15 Important Product Metrics to Track & Measure Success
Imagine a world where every software product you use is powered by data. From the moment you hail a ride on Uber or create your playlist on Spotify — the decisions behind these products are rooted in quantifiable insights.
In this article, we explore the metrics and key performance indicators (KPIs) that play a massive role in measuring the success of your product, provide valuable insights and guide you towards making better, informed decisions.
What are Product Metrics?
Product metrics – you’ve probably heard the term being thrown around in business conversations. But what really are they?
In simple words, product metrics are quantifiable measures that provide insight into your product’s performance, user experience and business goals. You can then translate these insights into informed decisions that can drive meaningful improvements. So, whether you want to track user engagement, conversion rates or customer satisfaction, there’s a product metric for you.
With so many metrics to keep an eye on, it can quickly get overwhelming. Which is why it’s so important to understand the relationship between metrics and your business goals. Metrics viewed in isolation are of little to no value. For example, if you’re looking to increase client retention, you need to track user engagement and repeat purchase behavior.
Key Metrics for Product Success
Acquisition Metrics
Acquisition refers to attracting people to your product and converting them from one-time visitors into returning customers. Sales activities primarily drive acquisition, and it can be measured by tracking channels, verticals and campaigns. Here’s a look at some useful acquisition metrics:
Conversion Rate
As a business owner, you give your customers a call to action, and they respond. Right? That’s what a conversion rate tracks. It assesses how effectively your product or service guides users towards making a purchase, filling out a form or downloading your application.
The math behind it is quite simple, all you need to do is identify the relevant event, and divide the number of successful conversions during a window.
Customer Acquisition Cost (CAC)
Next up we have the Customer Acquisition Cost, which tracks the amount you spend trying to acquire a new customer, and mostly covers marketing costs. It’s a handy metric to have to decide whether new investments are justified by the revenue generated.
To calculate CAC, all you need to do is divide the marketing and sales costs by the number of one-time visitors which transformed into new customers.
Customer Lifetime Value (CLTV)
Imagine a metric that could help you gauge how much to invest to acquire new customers. That’s Customer Lifetime Value for you. With CLTV, you get insights into the average amount a customer spends on your business.
To start crunching hose numbers, you need to multiple the Average Order Value by the frequency of purchases and the average customer lifespan.
Engagement Metrics
Let’s talk engagement metrics. These metrics give a lowdown on how users really interact with your business. It’s the users that keep coming back you need to target and increase.
Active Users
Active users – you know, the ones who aren’t just browsing, they’re the ones that make things happen. So, while revenue and user numbers are great, if they’re not active users, it’s not making much of a difference.
Before we dive into the calculations, it’s important to know what you define as ‘active.’ It can be as simple as someone liking your post. Now, divide daily active users by monthly active users and multiply with a hundred.
Retention Rate
Retention, like the name suggests, is all about how good your business is at keeping users engaged over the long haul. The greater your retention rate, the better the revenue.
Calculating it is a breeze. Simply divide the number of continuing users by the number of users you started out with.
Churn Rate
The flip side of retention is the churn rate, which keeps tabs on those you’ve lost. There are typically two types of churn rates, the customer churn, measures the number of users who bid farewell and the revenue churn which tracks the revenue lost due to it.
To calculate your business’s customer churn rate, get the ratio of the customers lost and the total number of customers you began with.
Revenue Metrics
Revenue metrics are arguably the ultimate measure of achievement, making them key targets to keep a look out for. While they can be analyzed in several dimensions, audience, channel and product are most common.
Average Revenue per User (ARPU)
Average revenue per user is your financial compass. You can tally up revenue each user brings, which helps in making informed decisions regarding price changes for example. There are essentially two types of ARPU, per new account and per existing account.
The formula is simple. Simply divide the monthly recurring revenue by the total number of accounts.
Gross Revenue
Gross revenue is essentially the big picture of your business’s finances, before any deductions come into play. To find your gross revenue, all you need to do is add up the total sum of revenue generated.
Profit Margin
This metric helps gauge an idea regarding the efficiency of your business in turning sales into actual profit. To calculate your profit margin, deduct all expenses from your gross revenue and divide the result by your total revenue.
User Experience Metrics
User experience metrics are great to have if you’re keen on understanding how customers perceive your product and what you can do to make it better. It’s more direct than engagement metrics and allows you to focus on certain features at a time.
Customer Satisfaction Score (CSAT)
If there’s anything that really matters, its your customers’ satisfaction. The CSAT allows users to rate their satisfaction on a scale, and you can use those numbers to measure overall satisfaction. To calculate, sum all the scores and divide it by the number of respondents.
Net Promoter Score (NPS)
Net promoter score is similar to a CSAT, but with a slight tweak. NPS groups individuals into neat categories based on their responses. Say you’ve asked your users to rate your product out of 10. Users who give you a response from 0 to 6 are detractors, 7 to 8 are neutrals and anything above are promoters.
To calculate the NPS, minus the percentage of detractors from the percentage of promoters.
Market Metrics
Running a business isn’t an easy feat. To be ahead of the game, you need to make sure you’re doing better than your competitors. Market metrics are a quantitative way to track your business’s performance.
