18 Fundamental Product Management Metrics and KPIs You Should Track 

What’s your favorite digital product right now?
Okay, don’t answer just yet, but is it one of the following? 

• Spotify
• Amazon
• Netflix
• Uber
• Facebook

🔥

Well, regardless of your answer, I’d like to draw attention to the common point of these products; they are all data-driven. The executives of these companies start their days and weeks by tracking some key metrics to offer you the most value and encourage your consistency. 

In this article today, I will be talking about these product metrics and product KPIs for your primarily for your product team and your product manager to track your overall product success. Too much product.😂

Let’s goooo. 

Base Business Metrics 

1- MRR (Monthly Recurring Revenue)

MRR, aka, Monthly Recurring Revenue is one of the most critical SaaS KPIs primarily used to understand how much recurring revenue a business has on its products that are subscription-based. It basically refers to the amount of money that comes into the company from the clients on a continuous basis. 

MRR is usually applied as a monthly number, and to understand it better, you can think of it as the inverse of churn rates.

While your churn rate helps you measure the percentage of your clients who are leaving you, MRR measures the amount of new money 💰 that clients who are staying are bringing in every month.

How to calculate it? 

The formula to calculate MRR is as follows: 

The number of monthly subscribers * Average Revenue per User (ARPU) 

What does it mean?

Here’s a quick example. Let’s say you have 10 subscribers on your $200 monthly plan, your MRR will be;

10* $200 = $2000

If your SaaS business is running on annual subscriptions instead of monthly ones, then you can, of course, divide the annual plan price by 12 and multiply the outcome by the number of your annual plan subscribers. 

MRR is usually the only key metric that businesses choose to rely on since it’s the money itself, but keep in mind that unless you focus on the clients and try to keep them attached to your services, your MRR is highly likely to disappoint you. 

2- CLTV (Customer Lifetime Value)

Customer Lifetime Value (LTV) is a metric that refers to the total amount you’re likely to obtain from a specific client within the time of their subscription to your services. 

Calculating this metric is essential when it comes to making smart product decisions for your business as it provides an accurate estimate of the future and allows you to have a pre-look at your business’ revenue and profit. 

What’s more?

• It helps you balance customer acquisition costs.

If you have a clear idea about LTV, you can be confident about the number of expenses you need to make in order to acquire customers – with too much risk on the table.  

• It helps you determine the payback period.

Thanks to LTV, you can understand how long exactly it takes for a client to ‘pay back’ their acquisition cost. The longer this period is, the more risk you’re faced to in terms of finance. 

• It helps you get attention.

It’s obvious that many possible investors in SaaS businesses are willing to see LTV reports as a part of their assessment of a profitable investment. 👩🏽‍💻 Thank me later! 

How to calculate it?

You can easily calculate this metric by multiplying profit per year by the average duration of the business relationship. And to know the latter, you should divide the number of your customers by the sum of the years you have been working together with them.  

Let’s say you have 10 customers and the sum of the duration of your relationship with them is 30 years. In that case, the average duration of this relationship would be 30/10: 3. 

3- CAC (Customer Acquisition Cost)

The Customer Acquisition Cost, aka, CAC, is the metric that represents your total cost of obtaining a brand new client, put differently, how much exactly it costs you to bring along a new customer into your business. 

It has always been quite a challenge for SaaS businesses to measure this metric accurately -especially for startups- simply because there are so many different channels. 

What I mean by that is, CAC may be split between two marketing channels -inbound and outbound- or include sales commissions in addition to other variables – refunds, account credits, or chargebacks. 

Why does it matter?

What CAC does for you, at its core, is that it shows you whether you should go easy on the marketing and sales expenses to obtain new clients, or on the contrary, increase them. 

How to calculate it?

To calculate CAC, you need to divide your total sales & marketing costs by the number of your new customers. And voila, there you have your number.

