Business Metric Strategies: How To Choose the Right Framework To Measure Success
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Business metrics provide a quantifiable way to measure the success of a business. They help organizations to track their progress internally while also serving as a way to communicate the performance of a business to stakeholders and external parties.
There are hundreds of metrics that could be factored into these calculations, but they need to be specific to an organization to be effective. Some considerations are the industry the organization belongs to, the strategy being implemented, or even the team function being assessed.
While the metrics need to be specific to the company, there are approaches that follow popular business strategies, such as using frameworks to group metrics around categories.
For the purposes of this post, we’ll focus on frameworks that are relevant to digital product management and are therefore informed by product analytics.
The Pirate framework is a model that groups and tracks metrics around the stages of a user journey. AARRR is the inspiration for its name and an acronym that represents each of the five stages:
Used by: This model best suits startups and SaaS organizations in the early stages of business, where growth is a key factor for success.
Advantages: It uses simple metrics that are easy to interpret and immediately actionable. It requires an understanding of customers, ensures that you can optimize each of the stages, and doesn’t require any technical knowledge. The framework also allows you to make data-driven decisions.
The HEART framework focuses on goals, signals, and metrics of five categories. Developed at Google, it incorporates a user experience (UX) approach and considers the customer experience of the product. The five categories evaluated:
Used by: Designed for software UX teams, this model extends to digital companies that are led by a customer's overall experience of their product.
Advantages: It connects the design process to business metrics. This can help in identifying patterns or processes that may cause customers to churn. It also allows design decisions to be connected to goals within the project through the Goals-Signals-Metrics process, which could make design decisions less subjective and instead backed by data.
The RARRA framework is similar to the Pirate metrics, incorporating the 5 stages of a user journey. While Pirate metrics is growth-led, RARRA is more product-led and focused on Retention. Essentially, growth is achieved by retaining existing customers. Therefore, the five stages are rearranged according to priority:
Used by: Companies similar to those using the Pirate model but at a more mature stage of business.
Report: Four Stages of Product Analytics Maturity in Organizations
Advantages: It focuses on retaining existing customers and can be interpreted as a more authentic growth strategy as it’s led by product, rather than just acquisition. This is because improvements tend to happen within the product for the purposes of retention, rather than trying to appeal to new customers. Retaining customers is widely known to have a lower Customer Acquisition Cost (CAC) than attracting new customers. In terms of business overall, this strategy could help benefit expansion efforts or better guide future extensions of the product offering.
In closing, there are many ‘ways of doing business’, and while frameworks like the above can help guide you in identifying the business metrics that are most applicable to your organization, you still need a clear idea of your business objectives. This will, in turn, inform your strategy, which then ensures that your business metrics are aligned with your needs. From there, you’re better positioned to identify the product analytics you need to track for your particular set of metrics.