Rethinking Product Benchmarking for Better User Engagement
Last updated on Thu Jan 23 2025
Imagine trying to fix your product by copying someone else’s strategy without knowing if it actually works for your audience. It’s a gamble, and not a smart one. That’s the trap many fall into with product benchmarking. Sure, it’s tempting to compare your Net Promoter Score (NPS), user retention rate, or feature adoption rate to competitors, but blindly chasing their numbers can lead you down the wrong path. Instead, the real growth happens when you focus on your own product, your own users, and your own data.
Not all benchmarking is bad, though. Internal benchmarking, which means analyzing how your product performs over time, is one of the most powerful ways to boost engagement and drive improvements. In this post, we’ll explore how to benchmark effectively, the best KPIs to track, and why looking inward often outshines chasing what the competition is doing.
What is product benchmarking?
Alright, let’s break this down in the simplest way possible. Product benchmarking is like being at the gym, and instead of focusing on your own gains, you’re side-eyeing the guy benching two plates. It’s about comparing your product’s performance or features with someone else’s to see how you stack up. Sounds smart, right? Sure, but there’s a catch: you might end up copying someone’s routine without realizing it’s not built for your body (or in this case, your product). But don’t worry—benchmarking doesn’t always mean you’re chasing the competition. There are smarter ways to do it.
Here’s the deal: not all benchmarking is the same. Let’s walk through the main types and figure out which one works for you:
Internal benchmarking This is the king of benchmarking. You’re not worried about what everyone else is doing—you’re looking at your own progress. Think of it as comparing this month’s gains to last month’s. You analyze your own data, see what’s working, and double down on it. That’s how you grow, bro.
Competitive benchmarking Alright, this one’s a little risky. It’s like looking at the competition’s stats and trying to beat them at their own game. Sure, it might give you an idea of where you stand, but remember: their users aren’t your users, and their wins might not work for you. Approach with caution, my friend.
Functional benchmarking Now, this one’s all about learning from the best, no matter what industry they’re in. It’s like seeing how a pro athlete trains and figuring out how to apply some of those techniques to your own game. You’re not copying; you’re adapting. It’s a smarter way to get inspired.
Moral of the story? Benchmarking can be a tool or a trap. It all depends on how you use it.
How to benchmark a product
Benchmarking a product can be a powerful tool if done correctly. The goal is to identify opportunities for improvement and align your product’s performance with measurable goals. But without a clear plan, it’s easy to get lost in the data. Follow these steps to ensure your benchmarking process delivers actionable insights:
Step 1. Identify the purpose of benchmarking
Start with the “why.” Are you looking to improve user engagement? Increase feature adoption? Or identify areas where your product underperforms? Defining the purpose ensures that your efforts are focused and meaningful, rather than chasing metrics that don’t align with your objectives.
Step 2. Set measurable KPIs
Once your goal is clear, determine the specific metrics to track. These Key Performance Indicators (KPIs) should directly relate to the purpose of your benchmarking. For example, track retention rates to measure engagement or Net Promoter Score (NPS) to gauge user satisfaction. Measurable KPIs give you a clear benchmark for success.
Step 3. Gather internal data for baseline performance
Before looking outward, start by analyzing your own data. Collect metrics that show where your product currently stands, such as churn rates, activation rates, or usage patterns. This baseline provides the foundation for comparing progress over time.
Step 4. Research external benchmarks (if applicable)
After assessing your internal data, consider researching industry benchmarks to gain external context. Analyze what leading competitors or similar products are doing well. However, treat external benchmarks as inspiration rather than a definitive guide—your users’ needs may differ from those of other companies.
Step 5. Analyze and compare the data
With internal and external data in hand, it’s time to dig into the numbers. Compare performance metrics to uncover trends, gaps, and opportunities. Look for areas where you excel and areas where improvement is needed. This step is crucial for turning raw data into meaningful insights.
Step 6. Use insights to guide improvements
Finally, translate your findings into an actionable strategy. Whether it’s refining your user onboarding process, introducing a new feature, or optimizing an underperforming area, use the insights from benchmarking to make informed decisions. Regularly revisit and refine your approach to stay aligned with your goals.
By following these steps, benchmarking becomes a structured, goal-oriented process that drives meaningful improvements for your product.
The 9 best KPIs for product benchmarking
When it comes to benchmarking, the metrics you choose to measure can make or break the process. Key Performance Indicators (KPIs) help you assess your product’s performance and identify areas to focus on for growth.

Below are some essential KPIs to consider, along with why they matter:
User retention rate: Measures how many users stick around over time. High retention indicates your product is delivering consistent value, while low retention is often a signal of friction or dissatisfaction.
Product stickiness: Tracks how often users return to engage with your product. A sticky product is one that users rely on regularly, signaling high engagement and utility.
Net Promoter Score (NPS): Gauges how likely users are to recommend your product to others. A high NPS means users are not only satisfied but also advocates for your product.
Feature adoption rate: Measures the percentage of users actively engaging with specific features. This helps you understand which features are most valuable and where improvements might be needed.
Free-to-paid conversion rate: Tracks how effectively free-tier users are converting to paying customers. A strong conversion rate is often a sign that your value proposition is clear and compelling.
Activation rate: Indicates how quickly and successfully new users achieve a specific milestone (e.g., completing onboarding or taking a key action). A high activation rate shows that users are experiencing value early on, which boosts long-term engagement.
Churn rate: Measures the percentage of users who stop using your product over a specific time period. A high churn rate can signal dissatisfaction, unmet expectations, or a lack of perceived value, making it a critical KPI to monitor.
