May 10, 2024
Analytics tools like Mixpanel are great for understanding user behaviour and funnels. But they have limited insight into the financial value users drive for your business. Acting like Mixpanel gives you a complete picture of your highest-value users and features is a costly mistake.
Mixpanel cannot segment based on user value
Mixpanel allows you to segment users based on actions they take in your product, like signing up, making a purchase, or using specific features. However, it has no inherent way to tie those actions to the actual dollar value each user generates for your business. You're segmenting based on behaviour, not financial impact.
For example, In this Mixpanel blog, they gave an example of a possible Mixpanel Segment:
Plus they give additional information like firmographic data, technographic data, paid vs free users, usage frequency, time on site/app, conversion goals, negative behaviours, and lack of activity.
Engagement is important, but the most engaged users aren't necessarily your most profitable. Some highly engaged free users could be a cost centre, while a smaller segment of lower-usage paid users drives most of your revenue. Mixpanel alone cannot illuminate these differences.
Mixpanel funnels are not economically value-based
Similarly, Mixpanel funnels only show you how users flow through your product experience. They can't quantify the revenue impact of users completing those funnels or pinpoint which funnels are yielding the highest-value customers.
A funnel with a high completion percentage may look successful, but if the users completing it have a low average LTV, you're celebrating the wrong metrics. Conversely, a funnel with a lower completion rate could be hindering your most profitable customer segment. Without tying funnels to financial outputs, you're operating in the dark.
As Mixpanel puts it “This allows you to identify where your users drop off, what segments convert the most, and other important facets of the user journey”, funnels do not show their LTV, revenue, etc., this is only surface-level data and not granular data.
Mixpanel has limited customer-level financials
While Mixpanel has Revenue tracking, it relies on you implementing that for each revenue event like subscriptions or in-app purchases. It doesn't automatically map those events to customer-level metrics like customer lifetime value (LTV), payback periods, or customer acquisition costs. Its financial data is event-based, not customer-based. So while you can see total revenue numbers over time, you lack the ability to analyse those revenues on a per-customer basis and understand your actual customer economics.
Mixpanel offers limited financial metrics on top of usage as integrated finance and product analytics is not their area of expertise or focus.
This makes prioritisation extremely difficult - you're working with half the picture. To run a sustainable, capital-efficient business, you need unified profiles combining product usage with customer financials.
Integrated analytics can help you segment customers based on value
Integrated analytics allows you to segment users by user value, user profitability, etc. - unlocking insights into your most valuable customer segments. For example, you may find that despite being less engaged, users upgrading from a particular self-serve plan are substantially more profitable than those using your free product heavily. With enriched data, you can double down on marketing and product efforts for that valuable segment.
You may also see that highly engaged users starting on a free trial are extremely unprofitable. This allows you to rethink your marketing spend and product strategy for that cohort.
By segmenting your customers on their value, you can optimise your marketing budget and more.
Integrated analytics can help you optimise costs
With enriched data, you can optimise marketing and product spend toward your highest-value segments.
Instead of running campaigns aimed at increasing top-of-funnel engagement, you can hone in on strategies for acquiring and retaining users with the highest value such as the highest LTV.
You may find that a particular content channel or ad campaign attracts users with low engagement but high conversion to your best-value plan. You can shift the budget towards doubling down on that tactic.
Similarly, on the product side, you can invest in building sticky features for your highest user-value segments while retiring efforts for low-value segments.
The goal is capital efficiency - investing prudently in the areas optimised for long-term revenue, not just engagement.
Integrated analytics can help determine what products and features are bleeding you cash
Integrated analytics sheds light on which funnels, products, and features are bringing in money versus just engagement. You can double down on what's profitable and cut what's not.
For example, you may find your free product has extremely high engagement, but those users rarely convert to any paid plan. They may be being over-served by features only intended for paid customers.
Or an enterprise feature with abysmal usage could be dragging down gross margins for that customer segment.
With visibility into both usage and revenue patterns, you can rationalise your product investments and align your roadmap with profitable growth. You can build and market the right features to the customers willing to pay for them.
In summary, while Mixpanel is great for understanding user behaviour, it lacks critical financial context. Integrated analytics can help you truly understand your customer economics and focus your business strategy intelligently.