Blog 34: Measuring product success
- Idea2Product2Business Team
- May 4, 2024
- 3 min read
Updated: Jan 27
Metrics is way to track and measure product success. By identifying what is working and what is not.
Metrics, KPIs and OKRs, all three words can be used interchangeably but each one has a specific use.
Metric: is every data point that we measure.
E.g., website traffic
KPI: Key performance indicators are specific data points that we measure over a period of time. They are a subset of metrics.
E.g., conversion rate i.e., % of visitors who complete a desired action
OKR: Consists of ‘objectives’ and ‘key results’. They are measurable outcomes used to track the achievement of that goal. They are a subset of metrics.
E.g., Objective: enhance user engagement
Key result1: increase average session length from x minutes to x+y minutes
Key result2: improve daily active users (DAU) by 20%
Key result3: Launch two new features aimed at increasing user interaction
Widely used metrics can be broadly categorised into 7 buckets.
1. Revenue:
a. Monthly recurring revenue (MRR): recurring revenue on a monthly basis
b. Annual recurring revenue (ARR): recurring revenue on an annual basis
Refer to blog 87: Delving deeper into product revenue metrics
c. Average revenue per user (ARPU): MRR/total number of customers
2. Costs:
a. Customer acquisition cost (CAC): cost for acquiring one customer
b. Cost per acquisition (CPA): cost of acquiring a new potential customer
3. Usage:
a. Daily active users (DAU): number of users other than one-time users per day
b. Monthly active users (MAU): number of users per month
c. Number of logins: times of signing in per month
d. Session length: Amount of time a customer spends in one session
e. Activation rate: number of users taking a specific action to get value
f. Retention: % of original installed base (1st month) that are still using
g. Website visitors: Number of unique and repeat visitors
h. Conversion rate (CVR): % of users who take up a desired action
(Refer to blog 93 for more on product engagement metrics)
4. Reduction in usage:
a. Churn: % of customers lost during a certain time period (monthly/annually)
b. Monthly churn rate: lost customers this month vs. prior month’s customers
c. Gross churn rate: MRR lost in the month, MRR at the beginning of month
d. Net churn: (MRR lost – MRR from upsells) this month, MRR at the beginning of the month
e. Burn rate: monthly cash burn rate
f. Bounce rate: % of users who leave after viewing only one page
(Refer to blog 93 for more on product engagement metrics)
5. Customer Satisfaction:
a. Customer satisfaction score (CSAT): Rating of satisfaction on a one to five scale
b. Net promoter score (NPS): Likelihood of your customers recommending your product to others
c. Referrals: Number of new customers acquired based on a recommendation (from an existing customer)
d. Retention: Rate at which customers keep and renew their accounts
e. Viral coefficient: Average conversion rate of new customers (invited by an existing customer)
6. Profitability/Value
a. Gross profit: total revenue minus the cost of goods sold
b. Customer Lifetime value prediction (CLTV): predicated net profit from the entire relationship with a customer. Suggested CLTV/CAC ratio is 3:1, (revenue from a customer should be three times more than the cost of acquiring)
7. Roadmap progress
a. Features shipped: Number of new features released to customers
b. Sprint burn down: How team is progressing towards completing all planned work in a sprint?
c. Velocity: Rate of progress or average amount of work completed in a given sprint
d. Work-in-progress: Current tasks that are actively being worked on
Jump to blog 100 to refer to the overall product management mind map.
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All the best! 😊