Customer lifetime value (CLV): Estimates the total revenue a single customer will generate for your product over their lifetime. A higher CLV shows strong user retention and monetization, helping you assess the long-term health of your business.
Time-to-value (TTV): Tracks how quickly users experience value after starting to use your product. A shorter TTV often leads to higher retention and satisfaction, as users feel rewarded early in their journey.
Examples of benchmark numbers and their implications
Let’s bring this to life with a few concrete examples. Say your user retention rate sits at 60% after the first month, while the industry average is 75%. This gap might point to onboarding issues or a lack of clear value early on, so focus on refining your onboarding process or highlighting key features sooner. If your free-to-paid conversion rate is 5% but top-performing competitors see 10%, consider optimizing your free tier to better showcase the benefits of upgrading, such as offering time-limited premium trials. Finally, if your feature adoption rate for a critical tool is below 30%, it could mean users don’t understand its value, so look into clearer in-app messaging or tutorials to drive engagement. Each of these metrics tells a story and helps direct your efforts where they’ll have the most impact.
Why internal benchmarking often outshines competitive benchmarking
Internal benchmarking focuses on your own product and user base, which makes it more reliable for driving meaningful improvements. By leveraging internal data, you can track trends over time, identify what resonates with your audience, and experiment with tailored solutions that align with their needs. This approach ensures that your strategy is rooted in real-world behaviors rather than assumptions based on external comparisons. For example, tracking user retention across specific cohorts might reveal that one group engages far more with a certain feature. By enhancing and promoting that feature, you can improve overall satisfaction and retention without worrying about what your competitors are doing.
Competitive benchmarking, on the other hand, often pushes companies into a follower mindset. While keeping an eye on the competition can inspire new ideas, it risks diverting your focus from what matters most: your users. For instance, copying a competitor’s gamification strategy might look promising, but if your users aren’t interested in gamified features, it could fall flat and waste resources. Internal benchmarking avoids this trap by using your own data to dictate priorities, ensuring that your efforts align with your unique user base and goals.
The dangers of focusing solely on competitor benchmarking
Focusing too much on competitor benchmarking is like copying someone else’s diet plan without realizing they’re training for a marathon, and you just want to fit into your jeans. Sure, their KPIs might look impressive, but what works for their product might not work for yours. For example, a competitor’s flashy new feature might drive engagement for them because their users love bells and whistles, but your users might prefer simplicity and clarity. Chasing those mismatched strategies can lead to wasted time, money, and effort, not to mention frustration when the results don’t pan out. Instead of constantly looking over your shoulder, focus on your own product and let your internal data guide your decisions—it’s like having a personal trainer instead of guessing your way around the gym.
Best practices for internal benchmarking and user engagement
Even though internal data will always be the best way to improve engagement, seeking inspiration from the outside world is also quite important.
You can look at what other companies are doing, not simply because you want to copy what they are doing exactly, but so that you can see new trends and consider what to try that would help to enhance your users' experience.
However, whether to implement a new idea should depend on your user base and not on external data from competitors. Always run new ideas by your users and prioritize what your data shows.
Define user segments

Start by breaking your audience into distinct groups based on their behaviors, demographics, or preferences. This segmentation allows you to understand how different types of users interact with your product. For example, power users might engage with advanced features, while new users might need simpler onboarding. By identifying these segments, you can tailor strategies to meet each group’s unique needs.
Monitor and analyze user behavior
Keep a close eye on how users interact with your product. Track key metrics like session duration, feature usage, and drop-off points. This data helps you pinpoint what’s working and where users might be encountering friction. By regularly monitoring behavior, you can uncover opportunities for improvement before they become larger issues.
Experiment with A/B testing
Test your assumptions by running A/B tests on different features or experiences. For instance, you might try two versions of a signup flow to see which drives higher activation rates. A/B testing allows you to validate ideas with real data, ensuring you’re making changes that actually benefit your users.
Iterate based on data
Use the insights you’ve gathered to refine your product over time. Improvement is an ongoing process, and internal benchmarking helps you stay focused on what matters most. Whether it’s optimizing a feature, simplifying navigation, or revamping onboarding, let the data guide your next steps.
Tips to improve user engagement through data-driven decisions
Data is a great tool for driving engagement. Use it to understand what keeps users coming back and double down on those elements. Whether it’s offering personalized experiences, highlighting underused features, or introducing time-saving shortcuts, the right data-driven decisions can transform your product into something users can’t live without.
When and how to look externally for inspiration
Sometimes, you need to peek over the fence to see what the neighbors are up to—but don’t just copy what they’re doing. Looking externally for inspiration is about spotting trends and innovations that might fit your product, not blindly following the crowd. The key is to take those ideas and evaluate them through the lens of your users and your data. Here’s how to strike the perfect balance:
Look for emerging trends Keep an eye on industry news, customer feedback, and thought leaders to spot new strategies and features gaining traction. Trends often highlight shifts in user expectations, which can help you stay ahead of the curve.
Analyze ideas through user needs Before you jump on a trend, ask yourself one question: does this make sense for your users? Just because a competitor added a shiny new feature doesn’t mean it’s something your audience wants or needs. Your users should always be the ultimate filter.
Test ideas using your data This is where the magic happens. When you find an idea worth exploring, test it with a small segment of users or run an A/B test to measure its impact. This step ensures you’re making data-driven decisions instead of throwing spaghetti at the wall and hoping it sticks.
Focusing on internal benchmarking allows you to base your product improvements on what truly matters: your users and their unique needs. A data-driven, user-first approach ensures that every decision you make is grounded in insights that drive real engagement and growth. Ready to take the next step? Explore tools and resources that can help you turn your data into actionable strategies and keep your product ahead of the game.