4- Churn Rates

Churn rate is the percentage of users that your business 🤫loses🤫 over a given period of time. Knowing this metric can help you understand why your customers are leaving you. And what will you do with that precious knowledge? You’re going to turn into a valuable weapon through which you come up with a better working product vision and focus on customer retention to reduce that number – as quickly as possible. 

How to calculate it? 

Here’s a quick look.

Put in other words, or just words, say your business had 100 customers at the beginning of the month and lost 20 of them by the end, this indicates that you need to divide 20 by 100. In that case, your churn would be 0,2%.

What are some other types of churn?

• Revenue churn 

Revenue churn rate is the rate at which you are beginning to lose revenue as a result of downgrades in subscriptions and cancellations. 

While the customer churn rate lets you know about the percentage of clients lost over a certain period, this metric gives you the exact percentage of revenue lost over the same period. It can be calculated by dividing the number of revenue lost as a result of cancellations over a given time period by the total number of revenue up for renewal. 

• Gross revenue churn

Gross revenue churn is, again, a critical part of your monthly earnings. It is an outcome of your clients’ cancellations or failure to renew their subscription plans on a continuous basis.

• Net revenue churn

Net revenue churn also demonstrates the effect of clients’ cancellations and failure to renew their plans. It also indicates the activity of customers who preferred to stay. It will let you know if there are any upgrades in your business and if your current client base is engaging in them. These two factors might have an effect on your net revenue churn.

Being able to see both the results of your remaining clients and those who decided to leave, this metric enables you to see the bigger picture with a negative churn rate and expansion revenue.

5- Trial to Paid Conversion

Trial Conversion Rate is the metric that helps you measure the percentage of clients that have successfully converted to a paid account from a free trial. 

This is a metric that indicates your product value by calculating the number of customers that find enough value in your product that they pay for. Varying based on your product type and type of trial used, Trial Conversion Rates usually -in SaaS- refer to the freemium product or a trial period that usually takes a couple of weeks.

How to calculate it?

You can calculate it by dividing the number of trial-to-paid users by the number of trial users. 

Let’s say you have a digital product that has 100 trial users out of which 20 users convert to a paid account, *congrats!* In that case, your Trial Conversion rate is 20%.

6- Retention Rates

• Customer Retention Rate

Customer retention rate is the most effective metric when it comes to understanding and mastering customer loyalty and how well your business is doing in terms of repetition. 

How to calculate it? 

The calculation for customer retention rate looks like this:

((NCE – NEW) / NCS)) X 100.

Translation please? 

In this formula, NCE is the number of customers at the end of the time period. While NEW is the number of new customers acquired during the time period, NCS is the number of customers at the start of that time frame. 

What are some different versions of it?

• User Retention Rate

User Retention Rate measures the retention of your complete user base, not considering if they are free or paid users. This specific kind of retention will help you figure out how to keep your current customers happy and engaged, though it might not necessarily help you achieve profit. However, it still acts as the right measurement for you if your business depends on advertising rather than a subscription.

• A Cohort’s Retention Rate 

This metric measures retention in terms of certain user segments or groups that share common characteristics. This one helps you focus on how specific user segments tend to behave and come up with more things that make them happy. 

Product Engagement

7- Active Users at a Given Time (MAU, WAU, DAU) 

Getting new customers is a challenge itself. But it doesn’t end there, keeping them is a whole another issue. 

At some point, you need to make sure they use your products actively and are seeing the value in it. 

Your monthly (MAU), weekly (WAU), and daily active user (DAU) percentage will let you know if you’re likely to obtain a high CRR or NPS. (will be mentioned later).

What are these used for? 

• DAU is typically the one used for businesses in which customers are expected to show signs of interaction on a daily basis. (channels could be e-mails, calendars, games, etc.)
• WAU is usually used for businesses with weekly regularities such as forums, mobile apps, productivity tools, etc.) 
• MAU is generally used for B2B applications in which users are expected to show interaction a minimum of a few times in a month or less.

