Data drives business, but adopting a data-driven approach to decision making cannot be successful without first identifying the key metrics for your company goals.
As product managers, data is vital for key metrics and key performance indicators (KPI). The right product metrics help identify strengths and weaknesses, track improvement over time, diagnose problems and more. The issue for organisations is how to use collected data effectively. This can be achieved by identifying the products key metrics that are most important to product vision, customer need and company goals.
Here we look at key metrics that really matter to your business and your stakeholders, by measuring your product not your product management or sales.
The fewer the key metrics you use for your product, the more focus you and your organisation will have. The “One Metric That Matters” is extreme, but does not mean ignoring other parts of your business. Continue to collate the important data your business generates, but focus on a single metric to drive your entire business. This metric may be a rate or ratio that offers a comparison as to whether your business is improving, declining or staying the same. This is usually through cohort analysis. If this is too extreme for your organisation, you can identify a single metric for each facet of your product such as retention, usage, revenue or service.
Key metrics that stakeholders need to see are those against which you will need to show how you are making successful changes, delivering value both to the business and also the end users of your product. Acquiring, engaging and satisfying users benefits the business and a successful business benefits your product.
Non-revenue generating resource consumption, customer satisfaction, Net Promoter Scores and other topics matter to stakeholders, but financial metrics such as revenue, margins and equity will always be the most important KPIs of any product for stakeholders, since money pays for salaries, electricity, office space, health benefits, taxes and more.
Your product’s business model will also influence key metrics. If your product has a subscription model, its key metrics are retention rate and churn rate that indicate how many customers are still happy to keep paying and how many customers cancel or do not renew.
Stakeholders are also interested in Average Revenue Per User (ARPU), Customer Lifetime Value (LTV), gross margins and a host of usage data including total users, monthly/daily users, monthly/daily active users and average session time.
Key metrics also help you understand how customers are interacting with your product and will identify opportunities to improve. When looking at feature and usage metrics, you need to not only identify what you want to know but what you could know. With more data you can test different hypothesis for correlations, but report only on the metrics related to your top goals to make implementation of any changes simpler.
An understanding of what your users are doing and how they are using your product is an invaluable tool throughout the product development process, and should be one of the cornerstones of your measurement strategy.
User engagement metrics are particularly helpful in understanding how users interact with your product. Trace how often your users log-in to their accounts and conduct the same analysis for a cohort of users over time. If there is a positive change, identify what changed and how you can leverage that elsewhere. You can reinvest this information to make better future product decisions.
Define your key metrics early and start measuring from a known baseline. It may not be possible to add on measuring capabilities once something has been shipped. Define the criteria that assess your user stories so that as a product owner you know everything you do is measurable where possible and has value for the product team. Build metrics testing into your QA process to ensure the data you are collecting is accurate before you start trying to quantify the unknown.
The metrics most in demand by stakeholders relate to sales, but these metrics have little to do with your product itself. Focus on your product unless you are responsible for sales and marketing. Highlight your product’s speed to market and the competitive landscape. Improving this measurement increases revenue and having key metrics to help understand these relationships is good for individual teams.
Do not confuse your success as product manager with the success of your product. Quantifying your product and its performance is more important than attempting to quantify the internal aspects of product management. The true measure of your worth is what is happening outside your office.