Flexible integrations: Third-party connectors allow you to create synergies with the tools already used by teams in product dev, marketing, or sales.
- Value for dollar: Consider whether the tool has paid tiers that compare with industry leaders, pricing models that don’t keep your team from using it more, or additional costs that may come from the additional tools your use case requires.
- Industry: Consider how user behavior in your industry may be particular, and how your business will develop. Read reviews on G2’s product analytics category and similar sites, and ask for recommendations from your peers.
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