Goal setting is hard. And yet, so important.

It’s one of the 8 critical decisions involved in building great products. If you get it right, you and your team can charge hard at the goal, ignoring everything else, to good result.

If you get it wrong and you do this, you often race down the wrong path.

What are some effective ways for setting strong goals?

Start From the Top

As part of your clear vision, you defined what success looks like. Go back and revisit that. Remember, you defined success not in the context of revenue or registered users, but in the context of when your user or customer is successful.

Hopefully, you identified a user outcome that indicates they’ve had success on your site. For Craigslist, this might mean they sold their old stereo. For Monster, it might mean they found a job. For Google, it might mean they got an answer to their question.

These types of outcomes can be hard to measure, but they are your true measure of success.

For now, stay away from measures like time on site, page views, number of connections, and so on. These are your product’s measures of success, not the users. We will be looking at product success measures as a means of driving user success in a bit, but they aren’t the end goal..

How do you know when you’ve found the right measure of success?

Ask yourself, so what? If the answer is something along the lines of “my user lives happily ever after” then you are on the right track. Take a look at these examples:

Craigslist:

Wrong measure: The user posted a for sale item. So what? The user might sell their stuff.

Better measure: The user got more than 2 local replies to their listing. So what? The user probably sold their stuff.

Even better measure: The user confirmed they sold their stuff. So what? Hurray, we solved their problem.

Once you’ve identified your true measure of user success, you can start to look at what behaviors drive user success.

Define the Path to Success

At this point, you either have some users who are having success on your site or you have a theory of how users will have success on your site.

If you are in the former camp, take a look at your successful users and work to understand the path they are taking to get there.

If you are in the latter camp, sketch it out on paper. What do you think they will do to get there?

For example, If I’m Craigslist, my success funnel might look like this:

Visit Site

Start create a post process

Write compelling copy

Add a photo

Post to the right category

Collect responses

Pick the best person

Sell my stuff

How do you identify this funnel? Compare the people who are having success to the people who aren’t having success. What’s different?

Do ads with photos get more responses? Then adding a photo should be part of your success funnel. Does shorter (but not too short) ad copy drive more responses? Then optimizing for the right ad copy length should be part of your success funnel. And so on.

If your product is brand new, you won’t have data yet. You will have to guess. Whether it’s explicit or implicit, you probably have some idea of what path your users will take on their way to success.

Write it down. Get it out of your head. Commit it to paper.

Once you start to get real data, compare it to your theory and evolve it.

Understand Your Points of Leverage

Now that you’ve identified your success funnel, what goal should you set?

You need to understand your points of leverage.

Where can you have the biggest impact on the total outcomes?

Start by taking a snapshot of how this funnel is performing.

For example, let’s suppose this is what our funnel looks like:

Looking at this funnel, there are a lot of things we could impact. Suppose we want to triple the number of people who sell stuff. We could try:

tripling our site visitors

tripling the number of people who create an ad

tripling the number of people who write compelling ad copy

we can’t triple the number of people who add a photo, because we are already at 50%

nor can we triple the number of people who post the right category, as we are already at 80%

almost everyone collects responses so that’s not a point of leverage

we could improve the % of people who identify the best person to sell to, but that alone won’t get us there

and we can make it easier to actually make the sale and go after that last 20%, but that’s not going to triple our outcomes either

You can see, we either need to focus on the first couple of steps in the funnel or we need to focus on more than one area for improvement.

Why don’t we just set our goal as tripling the number of people who sell stuff and figure out the how later?

That may be the right goal, but it’s not the right approach.

If you set a goal without having an idea of how you might get there, it’s not a goal, it’s a dream. – Tweet This

So what should you pick?

The answer is everybody’s favorite: It depends.

You might think your biggest point of leverage is the second step. If you could just jump from 1% of your visitors creating content to 3%, you’d be all set. It certainly seems compelling.

However, this might be your hardest metric to actually move. There’s a long standing pattern in online communities – a very small percentage (usually around 1%) create content and the vast majority of your visitors will only consume content. In a marketplace, this might even be desirable, as all those consumers create value for your sellers.

It might be time to focus on the top of the funnel and start growing your user acquisition efforts. Or it might be time to shore up those middle steps and increase the overall percentage of high quality ads.

It’s a judgement call. And only you can make it.

The point here is to make sure that you play with the numbers. Mix and match target conversion rates to get the outcomes you need. Then ask yourself, are those conversion rates possible?

Know Your Stage: Baselines, Growth, or Maintenance

So you know how to measure success, you’ve outlined your success funnel, and you’ve identified your points of leverage, now what?

(I realize that each of those is hard to do and could warrant its own blog post. Share your questions, obstacles, and concerns in the comments and I’ll try to tackle them in future posts.)

How you set your goal will depend on what stage you are at with that particular metric. There are three different stages to consider:

Baseline Goals: Do you have a baseline of data for this goal? Do you have a trend over time? Let’s be clear: a trend is more than two data points.

Does this number fluctuate? By day of the week, month of the year, your PR efforts?

If you don’t have a good handle on how this metric changes over time already, it will be very hard to predict how you can impact this goal. Rather than setting a numerical goal, set a baseline goal – your goal should be to collect data and understand what impacts this measure., not to hit a specific number.

Growth Goals: If you have a baseline and your focus is growth, then a growth goal is right for you. Growth goals might be:

3x site visitors

3x the number of people who write compelling ad copy

Grow the % of people who pick a person by 25%

Most of the things you already think of as goals are probably growth goals.

Maintenance Goals: Sometimes you get to a point where further investment leads to diminishing returns. It might be hard to get more than 80% of people to post to the right category. You might decide this is good enough. In this case, you probably want to set a maintenance goal to make sure this percentage doesn’t slip.

With time, you’ll have goals in all three stages. You’ll have a set of maintenance goals that really act as constraints on future development (i.e. increase compelling ad copy without negatively impacting posting to the right category). You’ll have a set of growth goals which are your primary focus and you’ll have a set of baseline goals that act as your pipeline, as these will eventually turn into growth goals.

Setting Growth Goals

It can be really hard to know how to set a growth goal. How much growth should you aim for during a specific period of time?

This is one of the hardest questions you will have to answer.

And there are no right answers.

But here are some tips.

First, extrapolate out your current trend. If you made no changes whatsoever, what number would you hit if time just passed, given your current rate of growth?

For example, if you currently have 1,000,000 registered users and they are growing 3% week-over-week and you are setting a quarterly goal, without doing anything differently, you should have 1,425,000 registered users at the end of the quarter.

Your growth goal needs to be higher than that.

Beyond that, I’m a big believer in setting aggressive goals. In this post, I explain how I get to a specific number that leads to exponential results. Take a minute to read it. And when estimating the impact of your activity plan, be sure to follow these estimating tips.

I’m a firm believer in the following:

Incremental goals lead to incremental results. Exponential goals lead to exponential results. – Tweet This

Which do you want?

Set your goals accordingly.

Have you identified your success funnel? Your biggest points of leverage? Have you set the right goal for driving product success? Please share your experience in the comments.

On Thursday, we’ll shift our focus from engagement to growth. Don’t miss out, subscribe to the Product Talk mailing list.