BUILDING BETTER PRODUCTS - Escape being cashflow negative

In today's fast-paced and competitive business world, tracking relevant Key Performance Indicators (KPIs) has become a critical factor in the success of any product. These metrics provide valuable insights into the performance of a product and its impact on customers. However, not tracking KPIs can have real consequences, leading to missed opportunities, lost revenue, or from a startup perspective, continuously high burn rate. In this article I'll write about the importance of tracking relevant KPIs for product success, specifically focusing on the customer lifecycle and the impact on payback period.

Examples of stages of the lifecycle:

The significance of tracking KPIs for the customer lifecycle

There are several reasons why tracking key performance indicators (KPIs) for the customer lifecycle from a product perspective is important:

1. It helps identify product-related issues: For example, if customers are dropping out during the onboarding process, it may indicate that the product is difficult to set up or use.
2. It helps measure product-market fit: For example, if the activation rate is low, it may indicate that the product is not meeting the needs of the target market.
3. It helps measure product adoption and engagement: For example, if the retention rate is low, it may indicate that the product is not providing enough value to customers to keep them coming back.
4. It helps measure product satisfaction: For example, if the customer satisfaction (CSAT) score is low, it may indicate that customers are not finding the product useful or are experiencing issues with it.

It's important to track key performance indicators (KPIs) for the customer lifecycle because it allows businesses to better understand how customers interact with their products or services at each stage of the journey. By tracking KPIs, the businesses can identify areas where they are succeeding or struggling, and make data-driven decisions to optimize their processes and improve the customer experience.

Overall, tracking KPIs for the customer lifecycle is an essential part of running a successful business, as it allows businesses to better understand and optimize their interactions with customers at every stage of the journey.

It is more common than you might expect that the most comprehensive tracking is done on the Acquisition side, and not on the product side.

The impact of not tracking KPIs on payback period

The payback period is the time it takes for a product to generate enough revenue to cover the initial investment. Not tracking relevant KPIs can lead to a longer payback period, delaying the time it takes for a product to become profitable. For example, a product with poor customer retention rates may take longer to achieve a positive payback period because it requires more time and resources to acquire new customers.

A longer payback period can also have significant financial implications, such as increased interest costs, reduced cash flow, and a lower return on investment.

Identifying and tracking relevant KPIs is critical to the success of any product. Some best practices include identifying key objectives, aligning KPIs with business goals, leveraging data analysis tools, and regularly evaluating and adjusting KPIs. By taking a proactive approach to KPI tracking, businesses can gain valuable insights into customer behavior, improve customer retention rates, and ultimately increase revenue.

Conclusion

In conclusion, tracking relevant KPIs is critical to the success of any product. Not doing so can lead to missed opportunities, lost revenue, and a longer payback period. By identifying and tracking relevant KPIs, businesses can gain valuable insights into customer behavior and make data-driven decisions that lead to better product outcomes. This enables businesses to improve customer retention rates, increase revenue, build better products, and escape the slow death of burning money too fast and getting cashflow positive too slow.

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