First, let’s talk about why product analytics are important.
Product analytics involves monitoring and evaluating data to gain insights into how users interact with a product or service.
This data helps companies evaluate whether a product is successful.
If a product isn’t meeting expectations, analyzing the data can help a company
figure out why the product is underperforming and identify opportunities for improvement.
Product analytics can also help a company avoid selling products that don’t benefit their business or that can harm their brand’s reputation.
A product that lacks quality leads to negative customer reviews or has a higher than normal return rate isn’t worth the hassle or the risk to a brand’s reputation.
Another reason product analytics are important is because they help a company
plan its inventory needs.
Knowing which products are the most popular and understanding changes in seasonal demand helps a company know when to purchase more inventory and how much to purchase.
Product analytics also help companies evaluate the impact of marketing
campaigns. For example, do orders and revenue increase when there’s a campaign centered around certain products?
How do promotions impact sales and is the impact large enough to make up for
the discounted price?
A company can use this information to plan its future marketing campaigns.
Now let’s consider some of the metrics a company might use to analyze product
performance.
A good place to start is with the number of times a product is viewed.
This indicates whether visitors are able to find the product.
If the number of views is low compared to similar types of products,
the company will need to find ways to increase traffic to the product.
For example, the company could highlight the product in their marketing campaigns.
They could also feature the product on the homepage or category page or
include it as a product recommendation on their website.
Next, it’s important to consider the product conversion rate,
which is the percentage of customers who purchase a product after viewing it.
Increasing the conversion rate even a small amount can make a noticeable
difference in the total revenue generated by a product.
What are some of the ways the company might improve the product conversion rate?
First, the company might update the product detail page.
They could upload higher quality photos and allow customers to zoom in for
more detail.
They could add photos of the product in all available colors and from multiple angles.
For example, if the product is a t-shirt, they’ll want to include photos of the front
and back or even a video of a model wearing the t-shirt.
Including a photo of the product packaging can also be helpful.
They might also update the product description to include the benefits of
the product, technical specifications,
a size chart, and any information that’s available on the product packaging.
The product photos and description need to make up for
the fact that customers may not be able to try on or inspect the product in a store.
If the product doesn’t have customer reviews enabled,
the company might consider adding this feature.
It can help convince customers who are undecided about purchasing the product.
If the product has no reviews or only a few, the company can encourage customers
to review the product by sending email reminders.
Another metric to consider for product analytics is the number of unique
purchases compared to the number of recurring purchases.
This is especially helpful for products with a short lifespan or for
subscription-based products and services.
For these types of products, a high number of recurring purchases will lead to
stronger growth.
Net profit margin and return on ad spend are two important metrics that we covered
in the lesson on product research.
It’s a good idea to evaluate these metrics on a regular basis to track any changes
and uncover opportunities for improvement.
In some cases, a product might have a negative profit margin but
still be worth selling.
For example, consider a business that sells printers at a loss but
then makes up for the difference over time through recurring sales of ink and toner.
The business loses money upfront but eventually makes up for it in the end.
It’s also important to consider how a product affects the average order value.
For example,
is a product priced significantly higher than the average order value?
If so, it may be priced higher than customers are willing to spend.
Another aspect to consider is how a product affects the purchase of other
products.
For example, do customers who purchase a bicycle also tend to purchase a helmet?
When customers readily purchase both products together, it increases the average
order value.
To increase the average order value, a company could include the product in
their cross-selling and upselling strategies.
They might also include the product in a bundle offer to increase sales.
For example, the bundle offer for bicycles and helmets could be
“Save 10% on a helmet when you buy a bicycle.”
Finally, it’s important to consider the return rate,
which is the percentage of products sold that are returned by customers.
Is the return rate for a specific product higher than the average for its category?
If so, the company will need to dig into why this is happening and
find ways to lower the return rate.
For example, is there a flaw in the product’s design?
Is the product description on the website accurate?
It’s important for a company to ask customers why they’re returning a product
so that they know how to make it better.
After making updates to improve a product’s performance based on data,
it’s important for
the company to track any changes to the product’s performance over time.
This will help them evaluate whether the updates are making a difference.
If not, it may be time to try something else or stop selling the product.
Alright, you’ve learned a lot about how to evaluate a product’s performance.
You’ve also learned ways to try to improve the performance of a product that’s not
selling as well as expected.
These will be valuable skills to help you in an entry-level e-commerce position.
In your role you may be asked to provide updates on how a product is performing or
offer suggestions on how to improve a product’s performance.
Keep up the great work.