With the rise of SaaS and all the changes it brought into our lives, product performance metrics have become somehow wider in range and categorization.
To be a successful modern product leader with a successful product at hand has also become quite a challenge. But as long as you manage to understand how users engage with, and derive value from your product, in other words, reach their aha moments and get to the point where they make the most of your product, it’s not very likely for you to experience such hardship.
And this is exactly why you, as a product manager, need to collect information about your product performance, its features, market adoption, and more. The correct product metrics will provide you and your product development team with great insights into the overall health of your product, its strong suits, weaknesses, and potential problems and allow you to create space for better improvement and customer experiences.
These specific product metrics can vary widely between different industries and business types. However, a commonly used set of them is helpful enough to provide a great product experience. Today, I’ll talk about them and provide information on their calculation and use cases.
Let’s begin with a simple definition and then get to know them right away.
What are Product Metrics?
Product Metrics are measurements of data that every business uses to evaluate the overall success of a product and to understand and track how and how often clients are engaging with it. They are like a close-up camera that captures the ways customers, users, or visitors interact with your application, product, or services and shows how those communication channels impact your business.
They are used by many teams, including marketing, customer success, analytics, and product, to gain further insight into the overall creation journey that begins with plans and hopefully ends in product success.
In my list below, I have categorized 10 product development metrics under two titles: Engagement metrics and Economic metrics. But before moving on to them, you need to have a clear idea about the importance of their roles and how much they can achieve for you concerning your product.
Let’s find out more about them.
Why is it important to track different metrics on your product?
Would you be interested in knowing how much of an impact your product has on your customers? Or would you be interested in having a brilliant comprehension of customer behavior? Or, would you be interested in developing a solid strategy for your digital products?
If the answer is yes, it’s the moment you know that you need some key metrics to track.
Let me elaborate on that.
Depending on business fields or their product goal, companies may use product metrics to:
- Come up with a relevant product roadmap
- Improve product strategy
- Make the necessary changes in their product
- Forecast revenue
- Measure the impact of individual product features
- Understand the success of a particular launch
To find answers to all of these questions above, you need product metrics. Not only that, you need the relevant ones.
Having said that, let’s now take a closer look at the most common product metrics, how to calculate them, and why exactly your business might need them to improve the overall user experience.
10 Product Metrics to Track
1- Conversion Rate
Conversion rate is the percentage of visitors visiting your website and showing a sign of desired key actions. These actions often include:
- Submitting a contact form
- Making a purchase from your website
- Contacting your business
- Creating an account
- Showing interest in subscription
The conversion rate tells you how well your website attracts people and gets them to complete actions similar to the ones mentioned above.
This metric is important because if you can increase it, you’ll be able to get leads with minimal effort.
To calculate the conversion rate for whatever your desired action, you take the number of customers who have completed that action and divide that by the number of ‘visitors’ who have not taken the further step and done the same thing yet.
2- New Customer Growth Rate
New customer growth rate refers to the speed at which you achieve to gain new clients over a specified period of time. This metric is generally measured within a monthly period; this is why it is sometimes called ”month over month growth”.
This metric will allow you to understand how good you’re at attracting new customers when calculated and utilized correctly. It’s also great for understanding the overall demand for your product within different times – even the tricky ones, including seasonal demand shifts.
For this metric to work efficiently, you need to calculate it every month. In that case, the calculation is something like this:
Customer churn rate is the percentage of users that your company loses over a certain time period. So, depending on your product and business model knowing your churn rate can help you figure out why clients are leaving your services so that you can develop a better plan focusing on customer retention to reduce that number as soon as possible.
Put in other words, let’s say your business had 250 customers at the beginning of the month and lost 10 customers by the end, this means you need to divide 10 by 250. In that case, your churn would be 0.04%.
4- Cost Per Acquisition
Cost per acquisition (CPA) is a marketing metric that tells you the total cost of a user completing a specific action.
In other words, your CPA shows you how much it costs to get each customer active, up, and running from the first touch point to conversion.
Depending on your marketing goals, that specific action can be defined as a single click, a purchase, a lead, or something else done by your potential customers.
You need to divide the total cost of your channel/campaign by the number of clients acquired with the help of that same channel/campaign.
The formula for it is this:
CPA = Campaign Cost / Conversions
To give an example of this formula in action, let’s say the sales team came up with a campaign that cost you $10,000, and ultimately you drove 1,000 conversions thanks to the same campaign. Then by doing the math; 10,000 / 1,000, your CPA would turn out to be $10.