To know your DAU, WAU, and MAU amount, you need to be using an expert tool such as Google Analytics which will do a great job showing you the number of potential customers who log in that specific day to use your services. 

8- Stickiness

Stickiness is a great product engagement metric that measures the number of people who show signs of great engagement with your product. They’re the best! And the metric that gives information about them should also be pretty cool, right? 

Highly engaged users are the ones that return to your services again and again. You can use this metric to understand if people truly value your product or not since it’s a strong signal that indicates just that. 

How to calculate it?

To calculate stickiness, you need to track two of the key metrics I’ve mentioned above – DAU and MAU. Combining these two will provide you with a stronger insight and will help you come up with a smarter and more relevant product strategy. 

Let me also drop the formula real quick: 

Stickiness = DAU/MAU or DAU/WAU

For instance, let’s say you have 500 monthly users, out of which 50 interact with your product every single day, then in that case, your product stickiness would be 10%.

9- Pages/Clicks/Actions Per Session

To begin with, a session – in a SaaS sense- is the combination of user actions during a set period of time on your website. It immediately begins the moment they arrive, and ends when they leave – or when they do not show any signs of activity for 30 minutes.

And, pages per session refer to the complete number of pages seen by a specific user during a given session. This key metric is calculated by dividing the number of sessions by the number of page views.

What is good for?

This metric will help you determine how sticky -again!- and engaging your website is. And, naturally, more visitors and time spent on your site will mean more sales. 

The same thing goes for clicks and other actions as well. All these indicators will help you track user visits and customer behavior that are shown during these visits. You’ll be able to see all the interactions, events, and transactions within the period of the user’s session.

10- Session Duration 

Similarly, Session Duration gives you the average amount of time spent per session on your site. You can easily calculate it by dividing the total time spent in sessions by the complete number of sessions.

Here’s the formula:

Sum(Total Session Duration) / Count(Total Number of Sessions)

Let’s say your website gets 10,000 sessions per month. All combined, these sessions equal to an overall session duration of 400 hours. Consequently, for this given month, your average session duration would be 2.4 minutes.

11- Feature Adoption Rate

Feature adoption happens when you introduce a new product feature, and luckily, your users decide to give it a chance. A good feature adoption rate means that your users are fully aware that this feature is offering them value, and they feel good about using it on a regular basis. 

On the other hand, a poor adoption rate is generally a sign that shows you might have some issues with feature awareness – or you may not be very good at making your users understand the value of what you’re offering. 

Why is it important?

Each new feature creates a valuable opportunity for you to offer a better user experience. When these features go unused though, they can have the quite opposite effect. This is exactly why your customer success teams should focus on feature adoption, to make sure what you’re creating actually speaks to the user and makes it easier for them to understand your services.

How to calculate it?

To calculate the feature adoption rate, you need to divide the number of new users of a certain feature by the number of product users, and then multiply the outcome by 100.

User Onboarding and Adoption

12- Product Adoption Rate

Product Adoption Rate, as the name suggests, is a measurement of the number of people who adopt your software and become familiar with it.

It’s about the ones that go beyond just signing up, logging in once, and never coming back to your product – these are actually the ones who are quite likely to cancel their subscription with you. 

By focusing on this metric, you’ll be able to monitor user activation and the overall stickiness of your product.

How to calculate it?

In order to calculate this metric, you need two crucial pieces of information gained from your product and user behavior analytics:

• New Active Users

 This is the number of people who complete a set number of key actions within the app, in a given period of time.

•  New Users or Signups

This is the number of people who signed up or created a subscription plan for your product in a given period.

• Product Adoption Rate

(New active users / Signups) x 100

13- User Activation/Aha Moment

Honestly, the name of this metric is quite straightforward for us to understand. At its core, it’s the percentage of customers who have shown an interaction with a core feature for the first time in a given period of time. 

In other words, it refers to the number of users who have successfully reached their ‘Aha’ Moment during their customer experiences with your product.

