These Are the Metrics Great Product Managers Track
Identifying, collecting, and analyzing the right metrics for your product
Hi there, Product People! In this week’s newsletter, we’ll be talking metrics: how to choose which ones are relevant to your product, and then how to collect and analyze the metrics you choose. It’s worth it, I promise :)
If you don’t have a background in data science, managing data as a Product Manager can seem like a daunting task. But it’s something you need to wrap your head around. That’s because data:
Gives you important user feedback on your product
Helps you build the right thing and solve problems quickly
Is a powerful communication tool between teams and stakeholders
The good news is that while it’s incredibly important to be a data-driven Product Manager, it doesn’t have to be complicated. Here, we’ve laid out the main metrics used by great Product Managers to build even greater products.
You might also be interested in: 5 Reasons Why Product Managers Have to Understand Data
Metrics That Matter in Product Management
No metric in isolation can give you all of the information you need, and there are so many out there which are worth keeping track of. What you keep an eye on will depend on your business strategy, the industry you’re in, and what stage of growth you’re in. Sometimes, metrics will be decided for you, as it’s important to keep your product’s KPIs and OKRs aligned with those of your company.
Here are the major metrics that matter the most for almost all product people:
1. MAUs / DAUs
Monthly Active Users (MAU) and Daily Active Users (DAU) are a great overview of a digital product’s overall health. If you’re thinking about your long-term growth, these are metrics that you can’t afford to miss! They help to track whether your user base is growing or not, and how ‘sticky’ your product is for end-users.
Determining what a DAU is will depend entirely on your product. It’s rarely as simple as someone who just opens the app and then closes it again. What many product people try to do is determine a minimum action taken to get value from a product. For a music streaming service, for example, this might be playing a song. For a messaging app, it could be sending one message.
Similarly, how often someone needs to use your product to qualify as an MAU will also vary depending on your offering. Do they need to use it once a month or twenty times a month to qualify?
Setting the bar too high can be just as disastrous as setting the bar too low. The question you need to ask yourself is, ‘how am I providing value for the end-user?’ and base your metrics off of that.
2. Customer Conversion Rate
How many people who land on your website or app do what you want them to do? Whether that’s signing up for the freemium version of your new tool, uploading their photos, or streaming your content. A low Customer Conversion Rate shows that people are landing on your app/website and not really finding what they’re expecting, or else they’re disappointed with the offering.
Why does this matter? For starters, it helps you identify key drop-off points for users and features which may not be working. Sure, they may find their way to your new feature, but if they’re not using it it’s hard to imagine what value it’s providing them with.
Equally, if you find that only a small percentage of your users find your new feature, but the conversion rate is very high, you know that the fault is not with the feature itself, but discoverability. Instead of scrapping the feature, go over your user onboarding process to help more people find it.
3. Churn & Customer Retention Rate
You know the drill by now…what counts as churn will depend on your product!
Customers are great, and getting new customers every day looks great on the growth charts. But if those customers are dropping off after only a few days (or in the fickle world of apps, a few seconds!) then you’ve got a leaky bucket, not a product. There’s no point filling the bucket with new users unless you can keep them. What you want is a high Customer Retention Rate, where more people come back than disappear forever.
As Airbnb Growth Product Manager says, companies that haven’t understood retention, and stepped on the gas too fast with their acquisition, have then lost all of their users very quickly. Without users, your product is nothing.
If you have a high churn rate, it means that your product isn’t delivering what it promises. On the other hand, a low churn rate shows that your user base is loyal, and like your product at least enough to stick with it.
Don’t forget that not all churn is bad! For example, dating apps like Badoo and Tinder are sometimes uninstalled because they’ve served their purpose, and the users are now in relationships. Not all products are designed to be used for the rest of their users’ lives!
Check out: What To Do With a High Churn Rate
Perhaps you have a job searching tool, which users would be inclined to uninstall when they land their dream job. Churn rate alone can’t give you the whole story, which is why you need…
4. NPS & CSAT Score
Net Promoter Score (NPS) and Customer Satisfaction Score (CSAT) are great ways to measure the sentiments of your users.
