Product Metrics You Need to Track to Stay Ahead of the Competition

Product Metrics

In this collection you'll learn

  • why it's worth to track product metrics...
  • ... and why you need to be careful about tracking vanity metrics
  • what are the various categories of product metrics
  • how to select the ones that fit your goals.

If you're looking to scale your product, you need to have a clear understanding of how it's performing. That's where product metrics come in. But with so many metrics available, it can be tough to know which ones are worth tracking. In this article, you'll take a closer look at the most critical product metrics and how to use them to drive your product's growth.

What are product metrics?

Product metrics are like a report card for your product

They help identify what's working and what's not, so that the business can make informed decisions about how to allocate resources and prioritize product development efforts. 

Information derived from tracking product metrics can be used to drive decisions about product features, pricing, and marketing strategies, and ultimately help the business achieve its goals.

By paying attention to these metrics, you can make more informed decisions and steer their products in the right direction.

The challenge of choosing the right product metrics

Informed decision-making requires data, but the abundance of data available to product teams today can be overwhelming and unhelpful. 

  • Ensure that you’re collecting high-quality data that is presented in an intuitive format that is easy to navigate.
  • Make sure you’ve chosen data that is aligned with your overall product goals, and that the metrics you have chosen represent what you are trying to achieve as a product team.

How to use metrics during product development?

By identifying and tracking the key product metrics that matter to your business, you can ensure that the software development team (your or an external one) is building the right features and making progress towards your goals. This helps to keep everyone aligned and focused on the most important objectives.

For example, if you are focusing on customer acquisition, you might track metrics such as website traffic, conversion rates, or cost per acquisition. By sharing these metrics with the software development team, you can ensure that they are building features that will support these objectives.

By using product metrics to guide the software development process, you can ensure that you are building the right product for your customers and making progress towards your business goals. This helps us to maximize the value of your investment in software development and achieve the outcomes that matter most to your business.

Why is tracking product metrics important while scaling your product?

As you scale your product, tracking product metrics becomes increasingly important to ensure that you are on track to achieve your goals.

As you expand your user base, you need to monitor product metrics such as user engagement, conversion rates, and churn to ensure that you are meeting the needs of your customers and retaining their loyalty

You also need to track revenue metrics to ensure that your business model is sustainable and profitable as you grow.

As you scale your product, you need to ensure that your resources are being allocated effectively. By tracking product metrics, you can identify which features or initiatives are driving the most value and prioritize our efforts accordingly.

How to identify the right product metrics?

  • Gain a clear understanding of your product goals. Identify what you're trying to achieve with the product, who your target users are, and how you can measure success.
  • Consider what data is available and what metrics are relevant to your product and business model. Identify metrics that will help you track progress towards your goals.
  • Evaluate chosen metrics to determine which ones are truly meaningful for your business. Consider factors such as how easily you can collect and analyze the data, how relevant the metric is to your business objectives, and how actionable the metric is in terms of driving decision-making.
  • Continually refine chosen metrics over time. As your product evolves and your business goals change, you may need to adjust the metrics you track to ensure they remain relevant and aligned with your objectives.

Metrics for Product Teams: The Pirate Metrics (AARRR)

Pirate metrics, also known as AARRR metrics, are a set of metrics commonly used by product teams to measure the success of their products. The acronym AARRR stands for Acquisition, Activation, Retention, Revenue, and Referral.

Pirate Metrics help to distinguish individual categories of metrics and group them in a way that makes it easier for you to select the most suitable metrics for your goals. With one exception - the additional category we propose is "Engagement". 

Below you’ll find metric suggestions for each of the mentioned categories. Familiarize yourself with them, and then analyze your current goals in scaling your product and tentatively choose the corresponding category and metrics.

Acquisition metrics

Acquisition metrics are a category of product metrics that help to measure the effectiveness of marketing and advertising efforts in attracting potential customers to a product

They help you understand how to increase the number of users who become aware of your product and start using it.