Market Share
Calculating your market share comes in handy when you need to gauge your position in the market. It’s essentially like claiming your share in the pie. To find your share, simply divide your company’s sales and revenue by the total industry sales.
Customer Segmentation
We hate to break it to you, but not all customers are the same. Customer segmentation simply allows you to group your customers based on shared characteristics. This could be anywhere from geographic location to purchase history and everything in between.
Competitive Analysis
Market research without competitive analysis is meaningless. It helps identify your business’s strengths and weaknesses, helping you gain insights into customer preferences, your position in the market and growth opportunities.
GA4 Metrics
Google Ads Clicks
Google Ads clicks refers to the total number of instances users have interacted with your business on the Google Ads platform. So, for example, if someone clicks on a phone number in your text ad, Google Ads records it as a click. However, you may note discrepancy in your number of clicks and visitors, this is because clicks are counted regardless of the user reaching your website.
Add to Carts
Add to Carts refers to the total count of instances when users added items to their shopping carts while browsing. This metric helps you understand how often potential customers express their interest in specific products, indicating a step closer to potential purchases.
Item Promotion Click Through Rate
This metric measures the effectiveness of a promotion in attracting user engagement. It is calculated by dividing the number of users who clicked on a promotion by the total number of users. This metric provides insight into how successful a promotion is at enticing users to take action.
Data Collection and Analysis
Now that we’ve discussed which metrics best align with certain business goals, the next step is to gather data.
While traditional methods such as surveys, polls and interviews are great data collection methods, there are several tools that gather and analyze data simultaneously. These include platforms such as Mixpanel, Google Analytics and Amplitude, which offer unique features such as visualization, segmentation and reporting.
These platforms allow you to parse out data, and answer specific questions – such as how intuitive is the buying process? Are your marketing campaigns reaching the right customers? Analytics data reveals user behavior insights. You can segment data based on age, location, date, time and more. Moreover, event data taxonomy allows you to select and arrange data according to ‘events’, such as the click of a button, allowing you to understand how your customers interact with your product.
Optimizing Performance and Driving Growth
Metrics are great for identifying your business’s shortcomings. Platforms such as Mixpanel and Amplitude offer a dashboard feature which allows users to monitor KPIs, visualize progress and identify trends.
Objectivity and accountability, often perceived as intangible, with metrics are well within reach. For example, poor user engagement may suggest a need to enhance user experience. You can compare metrics against industry benchmarks and set goals for your business based on data-driven insights and allocate resources appropriately to drive meaningful changes.
Optimizing product performance calls for a well-rounded strategy that revolves around delivering exceptional value to customers and staying ahead in the market. To start, adopt a customer-centric approach by actively seeking feedback and conducting surveys.
It’s also crucial to stay informed about market trends and competitors through market research and analysis, helping you refine your product positioning. Regularly monitoring KPIs to assess progress is the way to go, especially when it comes to making data-driven decisions.
Case Studies: Real-world Examples
Navigating metrics can seem daunting, fear not though. Here are examples of some of the world’s top businesses that have mastered the art of product metrics.
Netflix is a prime example of a company that relies heavily on metrics to optimize their streaming services. By tracking user behavior, they tailor recommendations according to viewing habits, content preferences and engagement levels, much like Spotify. Then there’s Airbnb, which extensively monitors booking conversions and reviews. We’ve also witnessed a significant effort to create a seamless and user-friendly platform. In case these weren’t convincing enough, Uber, a ride-hailing platform, leverages real-time data that identifies areas with high demand, and allocates its drivers accordingly.
If there’s anything to learn from these giants, it’s how to incorporate product metrics into your existing business infrastructure to improve user satisfaction and retention.
Implementing and Evolving Metrics Tracking
As a business owner, it’s not enough to simply understand metrics. You need to know how to pick the right ones. We’ll admit, it’s not simple. Don’t use any and you’re flying blind, use too many and you’re obstructing your field view. Which is why, you need to strike the right balance.
To begin with, you need to have a business goal. Are you looking to improve customer retention? Are you struggling with user engagement? Next, find your metrics, and ask yourself whether they’re actionable. If a metric isn’t solving a problem, it’s a vanity metric. It’s simply making you look good, but gives you little to no insight on your next step. Mix up your metrics but using a blend of leading metrics, which predict future outcomes, and lagging metrics, which look back at the past.
A classic mistake that many individuals end up making is collecting too much data. It’s always a good idea to collect only what you need, and ignore the background noise. A nifty hack is working backwards from your expected outcome to the change that needs to be made.
Perfecting metrics tracking is not a one-time effort, it’s an on-going process. With the market in a constant flux, it’s crucial to be flexible and agile to change. So, make sure you’re regularly assessing your metrics and ensuring they align with your goals.
Conclusion
And there we have it! Metrics are the future, and their data-driven insights can be real game changers. However, they are quantitative. So, while they don’t always give you a clear picture, they can point you in the right direction.
Everything boils down to choosing the right metrics and implementing them effectively. Remember: there is no right and wrong answer when it comes to choosing metrics. You simply have to assess which ones work best for your product.
