A product management parallel for ‘To be or Not to be’ is ‘To track or Not to track’. With sophisticated software tools making it possible to track almost everything that happens in & outside of your product, it is crucial for product managers to find metrics that are critical to them. Sooner than later product managers do realize that ‘less is more’. By tracking only critical metrics, product managers can increase the chances of moving the needle for them. Rather than just looking at a myriad metrics in an eye candy dashboard.
Importance of product management metrics
Every product that we use, especially the software-based ones, are data-driven. Tools and services are looking to gain an edge by catering to the needs of their customers better, and having proper metrics to measure collected data can help them identify pain points, white spaces, and new opportunities. Right metrics also focus organizations on improving customer experience. By measuring performance of well-defined user flows, teams can deliver the most value that encourages loyalty. With the help of the right metrics, executives can identify what the areas of improvement can be – and help teams solve issues that are more pressing.
12 critical product management metrics to track
While understanding customer sentiments has been an uphill task for companies in the past due to lack of data, organizations today have almost every kind of data available to them on customer behavior. The biggest issue, therefore, is not collecting data or analyzing them. But it is to focus on the data that is more relevant to the current goals.
In this article, we will discuss 12 such critical metrics that product management teams should consider. Now, of course, some of these metrics will apply in certain situations and will not apply in others. However, the idea is to list down the most common ones so that product managers can easily pick the ones that they find relevant in their product’s lifecycle. Rarely there will be a situation where a product manager will end up tracking all 12 metrics listed here simultaneously for their product.
Another important thing, some of these metrics may not be direct responsibility of the Product managers. But Product managers should have a say in all these metrics to eventually deliver a successful product in the market.
1. Customer conversion rate
Conversion rates can be measured at different junctures of the funnel. It could be converting a visitor into a lead or a marketing qualified lead into a sales qualified lead.
Customer conversion rate shows if people evaluating your software are converting into customers. If this rate is small, then that indicates a few possibilities such as 1. Your product does not seem to deliver what your marketing messages convey 2. The Aha moment is probably not evident quickly to the customers 3. You are solving a problem that does not exist etc
2. Retention rate
Retention rate is one metrics in product management that clearly indicates product stickiness. Retention rates tell product managers how engaging the user interaction is. Looking at customer acquisition statistics without a retention rate might look great on the growth charts, but if those customers drop out in a few days or weeks, then the product is essentially a leaky bucket. Product managers can focus on areas that hinder user experience and find ways to plug the gaps.
3. Daily active users
The Daily Active Users (DAU) number is like the pulse of a digital product: It indicates the overall health. For long-term product growth, managers should track whether the user base is growing and how ‘sticky’ it is for end users. The ‘active’ part should be more complex than opening and closing the app but should consider a minimum action taken to get value from a product.
4. Monthly Active Users
If DAU is the pulse, then MAU is the health check that takes a minute. If daily and monthly active user tallies are not matching, then product managers have to look at their product’s ‘single use’ aspect and see why it is appealing to customers. Managers can make the most of this metric by setting targets that align with the product vision. Creating agile roadmaps that account for user variations can help the product be more integral to customers’ work.
5. Net Promoter Score (NPS)
Net promoter score is a great way to measure user sentiments. In a nutshell, the NPS score of a product describes how well the users receive it. It asks users to rate the product out of 10 and segments the users into 3 categories based on their responses: 1-6 are detractors who use the product out of necessity and wouldn’t recommend it to a friend, 7-8 are passives who like the product but don’t feel the product is delighting them, and 9-10 are promoters who are the fans of the product and actively promote it. The classification allows product managers to focus on features that convert users from lower levels to higher ones.
6. Customer Satisfaction Score (CSAT)
CSAT (which is different from NPS) is a simple scale that measures user happiness with individual features and processes. CSAT measures customer happiness across specific points, not the entire user journey, unlike NPS. This allows product managers to be more specific in information gathering and identify features that need editing. They can plan their roadmaps better, and feature requests can be handled in a streamlined way too.
7. Customer Lifetime Value
Identifying customer lifetime value helps product managers to put a price tag on the users. It is a straightforward metric and can be determined for different user segments. The value of a B2B or enterprise customer would be much higher, and product managers can highlight features that help such customers to improve relationship value.
8. Customer Acquisition Cost (CAC)
Customer Acquisition Cost gives product managers a clear picture of how the product is being marketed to its customers. The cost of B2B products will be high, but high customer lifetime values balance that. Reducing customer acquisition costs requires product managers and marketing teams to thoroughly understand the market, the pain points, and the decision-maker profiles. Based on user feedback or reactions, the messaging and product feature highlights can be tweaked accordingly.
9. Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR)
MRR and ARR represent reliable income and are essential metrics for product managers. This is simpler in the case of subscription models, as product managers know the number of customers and can take an educated guess on how much they might spend in the upcoming financial period under consideration.
10. The average revenue per user (ARPU)
ARPU allows product managers to understand the effectiveness of the product. ARPU can be calculated per existing and new accounts; product managers can use the numbers to evaluate how the products are improving their usefulness to end users. For B2B products, the number of end users at customer organizations can be counted as ‘users’ to define the future service revenue.
11. Bounce rate
Measuring the bounce rate shows product managers the percentage of users who left after visiting only one aspect of the product, that too briefly. Tracking bounce rates lead to a better understanding of product usage and allows developers to make necessary changes.
12. Session duration
Session durations are the easiest metric to track, but they must still be more important. Digital product usage is defined by the total time users spend on the product; managers can calculate session durations of bounced users to find clues on improving user interaction. The data helps product teams understand why users favor certain features and allow them to explore how experience can be improved.
Tracking usage related numbers are helpful for several reasons: the act helps product managers track how the product is fairing in the market and helps stakeholders understand if the marketing and customer support efforts are working. Product management metrics like Retention rate help product managers plan their communication better and attract new users faster. Understanding the user intent behind these numbers can also help product managers in cross-selling and up-selling, as existing clients are more likely to try new offerings from trusted partners. Highlighting the right metric can close the switch to a better plan or facilitate a conversation.