Cost Per Acquisition (CPA) 

CPA metric helps you understand how much it costs to acquire each new user. By tracking your CPA, you can identify areas where costs can be reduced where you can increase the overall return on investment.

Conversion Rate

The percentage of product visitors who take a desired action, such as signing up for a trial or creating an account, is known as the conversion rate. By tracking the conversion rate, you can identify where potential users are dropping off in the acquisition process and optimize your marketing efforts accordingly.

Activation metrics

Activation metrics are a category of product metrics that help to measure how successful you are at converting potential customers into active users of your product

These metrics help to understand how users are interacting with your product and what steps you can take to improve their experience.

Activation rate

Activation rate measures the percentage of users who complete a desired action after signing up for your product. It indicates how effective your onboarding process is and how engaged your users are with your product.

For example, if your activation rate is low, it could mean that users are having difficulty understanding how to use your product or that your product is not valuable enough to continue using it. 

On the other hand, if your activation rate is high, it means that users are finding value in your product and are likely to stick around.

Time to First Value 

It’s the amount of time it takes for a user to experience the value of your product after signing up. By reducing the time it takes for users to see the benefits of our product, you can increase the likelihood that they will continue to use it.

Onboarding Completion Rate 

It’s the percentage of users who complete your onboarding process, which is designed to help new users get started with your product. By improving the onboarding process, you can increase the likelihood that users will become active users of our product.

Retention metrics

Retention metrics are an important category of product metrics that help you understand how you are retaining users over time

By tracking these metrics, you can identify areas where your product may be falling short and take action to improve user retention and drive long-term growth.

Churn Rate 

It’s the percentage of users who stop using your product over a given time period. By tracking this metric, you can identify the reasons why users are leaving our product and take steps to address these issues.

Customer Retention Rate 

It’s the percentage of users who continue to use your product over time. By measuring user retention, you can identify which features or aspects of our product are resonating with your users and optimize them to improve the overall user experience.

Net Promoter Score 

This is a customer satisfaction metric that measures how likely the users of your product are to recommend it to others. By tracking this metric, you can discover areas where you may be falling short and take action to improve user satisfaction and retention.

Customer Satisfaction Score

Customer satisfaction score metric, or CSAT, is a product metric that helps measure how satisfied your customers are with your product.

CSAT is typically measured through a survey that asks customers to rate their satisfaction with the product or service they received. The rating is usually done on a scale of 1 to 5, with 5 being the highest level of satisfaction.

Measuring CSAT helps your product team understand how your customers perceive your product, what they like about it, and what they think could be improved. It can also help you identify areas of your product that are causing dissatisfaction, allowing you to make improvements to keep your customers happy and loyal.

Engagement metrics

Engagement metrics are a type of product metrics that measure the level of interaction and involvement of users with a product. They provide insights into how users are using the product, their behaviors, and the value they derive from it. 

Engagement metrics help product teams to track how frequently users are accessing the product, how much time they spend using it, and how they interact with different features. These metrics are crucial for measuring the effectiveness of a product and optimizing it to improve user engagement and retention.

Participant conversion rate

The participant conversion rate is a product metric that measures the percentage of users who complete a specific action or task within your product. It's an essential metric for tracking user engagement and identifying opportunities to improve your product's user experience.

For example, if your product includes a sign-up process, the participant conversion rate would measure the percentage of users who complete the sign-up process after starting it.

By tracking the participant conversion rate, you can identify areas of your product that may be causing user frustration or drop-offs and make data-driven decisions to improve the user experience.

Feature usage

Feature usage metrics is a product metric that helps you understand which features are popular among your users, and which ones are not. It allows you to identify the most frequently used features and use this data to prioritize which features to enhance or remove. This approach can also help you identify potential product bugs or opportunities to improve the user experience.

To track feature usage metrics, you need to identify the key features of your product and then create a system that records which features are used and how often. This data can be also used to create more targeted marketing campaigns, personalize the user experience, or optimize your product's pricing strategy.