To track and measure these two types of metrics, you can use tools that will enable you to monitor the new user onboarding flows – to analyze all the key processes with which your users are having issues. 

You can use tools such as Amplitude, Mixpanel, Woopra, etc. to measure adoption and user activation with numerous helpful resources in addition to personalized funnels. 

14- Onboarding Completion Rate 

You can consider this one as the next essential step that comes along after the previous heading. The completion rate is basically the percentage of users who actually cross the finish line -the percentage of promoters- and complete your onboarding process. Yup. All of it. 

This part is quite important since it’s all about conversion, really. If people are not completing your onboarding flow, it’s not highly likely that they are going to convert. You can easily focus on this problem by looking for the parts they are most likely to give up, -or are already giving up- and then begin creating changes just right there. You can ease those points by getting rid of some of the unnecessary, too complicated steps, making process improvements, or providing better help along the way. 

How to calculate this metric? 

Your completion rate equals to the division of the number of users who finished your onboarding by the number of users in that onboarding cohort.

Customer Satisfaction 

15- NPS (Net Promoter Score)

Net Promoter Score measures long-term customer satisfaction and the exact percentage of your devoted users. It enables you to monitor user actions, understand them, and find out more about customer loyalty and engagement. 

Being closely related to your Customer Success Metrics, your Net Promoter Score primarily assists you in figuring out how content your client is with your product and services in general. You can use this engagement metric to come up with sensible product goals and product roadmaps for product updates, product development, and new product features. 

How to calculate it?

It’s actually safe to say that NPS calculation begins with a simple question: ‘‘How likely are you to recommend us to others?”

Following this question, the audience ranks their likelihood on a scale of 0 to 10 and lets you understand their possibility of spreading the word about you, they can also leave a comment or provide customer feedback on their reasons. 

16- Customer Health Score 

Your Customer Health Score is a key metric that’s used to determine the likelihood of any circumstance your customer might end up in – this could be growth, consistency, churn, you name it. 

Monitoring this metric and using the results you gain from it helps you target possible risks that are connected to individual users, groups, or accounts. This way, you’ll be able to identify your power users, expansion opportunities, and churning customers in advance!

To create a customer health score, you can make use of these 3 ingredients:

• Frequency

This one includes questions related to the frequency level of your users spending time in the product.

• Breadth

This one is about the number of users in a certain account using your product.

• Depth

And finally, this one’s about the product’s key features that are being used constantly. 

Built on these 3, your score will show you how many users are logging in frequently and using your product in a way that’s as valuable as possible. And risky accounts, obviously, would be the ones with few users who are not gaining that much of a value using your product.

17- Ticket Volume

Another customer-related metric on my list the Ticket Volume. This one will help you monitor the number of tickets you’re generating along your process. They can be quite helpful when it comes to planning support requirements to provide a better product experience. 

How to calculate the average tickets per customer?

To calculate the number of tickets that each customer generates, you need to define a period of time first. Then divide the number of tickets created during that time by the number of customers that were active  back then.

18- CSAT (Customer Satisfaction Rate)

Customer Satisfaction Score or CSAT is one of the most critical key performance indicators that can help you reach your biggest dream: a loyal customer.

By understanding and tracking this metric, you can evaluate how happy and content your customers are with your services.

The primary business goal here would be to make sure your customers are happy enough with your product to recommend you to others.

How to calculate it?

You need to divide the number of satisfied customers by the total number of responses, and finally multiply the result by 100.

Frequently Asked Questions

What are the 5 most important metrics for the performance of a product?

To have a clear understanding of the overall performance of your product, the key metrics you ought to follow are:

• Sales revenue
• Customer acquisition costs
• Customer churn
• Customer engagement
• Customer satisfaction 

How is product management value measured? 

To measure product management value, you should pay attention to the most critical product management metrics:

• Monthly recurring revenue (MRR)
• Customer Lifetime Value (CLTV or LTV)
• Customer Acquisition Cost (CAC)
• Daily Active User/Monthly Active User ratio
• Session duration