5- Customer Lifetime Value
Customer Lifetime Value measures how much profit your customers will bring during their relationship with your business. It also shows how well your current user base is doing right now and how likely your business will grow in the future. This metric can be used by your sales/marketing team to make decisions about sales, marketing analytics, product development, retention strategies, and even customer support.
It can also be used for:
- Measuring how good you do your business
- Gaining more focus and having relevant goals
This equation suggests that the CLV equals profit per year multiplied by the average duration of the relationship. And, to know the average duration of the relationship, here’s what you should do.
You have to divide the number of your clients by the sum of the years you have been interacting with them. Let’s say you have 5 customers and the sum of the duration of your relationship with them is 20 years. In this case, the average duration of this collaboration would be 20/5: 4.
6- Net Promoter Score
This metric measures long-term user satisfaction and the percentage of your loyal clients. It helps you see what matters most before taking big product decisions. It’s mostly great for understanding user actions, user behaviors, customer loyalty and engagement, and the possibility of them recommending your service to others.
The way to measure NPS begins with a simple question: ”How likely are you to talk about us to a friend or a co-worker?”
Later on, the respondent ranks their likelihood on a scale of 0 to 10, with zero being highly unlikely and ten being extremely likely. It would also help further if you created a comment section in which active users can explain the reasons behind their ratings, making you understand more in detail.
7- Active Trials
This metric lets you know how well your service works and how much of a user attraction you manage to get via your product. If your active trial number is growing on a regular basis, it means what you are doing is actually working, and people are becoming more engaged and happy with it. By tracking this metric, you will be able to spot trends in your revenue growth, and closely examine the parts that require changes.
The calculation for active trials is quite simple. One example could be a music streaming app. Let’s say that a specific app offers a one-month free trial before charging a monthly rate for their service, and thus, has 100 subscribers as free trial accounts. In that case, the number they have would be 100 for that month.
8- Session Length
The session length metric refers to the amount of time a user spends on your website or application during a single session.
This metric is a great way to measure engagement. With its help, you will have clear information about a user leaving right away while interacting with your app or spending quite some time with it. This data can be combined with other indicators to gather valuable information about the value your service provides to the users.
To calculate the session length, you need to closely track exactly when a user starts and stops using your product. This can be determined by tracking the first event when the page loads and the last event which can be clicking on a ”Quit” button.
The formula for it is:Timestamp when the user left the app – Timestamp when the user started the app
9- Number of Sessions
Similarly, a specific session refers to the number of times a user pays a visit to your website. This means a single user might have multiple sessions while browsing if they wish to visit at different times or on different days.
Sessions per user, at its core, is the number of sessions of a unique user. It’s a set of interactions, visits, and web requests, made within a given time. A single session generally contains multiple crucial activities such as page views, events, or transactions. Therefore, these sessions can help you determine how often your users are actively taking part in actions and interacting with your website.
With the help of it, you can understand if your digital marketing is progressively bringing more people to the website or not, or if growth in sessions and page visits are actually a cause of the same users regularly coming back.
Similar to the session length, your session number is calculated in a very basic way. Let’s say you’re enjoying an end-of-year sale and seeing a spike in interest, resulting in your website having 6,000 sessions in one week and 3,500 in the next. This means your website’s session count for those two weeks is 9,500.
10- Feature Usage
Feature usage is a metric that provides insight into the percentage of customers using different product features.
This measurement helps you prioritize the features that actually matter, and remove the focus on others that do not require it as much.
With this metric, you’ll gain answers to the most crucial questions like ‘how often is a feature used?’ or ‘how long are users spending on it?’, and more.
To calculate the active usage of a product for a specific time frame, you need to divide the number of users using a feature by the total number of users.
Frequently Asked Questions
What are the most important metrics for measuring the performance of the product?
The most important key metrics for measuring the performance of a product are as follows:
- Conversion Rate
- Customer Growth Rate
- Cost per Acquisition
- Customer Lifetime Value
- Active Trials
- Session Length
- Number of Sessions
- Active Usage
How do you identify product metrics?
To identify product metrics, you first need to decide what you’re looking for. You need to define your business goals and find the right business metrics by asking the right questions first.
How do you evaluate product performance?
There are certain metrics that will help you evaluate your product performance. These metrics include:
- Revenue Per Customer.
- Revenue Per Product.
- Churn Rate.
- Customer Lifetime Value (LTV)