Product usage

Product usage refers to the degree to which your product is being used by your customers. It's a metric that helps you understand how your customers interact with your product. 

Product usage can be measured by tracking various user actions, such as the number of times a feature is used, the amount of time spent on your product, or the frequency of product updates. 

It allows you to determine if your product is meeting the needs of your customers.

Revenue metrics

Revenue metrics are an essential part of product metrics that help us understand how well our product is generating revenue and driving growth. By tracking these metrics, you can identify areas where you may be falling short and take action to improve revenue generation and drive long-term growth.

Monthly Recurring Revenue (MRR)

Monthly Recurring Revenue (MRR) is a product metric that measures the predictable, recurring revenue generated from customers each month

MRR helps businesses understand the revenue they can expect to receive on a regular basis. It can be used to track changes in revenue over time as well as to forecast future revenue and inform business decisions related to pricing, sales, and customer acquisition.

Average Revenue Per User (ARPU)

This is the average revenue generated by each user over a given time period. By tracking this metric, you identify which user segments are generating the most revenue. Then, you can optimize your product to increase revenue from these segments.

Customer Lifetime Value (CLTV)

It’s the total revenue generated by a user over the course of their relationship with your product. By measuring CLTV, you can identify which user segments are generating the most revenue over the long term and optimize our product to increase it.

Referral metrics

Referral metrics help product teams to understand how well a product is being shared and recommended by our users to others. By tracking referral metrics, you can identify the user segments that are most likely to refer to others. Then, you can optimize your product to encourage more referrals, and drive long-term growth through word-of-mouth marketing.

Net Promoter Score (NPS) 

This metric measures how likely a user is to recommend our product to others. By tracking NPS, you can discover which user segments are most likely to recommend your product, optimize your product to encourage more recommendations, and measure the impact of your referral programs.

Viral Coefficient

The Viral Coefficient is a product metric that helps you understand the viral growth of your product. It measures how many new users are brought in by each existing user, on average. It's a crucial metric for companies that rely on word-of-mouth marketing and social sharing to grow their user base.

The Viral Coefficient is calculated by dividing the number of invites sent by the number of users who accept those invites and become new users. This gives you a ratio that indicates the virality of your product. By tracking your viral coefficient, you can identify which features or aspects of your product are driving viral growth and optimize them. 

Referral share rate

Referral Share Rate (RSR) is a product metric that measures the percentage of a company's new customers who were referred by existing customers. It allows us to understand the effectiveness of a company's customer referral program and the level of customer satisfaction and loyalty. A high RSR indicates that customers are actively recommending the product to others, which can help drive growth and reduce customer acquisition costs. 

You can calculate RSR as the number of new customers acquired through referrals divided by the total number of new customers.

Vanity metrics - how to identify them?

Vanity metrics are metrics that look impressive on the surface but don't provide us with any meaningful insights into the health or growth of our product. These metrics can be misleading and often distract us from the metrics that actually matter.

To avoid tracking vanity metrics, try to focus on metrics that are directly tied to your product goals. Vanity metrics often don't directly relate to our product goals. By focusing on metrics that are directly tied to our goals, you can ensure that you're measuring what actually matters.

Vanity metrics can often be manipulated through tactics like spamming, buying traffic, or other dishonest methods. 

Metrics can be misleading if they're not considered in the context in which they're measured. By considering the context in which a metric is measured, you can ensure that you're not being misled by vanity metrics.

Vanity metrics can also look impressive in isolation, but when viewed in the context of other metrics, their lack of value becomes apparent. Use a variety of metrics to measure the health and growth of our product.

Final word

Product metrics are crucial for the success of any product, and understanding them is essential for any product team. It's important to remember that no single metric is perfect for every scenario, and different products and business goals may require different metrics. Therefore, it's crucial to continue exploring the topic and keep up with the latest developments in product metrics. By gaining more knowledge and selecting the right metrics for your specific case, you can improve your product's performance and achieve your business goals.

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