You’ve created an MVP for your genius digital product idea! You want your product to start working immediately… and rightly so. Today we will tell you what, how, and why to measure during this process.
Knowing what is of value to the customer and whether our product will solve his problem is essential in creating the final version of the product. MVP is admittedly an experiment, but it is worth taking such a risk, counting on profit at relatively low costs. The consumer will get a chance to try the minimum version of the product, and in return will leave valuable information about himself, his behavior, problems, and needs. By examining this data and, at the same time, interacting with the end customer, we learn about our product and verify its potential development directions.
“Your MVP is cheap, effective, and fast. Built following the rules – it is the minimum profitable product that will enable the team to collect the maximum amount of validated customer information with the least effort. You thought about the fact that the MVP should have a minimum amount of functionality, but it accurately reflects the essence of the idea and correctly diagnoses the needs of potential customers. The job of the MVP is to start the process of building, measuring, and learning so that the product will ultimately meet consumer demands. “
MVP will help you assess which solutions create added value and provide a competitive advantage, and which are a waste of time, energy, and money. Knowledge and learning is the most important element in the progress of a new product.
Collecting empirical data from real customers will help you set more precise revenue goals and verify the effectiveness of the created product development strategy. Low-cost verification of the attractiveness of the business concept is a safe solution from the point of view of maintaining financial liquidity – therefore the implementation of MVP is very popular among startups. The MVP itself can also generate revenue if customers like the minimum version of the product and are willing to pay for it.
Before we start the MVP implementation process, we determine:
- what do we need to find out,
- which elements will be tested (it is especially worth getting feedback from users on key areas/functionalities from the point of view of building a competitive advantage),
- what research techniques we will use,
- which group of clients do we intend to reach,
- how we will analyze the data.
The goal of MVP is to start the process of continuous learning about our product with the active participation of real customers and to find answers to business needs. Customers tested at this stage Eric Ries calls “early market customers”. They are often optimistic about the product, like technological novelties, and are characterized by a critical approach being a source of valuable feedback. When customers interact with the product, they generate twofold feedback – on the one hand, it is qualitative knowledge (e.g. what I like, what I would change), and on the other – quantitative (e.g. how many people use the product and recognize it as valuable, and how many give up contact with him). So we research and measure -> learn -> change, examine -> measure -> change, measure…
What do we measure and how do we measure?
We measure quantitatively:
- Customer engagement by analyzing the number of downloads and interactions on social media. An engaged customer is a customer deeply connected with the product – its ambassador. Commitment is expressed in product recommendations on social media, active participation in surveys, and discussions on product improvement.
- Registrations – we check how many people register to use the product. The number of registrations can be an indicator of interest in a product. The higher the interest. The very high number of registrations does not indicate the success of the product yet, but it does provide information that may indicate a market need.
- Client activity – this indicator reflects the number of clients actively using MVP. These are customers from a group of people who are involved or interested in our product. There is a chance that they will use it longer. The number of active customers compared to the number of registrations can be used to conclude what percentage of people ultimately use the product.
- Customer acquisition costs – this is an important indicator that will allow you to optimize your marketing and sales activities. When implementing a new product in the MVP version, we should bear in mind that our product will initially reach a relatively small number of customers. One of the ideas for acquiring new customers is advertising on social networks. Unfortunately, it is often quite an expensive investment. The correctly calculated unit cost of user acquisition may be the basis for a decision to start or end marketing or sales campaigns.
- Paying users – these are particularly valuable customers who, despite the lack of additional product functionalities, decided to pay for the minimum version. Their numerous presence proves the consumer potential of the product.
- Lifetime customer value – an indicator by which we can calculate the revenue that we can expect from one customer (created account) in the product life cycle. By comparing this metric with the acquisition costs, the number of registrations, and commitment, we can decide whether it is better to build relationships with existing customers in the long term or whether it is better to acquire new customers on a continuous basis. At the MVP stage, it can still be quite difficult to calculate the lifetime value of the client, because we are just testing the business model and the collected data may be insufficient.
- Dropouts – A bitter to swallow gauge for software developers, illustrating how many users have opted out of further exploring/subscribing to MVP. Too high suggests a need for product changes or no market need.
Read more about MVP here: Tesla MVP case study!
We measure qualitatively:
- Word of mouth – opinion about your product already functioning on the web or in real life. Overheard opinions play an important role in the decision-making process. Actually, at every stage of the product’s existence, it is worth researching the opinions you hear. If people talk about the product positively, it is worth further strengthening this message. However, if the opinions are negative, it is worth investigating what factors affect it.
- User feedback (user interviews, usability testing, surveys) – each measurement of behavior, as well as a change in customer behavior in contact with your product is a valuable indicator of its functionality. We can observe the way users use the product, ask about the first impression, or inconvenience, or discuss individual parts of the product. Such “live” feedback enables faster correction of noticed errors.
MVP requires agile actions and continuous iterative work from the entire team to improve product quality – therefore, cyclical validation, drawing, and implementation of conclusions result in positive changes in building and improving the functionality of the product. By conducting regular measurements and collecting feedback from users, there is a great chance to obtain enough information to make the right decisions and plan the right road map of the product for the next period. An effective product – is one that solves the real needs of users, so research and knowledge obtained from their analysis as well as constantly striving to optimize solutions are the flywheel of effective product development.
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Your MVP is working! Thanks to continuous learning resulting from regular measurements, you are able to start the next stage of product development, effectively minimizing the risk. You validated the real market demand and the business value of the product without unnecessary costs and introduced the necessary changes, communicating to users that you care about their needs and that their opinion is important to you.