The Ultimate Interview Cheatsheet: Top 21 Metrics Every Product Manager Must Know
In my Product journey, I’ve come to appreciate the significance of metrics and KPIs (Key Performance Indicators) in shaping successful products. In this post, I will share the top 21 product metrics that every product manager should know, along with their formulas and straightforward explanations.
1. Activation Rate (AR)
Formula: (Number of users who completed the desired action) / (Total number of users) x 100
Explanation: Activation rate measures the percentage of users who take a specific action upon signing up. It’s a vital indicator of user engagement.
2. Churn Rate
Formula: (Number of customers lost during a period) / (Total number of customers at the beginning of the period) x 100
Explanation: Churn rate quantifies the percentage of customers who stop using your product during a given period. Lower churn is better.
3. Monthly Recurring Revenue (MRR)
Formula: Sum of monthly subscription revenue
Explanation: MRR shows the predictable monthly revenue generated from subscriptions. It’s a cornerstone for SaaS product managers.
4. Customer Lifetime Value (CLV)
Formula: (Average purchase value) x (Average purchase frequency) x (Average customer lifespan)
Explanation: CLV predicts the total revenue a customer is expected to bring over their entire relationship with your product.
5. Customer Acquisition Cost (CAC)
Formula: Total cost of sales and marketing / Number of new customers
Explanation: CAC reveals the cost associated with acquiring a new customer. It should ideally be lower than CLV.
6. Net Promoter Score (NPS)
Formula: (% Promoters — % Detractors)
Explanation: NPS measures customer loyalty. Promoters (those who love your product) minus detractors (those who don’t) gives your NPS.
7. Customer Satisfaction Score (CSAT)
Formula: (Number of satisfied customers) / (Total number of respondents) x 100
Explanation: CSAT helps gauge user satisfaction. Users are typically asked to rate their satisfaction on a scale.
8. User Retention Rate
Formula: ((Number of users at the beginning of a period — Number of users at the end of a period) / Number of users at the beginning of the period) x 100
Explanation: User retention rate indicates the percentage of users who continue to use your product over time.
9. Monthly Active Users (MAU)
Formula: Number of unique users who engage with your product in a month
Explanation: MAU quantifies how many users are actively using your product on a monthly basis.
10. Daily Active Users (DAU)
Formula: Number of unique users who engage with your product in a day
Explanation: DAU measures the number of users who actively use your product on a daily basis.
11. Stickiness
Formula: (DAU / MAU) x 100
Explanation: Stickiness measures how often users engage with your product. A higher stickiness indicates strong user engagement.
12. Conversion Rate
Formula: (Number of conversions) / (Number of visitors) x 100
Explanation: Conversion rate shows the percentage of users who complete a desired action (e.g., sign up, purchase).
13. Average Revenue Per User (ARPU)
Formula: Total revenue generated / Total number of users
Explanation: ARPU indicates how much revenue is generated on average per user. It’s essential for monetization strategies.
14. Cost Per Acquisition (CPA)
Formula: Total cost of acquiring customers / Number of new customers
Explanation: CPA reveals the cost associated with acquiring new customers. Lower CPA is better.
15. Feature Adoption Rate
Formula: (Number of users who adopted the feature) / (Total number of users) x 100
Explanation: Feature adoption rate helps assess how well a new feature is received by users.
16. Session Duration
Formula: (Total time spent by all users) / (Total number of sessions)
Explanation: Session duration indicates how much time users spend on your product during a single visit.
17. Customer Effort Score (CES)
Formula: (Sum of responses) / (Total number of respondents)
Explanation: CES measures how easy or difficult it is for customers to use your product.
18. Retention Cohorts
Formula: (Number of users from a cohort still active) / (Total number in the cohort) x 100
Explanation: Retention cohorts track how specific groups of users behave over time.
19. Feature Usage Frequency
Formula: (Number of times a feature is used) / (Total number of users) x 100
Explanation: This metric quantifies how frequently users engage with a specific feature.
20. User Satisfaction Index (USI)
Formula: (Sum of satisfaction scores) / (Total number of respondents)
Explanation: USI is an overall satisfaction score based on user feedback.
21. Referral Rate
Formula: (Number of referrals) / (Total number of users) x 100
Explanation: Referral rate quantifies how many users refer others to your product.
In the dynamic world of product management, mastering these 21 essential metrics is like holding the keys to success. With these insights, you can make informed decisions, enhance user experiences, and steer your product towards greatness. Remember, data is your ally, and these metrics are your compass in this ever-evolving journey.
So, keep these metrics close and monitor them diligently. Whether it’s optimizing conversion rates, boosting user satisfaction, or reducing churn, these tools will guide your path to a product that users love.
As you continue to explore and refine your product, always remember the power of these metrics in your hands. Use them wisely, and let data be the wind in your product’s sails.
