Metrics and KPIs You Need As Product Manager
Product metrics matter because without them, teams would have few reliable ways to understand how the elements of their digital product are performing. Business metrics can capture the overall success of a company, customer interview can provide qualitative information, but only product metrics can give you objective and immediate data on how users interact with your product.
Common Product Metrics
Key metrics categories
Here are the most commonly used product management metrics:
- Engagement — The frequency and cadence of key actions
- Revenue — Sales revenue generated
- Conversion — Driving purchases, sign-ups, form-fills, etc.
- Retention — Users coming back
- Activation — A user’s first value moment
- Active usage — Daily, weekly, monthly, or even annually active users
- NPS — Customer satisfaction
Metrics to forecast business success of a product
These are the numbers showing how much you’re making today and will be making in the future, and subsequently — how much more you can develop or simply for how long you can stay afloat. Stakeholders care about the revenue, customer acquisition cost (CAC) and customer lifetime value (LTV or CLTV). These indicators define the fate of the company and the product.
- LTV = Long term Value
- CLTV = Customer Long term Value
- CAC = Customer Acquisition Cost
- MRR (Monthly Recurring Revenue)
These metrics measure a product’s total revenue in one month. To calculate them, consider the MRR at the beginning of the month, add gained revenue from new subscriptions, and subtract churned revenue from lost customers.
2. CAC (Customer Acquisition Cost)
This metric covers all the costs spent on attracting customers: marketing spendings, sales team work, advertising. Sometimes these costs include salaries of marketing and sales professionals. Usually, customer acquisition cost involves setting a specific period of time and total revenue. CAC is useful for measuring the efficiency of marketing and sales activities, and for knowing if the amount your company spends to acquire new customers is worth the revenue they bring in.
3. CLTV / LTV (Customer Lifetime Value / Lifetime Value)
It’s useful for understanding how much you should spend to acquire customers, and for identifying the customers you should be pursuing. These metrics allow you to calculate how much money a user will generate in the long term. LTV displays an average profit from one user before they cancel a subscription. The point of this KPI is to show you how much you can spend to attract a new customer at an early stage, regarding the probable profit from one person.
Metrics to analyze and grow user engagement
Customer-oriented metrics will show you how your product development efforts transform into user interactions. How many users find and use your product? How much time do they spend using it overall or a particular feature? How do customers react to a specifically planted action or feature?
- Daily Active User / Monthly Active User Ratio
The most valuable metrics of product growth is the number of users or subscribers for a fixed period of time. But the number of people who have subscribed or purchased your product isn’t a primary KPI. What really matters is the number of active users. Metrics of this category track how many unique visitors or users you have per day (DAU), week (WAU), or month (MAU).
A good DAU/MAU benchmark varies based on what type of app you have. Generally, you want to focus more on how your DAU/MAU is trending over time rather than the actual number.
2. Session Duration
This KPI is the easiest way to track digital product usage. Note that simple logins or visits are usually not good benchmarks for measuring sessions, since what usually matters is not whether a user has your site open on their browser, but whether they’re engaged with it.
3. Traffic
This KPI mostly applies to websites, while for applications and software we use the number of users. It shows the general number of people who found and visited the website. While organic traffic is related to the number of visitors who found a webpage via search, paid traffic counts those who visited it from paid sources, for example, paid search, social media ads, or sponsored content.
4. Bounce Rate
Another metric is the bounce rate. It allows for measuring the percentage of users who visited only one page of a website or app and left. Bounce rate allows you to track the user behavior and understand how to optimize your product to reduce this number and increase user attention.
Metrics to keep users interested
Retention metrics help understand whether your marketing and customer support efforts pay off. If you know your Customer Acquisition Cost, you know how much it takes to attract a new user. Your current clients are much more likely to try a new feature, switch to a better plan, or take part in an interview for user research, so it makes sense to focus on retaining them.
- Customer Retention Rate (CRR)
Customer retention rate (CRR) is the percentage of customers who stayed with the company after a certain time period. You can base your calculations on a number of downloads or first logins to the app. You can understand if and for how long you’ll be able to retain new customers when your customer retention rate is growing. In case it dropped, you can be on the lookout for a new competitor or a problem in customer service.
2. Churn Rate
While retention rate measures the percentage of users who stayed, the churn rate measures those you’ve lost. There are two types of churn rate: customer churn (number of users who canceled paid subscriptions) and revenue churn (amount of revenue lost due to customer churn).
Metrics to measure product/feature popularity
One of the central product manager responsibilities is to lead the product development workshop, where a product team works on ideation of new features and UX design. To make relevant decisions, you need convincing data on product and feature usage. Two key metrics here are the number of user actions and sessions per user.
- Number of session per user
This metric helps understand key user behavior: how often users come back and use the site. It can be tracked with statistics that display the number of logins or site visits.
2. Number of user actions per session
This KPI seems similar to the previous one, but it tracks not just how many times a user opened an app. It displays which actions a user made and which feature(s) they used while using the app.
Metrics to evaluate user satisfaction
- NPS (Net Promoter Score)
This metric measures the number of loyal customers who are likely to recommend a product (promoters), and those customers who hate it (detractors).
2. CSAT (Customer Satisfaction Score)
It measures the overall level of content or discontent of a user about a specific product or service feature. Usually, users are asked to rank a product or service on a scale of 1–3, 1–5, or 1–10. It’s calculated by summing the score and dividing it by the number of respondents. Ask for user feedback at several points through the customer journey and do it before another subscription renewal so you have time to introduce improvements.
But which metrics matter most? A survey of nearly 500 product professionals across the globe revealed that these are the top 3:
- Retention
- Engagement
- Conversion
Selecting product metrics that matter is a journey, not a destination. Just as the product itself, product metrics need to be iterated. We should start with a small data set and then adapt according to the outcomes we need to measure.
Without product metrics, we can’t be outcome-oriented. Without being outcome-oriented, we can’t be agile in its proper meaning. Finally, without being outcome-oriented and agile, we can’t manage our products in an efficient and modern way.
The power of metrics entered Product Management to change it forever, and there’s no going back.
