Updated: July 6, 2023 - 9 min read
Product metrics are crucial when it comes to making informed product decisions, but as a product leader, you’ll know that they can easily spiral out of control. At the start of product development, relevant KPIs may be unclear, so you just start tracking everything, from churn rate to how many times Linda from marketing makes a cup of tea…just in case. Before you know it, you’re drowning in a sea of KPIs, unable to see the bigger picture. Identifying the most important product metrics is clearly paramount, but how can you do it? Say hello to metrics trees!
What are metrics trees (and why should you use them)?
Metrics trees, also known as KPI trees, show the relationship between the key metrics in a business, from the overall goal down to all the metrics that influence it. These visual aids illuminate your single overarching goal or topline metric, and clearly highlight which metrics contribute to achieving it.
Showing is often better than telling, so here's an example of a metrics tree showing how several metrics feed into the topline metric of monthly active users:
(Don't worry, we'll explain exactly how these work with examples later in this post!)
Aside from being a clear way to visualize product metrics, they can also help you to make better product decisions in several other ways:
Identify the right metrics – Instead of wasting time and money tracking the wrong product metrics, metrics trees help you to see the bigger picture by redirecting your focus to your North Star and the most relevant KPIs.
Make connections – Metrics trees bridge the gap between customer behavior, product metrics, and company goals. This makes it easier to know if you’re tracking the right product metrics and how they relate to your strategy.
Foster alignment and transparency – Having a shared document like a metrics tree increases alignment among teams. It also serves as a clear and effective reference point for conversations between departments and with different stakeholders. With a well-built tree, you should find that your discussions become much more outcome-orientated.
Coaching – Metrics trees are an excellent tool for coaching Product Managers to understand metrics and see the bigger picture.
Build an effective metrics tree in 5 steps
Now that we’ve seen some of their key benefits, how can you use metrics trees to make more effective product decisions? Here are 5 steps to help you make the most out of your product metrics.
1. Team up to identify your key metric
While building a metrics tree may seem like a job for the product team, including other departments and getting their input and feedback is key, as they may highlight points you would have never otherwise considered. So round up the product team and other relevant stakeholders such as the Marketing and Business Intelligence teams to build the tree and identify the KPIs together.
Now you’ve got everyone together, what next? If you have a North Star metric, this is the perfect place to start. If you don’t have a clear top-of-the-tree metric, begin with one of your most important customer metrics or business goals.
This first step is paramount because it will be the focal point of your entire product strategy. You may find that you had already identified the leading metric, but you might realize that you had been focusing on the wrong metrics until this point. Just another reason why metric trees are a powerful part of a product leader’s toolbox.
2. Consider all important metrics along the user journey
Once you’ve identified your top-of-the-tree metric, don’t stop there. Now it’s time to consider all the other important metrics along the user journey.
It’s up to you how you choose to do this. You can do it by listing them on a (virtual) whiteboard or using another brainstorming tool. Once you’ve listed all relevant KPIs, discuss their hierarchy and weight to help you prioritize what’s most important moving forward.
3. Create branches with metrics that ladder up to the previous metric
Now that you’re clear about your leading metric as well as the other relevant metrics along the user journey, you can continue to grow your tree. Just like gardening, this will be a messy process and you’ll definitely need to revisit your tree to prune and de-weed.
It’s completely expected and normal for your tree to grow over time as you learn more, so don’t get too attached to how it looks initially.
But watch out for unbridled growth! You need to be ruthless when deciding which parts of the tree really benefit from more detail, and when presenting it to other team members, feel free to hide branches that are no longer in focus or which are less relevant to a particular discussion. To do this, you might want to create a top-level tree that captures the whole product landscape and allow teams to go into more detail in specific branches.
4. Consider mathematical relationships and hypotheses
One way to fill out the branches is to think of your problem as a math equation. Start with one metric and then think of everything else that leads into it. For example, if you’ve decided that the number of monthly active users is your leading product metric, identify other metrics that contribute toward that goal. For instance, the number of new users, returning users, and reactivated users. You can think of this like an equation:
Monthly Active Users (MAU) = new users + returning users + reactivated users
An equally valid and important way to identify product metrics to include on your tree is to take a research-driven approach. This is useful in cases where you might not yet have enough information to know what contributes to a metric. In these cases, you’ll need to conduct research, talk to stakeholder groups, and form hypotheses.
Top tip: When there’s a definite link between specific metrics, it’s common to draw the branches with solid lines. In contrast, it’s good practice to use dotted lines to denote hypotheses to show that the connections are less reliable and may be changed later.
5. Reflect and review
When you’re filling out your tree, take time to reflect, share it with others, and ensure there are no overlaps or gaps between branches, where possible. And now for the best part, say goodbye to your overgrown KPI dashboard! It’s time to update it to reflect your metrics tree.
But bear in mind that building a metrics tree isn’t a set-it-and-forget-it activity. As a product leader, you know that business goals can change, so regularly revisit your tree to keep it updated, accurate and relevant.
Just like a real tree, timely interventions are crucial for good health. Not sure how often to check if it needs pruning or repotting? Make it a habit to check in on your tree any time your strategy, or objectives change. Other effective times to review your tree include following a new discovery, or when you spot something wrong with your tree, such as metrics that are based on a hypothesis that turns out to be wrong.
Even if your tree seems healthy, it’s good practice to schedule regular check-ins every quarter. To review your tree, simply find a starting point and then review the branches and their relationships section by section.
Metrics Trees in Action
Now that we’ve covered the 5 steps of building an effective metrics tree, let’s look at how to use it with an example:
Hafsa is head of product at a news channel where she’s responsible for developing a new audio app designed to attract a younger demographic. Hafsa and her team started working on the app five months ago and already have a dashboard that collects all the product metrics they’re tracking. Unfortunately, it’s not very useful because they never deliberately chose any KPIs; they’re just tracking nearly every event that occurs in the app. Yikes!
Metric trees to the rescue
Hafsa knows they need to identify the most important KPIs, and proposes making a KPI tree. As a first step, she calls a meeting with the product team and other relevant stakeholders (including Marketing and Business Intelligence) to work on the tree and identify the KPIs together.
When first developing the app, the team focused on acquiring new users. But when they meet to discuss what should go in the tree, they realize that attracting new users isn’t their most important goal, but instead monthly active users (MAU). (Imagine if they’d never made a metrics tree!) So now MAU is their top-of-tree metric, whereas new users is just one element that affects it.
By collaborating with other teams, they also identify other branches that affect MAU such as returning and reactivated users. They think of these branches like an equation:
MAU = new users + returning users + reactivated users
The team realizes that the number of new users is an important metric for them, so they decide to break this down into several other KPIs. The marketing team decide to break down new users into several other KPIs related to acquisition, like app store views, organic and paid leads, and search impressions. Aren’t marketing teams great?
Compared to new users, retention is much harder for Hafsa’s team to break down. The team identifies some metrics they believe lead to retention but they need to conduct user research and collect feedback before they can be sure. For the time being, they draw the branches leading to these metrics with dotted lines as we discussed earlier.
And that’s it! Hafsa and her team have a clear idea of success and can now measure progress in a meaningful and transparent way. Of course, they’ll revisit their tree regularly as the seasons and business objectives change. They’ll be sure to prune back anything that no longer serves their goals and add metrics that they discover can catalyze their growth.
Now it’s over to you. Where could you use a metrics tree to get the most from your product metrics?
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Updated: July 6, 2023