The Product Metrics Guide

6 min readOct 27, 2020

What are Metrics anyway?

Throughout our lives, our performance and skill level has been represented through marks or grades. Be it marks from competitive exams or marks from individual subjects in college, these numbers have always been a reference point to monitor our progress and growth. Similarly, product managers employ numbers to measure a product’s performance. These numbers are more formally known as metrics or KPI’s and give you critical information on how a product or feature is fairing in the market and helps you identify what is working or not working for your product.

Why are they important?

Let’s take a simple example. Say you’re the PM who introduced Instagram stories to improve user engagement. To measure its success, one might think that user feedback would be the best way forward. But how often do we provide feedback ourselves? That’s when metrics can come in handy. As an indicator of success, you can track insights such as the increase in app usage post feature introduction, the number of stories per user per day or week, the ratio of a number of clicks to the number of stories etc. Metrics also enable PMs to make data-driven decisions to achieve goals such as an increase in revenue, user base, retention etc. Hence, they form an integral part of product strategy.

Key Categories of Metrics

While metrics can vary based on your product, the following are a few of the traditional metrics which you can leverage based on your business goal:

Note: The following is not an exhaustive list.

User Engagement

The metrics listed in the image below are some metrics commonly used to gauge the level of user activity.

2. Revenue

Revenue is one of the most important metrics for a company and is directly dependent on other metrics. If the other metrics are optimized, revenue will fall into place. Some of the key ways to track revenue are:

Monthly recurring revenue
Annual recurring revenue
Customer lifetime value
Cost per acquisition
Average Revenue Per Unit (ARPU)

3. Activation and Conversion

Activation refers to a user’s first value moment. The meaning of activation can vary from product to product. For example, a user who signs up for a free trial or someone who watched ‘X’ number of videos within 7 days could be categorized as active. While conversion can refer to actions such as a successful purchase. Activation Rate and Conversion Rate are the most commonly used metrics to measure the same.

4. User Retention

Customer Retention Rate: Retention, a sign of loyalty, refers to the number of users who continued to use your product over time.

Retention Rate=(Customers at the end of the calculated period — New customers) X 100/ Customers at the start of the calculated period

Churn Rate refers to the percentage of users who stopped using your app during a given period. High churn rates suppress growth and increase your customer acquisition budget. Churn can be attributed to a lack of features, poor support, strong competition etc.

Churn Rate = Number of Customers Lost/Total Number of Customers

5. Customer Satisfaction

Net Promoter Score: High NPS can be a good indicator of organic growth. To calculate NPS, users are asked to rank a product from 0 to 10. ‘Detractors’ usually score from 0 to 6 points. Users who give 7–8 points are ‘Neutrals’ and those who score the product between 9 and 10 are ‘Promoters’. Then the NPS is calculated as follows:

Net Promoter Score = %Promoters — %Detractors

Customer Satisfaction Score (CSAT)

Tools to track Metrics

Some of the most widely used metric tracking tools are:

Google Analytics :

Google Analytics is one of the most sought after tools as it follows a freemium model. While start-ups and smaller firms can use this tool with minimum features for free, bigger firms will have to opt for the paid version . Comes in handy for e-commerce like websites

CrazyEgg

Crazyegg tracks the user’s interaction with your website by tracking mouse clicks. The tool offers 2 key features — 1) Heatmap View: Gives a visual picture of regions on a website that is most used by users 2) Scrollmap View: Shows where users are spending their time on a page. These features enable website owners to optimize data that seems to attract customer attention.

Mixpanel

Mixpanel is available for both web and mobile applications. Some of its selling features are analysis and tracking of engagement funnel, user profiles, cohorts, custom dashboards. The tool gives you a clear indication of user conversion and drop rates at every stage of the funnel and helps you determine what works for you and what doesn’t! The pricing for this tool is pretty affordable for the features it provides, especially for mobile-based start-ups.

Adobe Analytics

Adobe Analytics is one of those tools which has been the turning point for a number of big brands like TATA Cliq etc. Some of the key features mentioned on their website are: multichannel data collection, segmentation of customer data, capture most relevant data from mobile and website applications, Integrate data from CRM systems for easy customer 360-degree analysis, customer journey metrics, etc. Pricing for this tool is not disclosed.

Popular frameworks

HEART Framework:

Proposed by Google, this framework is widely used to measure user experience. The metrics of this framework can be used at a product level as well as feature level:

Happiness: How users feel about the product? This can be gauged using NPS, Customer satisfaction score etc.

Engagement: How are people using the product? It can be measured using a number of actions such as shares, uploads etc.

Adoption: New users. This can be measured using metrics such as the number of new subscribers, upgrades etc.

Retention: Existing users. This can be measured using number of active users, renewal rate, repeat purchases etc.

Task Success: Complete actions. The number of users who accomplish a task can be used for the same.

2. AARRR Framework:

The model is also known as the Start-up metrics for pirates and was developed by Dave Mcclure. The framework is easy to understand by both experienced folks as well as newbies making it a favourite framework for big established firms and start-ups. The metrics captures customer behaviour at various stages of their interaction with the product and helps PM’s make more data-driven decisions to optimize the product and make it more loveable to customers

The image below covers the metrics in the framework