How to evaluate product success and demonstrate ROI

How do you know if your product is truly making a difference? Simply creating a great product isn’t enough – you need to prove its value. This is where return on investment (ROI) comes in.

ROI isn't just about money – it's a way of saying, "Hey, look how awesome this is for you!" It tells a story of how your product delivers measurable results, improves processes, and brings value to both businesses and customers.

In this article, I’ll highlight eight strategies for measuring the impact of what's being sold and proving that it's all worth it.

1. Define objectives and KPIs

When measuring your product's impact, it's crucial to begin by clearly defining objectives and identifying key metrics aligned with those objectives.

Start by understanding what your product is meant to achieve, whether it's increasing revenue, reducing costs, improving customer satisfaction, or gaining market share. Having clear objectives set in stone will guide the process of measuring ROI.

Once your objectives are established, you can identify specific metrics like key performance indicators (KPIs) to track progress. For instance, if the goal is to reduce costs, relevant KPIs might include reducing operational expenses or lowering customer support costs.

2. Set a baseline for comparison

Want to know if your product is making a difference? Well, you need to start by figuring out where you're at right now.

To do that, you've got to measure some key things before you even start using your product. These are your baselines, allowing you to see how much your product is helping.

Collect pre-usage data

Before you start using your product, you need to gather information on how things are going.

For instance, if you were starting a weight loss program, you'd want to know things like how many KGs or inches you lose after a certain period. This information will be your starting point for seeing how much the weight loss program helps later.

Use control groups

Another idea is to have a user group that doesn't get to use your product. This group will help you see what's making a difference.

For example, if you're trying out a new survey tool, you could keep some of your audience on the old system. Then, you can compare how things go with the new tool to how they go with the old one. This helps you figure out if your new product is genuinely making a difference.

3. Measure financial results

Seeing how much revenue your product brings in is a great way to understand its impact. Below are several methods you might use to assess this:

Track revenue growth

Look for any increase in revenue that can be linked to your product, like higher sales, add-on sales, reaching new markets, and more. For example, if you have a digital marketing tool, you'd want to track the increase in audience reach after introducing the tool.

Quantify cost savings

Figuring out how much money your product helps save is a big part of calculating its return on investment. Look for any costs that go down directly because of your product, such as lower operating expenses, reduced need for customer support, or more efficient processes.

If you have an automated billing system, calculate the savings from fewer billing errors and the time it saves.

Assess profit margins

Understanding how your product affects profit margins is crucial in determining its profitability. You can compare profit margins before and after your product is used to see the difference it makes.

For instance, if your product lowers manufacturing costs while keeping sales prices steady, it can boost profit margins and increase your return on investment.

4. Measure customer impact

Understanding how your product impacts customers is crucial for showing its value. Here are a few ideas you can implement to gauge this:

Evaluate customer satisfaction

High satisfaction scores from customers often indicate that they are more likely to remain loyal to our brand and less likely to switch to a competitor. This increased loyalty is beneficial for ROI as it can lead to higher customer retention and increased long-term revenue.

Monitor retention to gauge product importance

Keeping our customers happy and coming back for more is important to make sure our product does well.

By keeping a close eye on how many customers stick with us and how many leave, we can really see how much our product means to them. This information is priceless for understanding how our product affects customer happiness and loyalty.

Analyze adoption rates

High adoption rates usually mean a more significant impact, as more users trying out the product leads to more overall value. As product managers and CSMs, tracking metrics like daily active users, feature utilization rates, and onboarding completion rates is crucial for showing the value of our work.

5. Deliver a short time-to-value

Time-to-value (TTV) is all about how quickly customers can start reaping your product's benefits after implementing it. The faster they can see value, the quicker they can get a return on their investment.

One way to improve TTV is to reduce the time customers take to get your product up and running.

If your product has a long and complicated setup process, it might take a while for customers to see the benefits. Providing thorough and easy-to-understand documentation and tutorials for your product.

If customers need help understanding how to use your product or cannot maximize its potential due to a lack of guidance, it will take them longer to realize the value. Clear and comprehensive instructions can significantly reduce the time customers take to benefit from your product.

6. Use customer feedback

Customers share real-life stories of how your product is helping and what challenges it's solving. When you blend these stories into your ROI analysis, you give context to the numbers and show the broader impact of your product.

I implore you to create case studies that showcase real examples of how your product has brought value to other customers. These stories should include data (like increased revenue and cost savings) and personal insights (such as improved satisfaction and streamlined processes). By sharing these stories, you help others see the potential ROI of your product.

7. Check-in and adjust as necessary

If you want to ensure your product continues to deliver value, you’ll need to review and modify your ROI model frequently.

Review the objectives and ROI results and ensure these are linked. If there is a misalignment, make the necessary adjustments. A high churn rate can indicate that customers are not seeing enough value from your product. Look for ways to improve your offerings and keep the churn rate low.

8. Discuss the outcomes

One way to stand out is to share the results of your ROI measurement with relevant stakeholders. If you are not sharing the results, it is not helpful to showcase value. It can be overwhelming, but you should create reports for different audiences to showcase unique value to their use case.

For example, senior leadership might want to see revenue and operational impact; a marketing team might love customer success stories, and a product team might love adoption rates. Tailoring your message makes sure everyone gets the info they need. One way to make the result enjoyable is to use infographics where possible.

In a nutshell

We’ve discussed a lot in this article, and one thing to take away is that we cannot overemphasize the need to showcase ROI. Even in a scaling digital space, you should put in measures to highlight these wins.

Customers usually need help to justify why they should keep using your product. You can do this by setting clear goals and KPIs, comparing results to baselines, measuring financial outcomes, and assessing customer impact.

Understanding how a product affects everything overall helps your business, makes customers happy, and builds trust. This all leads to long-term success.

How to evaluate your product's success and demonstrate ROI