Your NPS score, in a nutshell, tells you how well your product is loved by users. It helps you segment your users into 3 categories based on how they rate your product out of 10.
1-6 = Detractors
These people use your product, but only out of necessity/lack of alternative, and wouldn’t recommend it to a friend.
7-8 = Passives
These people like your product, but you haven’t delighted them.
9-10 = Promoters
These people are gold dust. They’re your number one fans and will actively promote your product within their circles.
Once you have your promoters, you can leverage them in your product-led growth strategy, and in your marketing.
CSAT is a simpler score and can be used to measure how happy users are with individual processes and features. While NPS is more often used to measure how happy customers are with the entire user journey, CSAT allows you to be more specific. For example, you can ask users to score your onboarding experience out of ten, once they’ve finished the tutorial. It’s a one-tap survey which is a common feedback collection method within customer service.
CLTV, or Customer Lifetime Value, helps you to put a price tag on your users.
It’s very simple to work out, and can be made more effective by working out the CLTV for each segment of your users. For example, the value of a B2B/enterprise customer could be higher than your average B2C customer.
For example, let's say you run a subscription service that the average customer pays $10 per month for. If the average customer lifetime is 2 years, that gives each customer in that segment a CLTV of $240.
CAC, or Customer Acquisition Cost, is a great metric to keep track of alongside your CLTV. Your customers may be expensive to acquire, but if the CLTV is high enough, it’ll be worth it. But if you find that your average CLTV is pretty low (let’s say you’re operating on a freemium model), a high acquisition cost could put you out of business!
To work out your CAC, you’ll need to work hand in hand with the product marketing team. You’ll need to divide the cost of your marketing efforts by the number of customers you acquire. For example, let’s say you ran a Facebook ad, and spent $2000 on the design, building the landing page it leads to, and actually showing it to people. If that ad gained you 200 customers, that’s a CAC of $10.
This is why it’s important to track your CAC alongside your CLTV. If you find yourself spending a huge marketing budget for customers that have a low CLTV, you may need to find leaner ways of gaining new users.
7. MRR / ARR
Monthly Recurring Revenue (MRR) and Annual Recurring Revenue (ARR) are important numbers for two reasons. These numbers may fluctuate, but they represent reliable income. That is to say, they’re the amount of revenue you can reasonably predict to be coming in every month and every year.
For subscription services, this means knowing that you have X amount of customers spending Y amount every month, leading to a predictable income stream. The number will shift as people sign up and cancel, but let’s say you have between 100,000 and 110,000 subscribers in your first quarter. As long as you maintain 100,000 users, that’s 100,000 users worth of reliable revenue.
These numbers are useful for several reasons. It helps you keep track of how you’re doing, but it’s also an important number to be able to share with stakeholders and shareholders. There will be some people who are invested in your product who only understand the big numbers. They want a quick overview, and MRR/ARR are a great way to give them just that.
You might also be interested in: Product Management Skills: Stakeholder Management
Managing Your Product Data
Managing your data can seem like a daunting task if you don’t come from a data science background. There are a few keys to proper data management that will set you up for success:
Centralize your data. If you have your data split up across a number of different sources, keeping track of metrics becomes harder. When different teams/team members are accessing different data locations, you risk miscommunication.
Share your data. Shared data is more powerful. Empower team members to make good, data-driven decisions by giving them access to the metrics they need.
Visualize your data. Using tools with data visualization features turns complicated numbers into simple visuals. This makes them easy to understand for all team members, not just those who are well versed in data.
It can be a challenge to choose the right metrics and align your Product team on them. But these practices are what transform good products into great products. If you've found your own way to stay on top of metrics, put it in the comments!
Got anything interesting to add? Share your thoughts in the comment section below.
Don’t forget to check out some of the previous issues!