How product metrics help in product management
If you are a product manager you already know the importance of being data-driven in your work. Being data-driven has been the foundation of every successful product in the world, and product metrics are an important part of that.
But what about when you are building a new product or feature? Choosing product metrics in the first days of development is hard because you have no data history. In some cases, if a short time has passed since launch, you have a decent volume of data and information, but you still have no structure or focus on the right metrics to use.
What are the right metrics that product-team members can use to measure the potential success or failure of a product? Below are points for choosing and using the right metrics in planning your product roadmap.
Set product metrics from the first days
By setting your metrics from the first days of the product you will understand more of what is happening inside the product and make better decisions. Talking about product metrics during development is a good idea because it occupies your mind with the topic, and through those requirements you try to fill gaps and design the system so you can collect the data you need later with ease. In fact, after you have set product strategy you will be able to set your metrics as well.
With the abundance of analytics tools for user performance and behavior that product managers have, filling a warehouse of data right after the first users arrive is easy. The real challenge is choosing the right metrics to focus on.
Look at metrics like a scientist
To set the right metrics in the early days, you have to think like a scientist. Scientists first state their hypotheses, then specify a way to test the hypothesis, then measure. Although this way of looking at things is very simple, it is one of the best ways to steer a product toward success.
For example, you might think a conversion metric is very important and should be measured—for example, the percentage of trial users who convert to paid. Even without any data from real users you can state your hypothesis about what this metric should look like and what the ideal target is for you. The process of choosing the metric is valuable in itself because it leads to very good conversations among team members and lets you test your hypotheses as soon as users start using the product and plan the rest of the path from there.
Further reading: Strategy is not a to-do list!
Are you measuring the right thing?
The metrics you choose depend on the stage your product is in, your industry, your product type, and the size of your company.
The most important thing to keep in mind for your metrics is choosing a limited number of metrics that really matter to you. These are the ones woven into your organization’s long-term goals, through which you can reach your business goals.
Stay away from vanity metrics. Vanity metrics are the ones that feel good to have but that you cannot act on in the end. For example, page views or Facebook likes are vanity metrics because they have nothing to do with user success or your business.
Better metrics in this area can be things such as active users, customer-acquisition cost, and average revenue. These are metrics that can affect the course of your business.
Sample product metrics for you
It is better to start this work by searching and researching the metrics known as success metrics in your industry. Whether you are in retail, media, a SaaS company, or any other industry, people before you have looked for their metrics and you can learn from them.
In general, business goals such as revenue, profit margin, customer-acquisition cost, and return rate are shared across most businesses, and you can use them too.
Below we introduce a number of metrics that help you measure success from the customer and business sides. Of course the metrics you choose depend on your business and product. Still, keep in mind that you should start with a limited number of metrics because you need focus.
Engagement metrics for the product
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Product usage rate (repeat logins, sharing)
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Percentage of users who take a particular action
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Usage of product features compared with other features
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What kind of customer uses each product feature
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Return rate
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Bounce rate
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Product quality
Business-oriented metrics
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Customer acquisition cost (CAC)
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Lifetime value of each customer (LTV)
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Monthly recurring revenue (MRR)
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Annual recurring revenue (ARR)
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Average revenue per user (ARU)
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Conversion rate (site visit converting to member)
Having a metric, even an unsuitable or wrong one, is better than having none. So choose metrics to start with and go forward with them. Once you have wrestled with your metrics for a while, you gradually make them more precise and more suitable. Remember that choosing and reviewing metrics is team work. Share the metrics with your team and use their help.