Product managers, this one goes out to you.
Thanks to your leadership and collaboration superpowers, teams out there manage to make cross-functional work look seamless. You’re an expert at wrangling feedback, gaining alignment, championing your vision, and bringing stakeholders along. And you probably already use key performance indicators and data to do so.
But are the metrics you're tracking the right ones?
There are pretty much an infinite number of product metrics you can think about tracking. Growth metrics, user engagement metrics, north star metrics, team-level metrics…laddering up into business metrics—and that’s just to name a few. With so many types of metrics out there, it can be easy for the things that are most important to your team and your product to get lost in the mix. Metric overload can be a real issue.
We’re here with a much-needed reality check: you don’t need to focus on every single metric. Think about your product, your target customer, and your product team: what objectives will help you drive toward greater business goals, unlock value for your users, and get the teammates and stakeholders you work with fired up? That’s your sweet spot.
With all that in mind, here’s an overview of nine key product metrics (and why they matter) for product development teams.
Note: There are many ways to define “product team” depending on the size and structure of your organization. For the purposes of this post, our focus is on cross-functional product teams: groups of product managers, developers, designers, and other collaborators who work together to develop useful products and features that align with business goals and users’ needs.
As a product leader, there are a number of benefits to focusing on the right product management metrics:
While the “right metrics” will look different across products, teams, and companies—here’s a few of the top contenders to get you started.
As a product leader, it’s important to keep tabs on how customers are engaging with the things you build. The more often someone uses your product, the more likely they are to get value out of it (and the more value they’ll provide to your business down the line too). Calculating your daily active user count is an easy way to measure whether your user base is growing and how sticky your product is—making it a crucial product usage metric. To measure DAU, simply count the total number of unique users on a given day. You can also calculate your average daily active users by counting the total number of active sessions you’ve had over a period of time—usually a month—and then dividing by the number of days in that month. (You can double count users with this method, so long as their visits were on different days.)
Average daily active user count = Total active sessions / days in that time period
Let’s unpack this crucial product usage metric a little further. The definition of “daily active user” will vary from product experience to product experience, and depend on your business model. Ask yourself: what’s the minimum action a user needs to take to get value? What customer behaviors or user actions are most important? How do we define product success? For digital products, that might be a request for a demo or sign-up for a free trial. For an e-commerce store, that might be visiting the website or app, or turning a visitor to a customer.
Conversion rate is a valuable metric that helps you measure how many users take a desired action once they land on your product or website. If your conversion rate is low, it means there are barriers preventing users from doing whatever they came there to do. Conversion rate helps you identify key drop-off points in your product funnel or experience and problem-solve around them to get more desired user actions. To calculate your product’s conversion rate, just divide the number of total conversions (however you define it) by the number of unique sessions or unique visitors to the experience.
Conversion rate = [Number of conversions / number of unique sessions or visitors] x 100
A bounce rate is pretty much the opposite of a conversation rate. Your bounce rate is the percentage of customers or users who visit a single page on your website and do nothing on that page before…bouncing.
Retention rate measures the percentage of existing users your product retains over a given period. In other words, from one month, quarter, or year to the next, what percentage of users stick around? Retention rate is critical for product teams because it measures how sticky your product is. To calculate retention rate, first choose a period of time (month, quarter, etc.). Take the total number of users at the end of that period of time (E) minus the total number of new users (N). Then, divide that number by the total number of existing users at the start of the time period (S) and multiply by 100 to get your retention rate.
Retention rate = [(E-N)/S] x 100
Many teams use retention rate as a primary metric because it has such a powerful pay-off—a 5% increase in retention can produce a 25-95% increase in profit. And it’s more cost effective— retaining existing users is often 5x cheaper than acquiring new ones.
Customer churn rate is another common metric for thinking about retention, but focuses on the loss side of things. It’s typically measured as either the number of users lost or the dollar value lost that those users represent, over a period of time. Your customer churn rate is calculated by the number of users who churned divided by the total number of users at the beginning of that period of time. So, using the same variables as above:
Customer churn rate = [(S-E)/S] x 100
As a product leader, this key metric can help you get to the heart of product releases and understand what drives user adoption. Adoption rate provides insight into the usage of new product features over a period of time, so you can iterate and make future improvements. You can calculate it by dividing the total number of customers who used the feature during your set time period (CF) by your total number of customers during that same time.
Adoption rate = [customer who used feature / total customers] x 100
Net promoter score is a common metric that teams use to understand customer satisfaction and customer loyalty. It’s similar to a customer satisfaction score, but different in that it goes one layer deeper to help you uncover your truly loyal customers. It’s based on customer responses (on a scale 1-10) to one customer survey question: “How likely are you to recommend [business/product] to a friend or colleague?” Users who respond 0-6 are “detractors”; 7-8 are “passives”; and 9-10 are “promoters”—your loyal customers. After surveying users, your net promoter score is calculated by the difference between the percentage of customers who are promoters and detractors.
Net promoter score = % of promoters - % of detractors
Customer lifetime value takes into account a customer’s revenue value in comparison to your product’s predicated customer lifespan. It’s a valuable metric that helps you identify your customers or user segments that are most valuable—and then prioritize product updates to help retain them. As a product manager, it can look at CLV at a company level (your whole customer base) and by customer segments.
You’ll need a few different inputs:
Customer lifetime value = Customer value X average customer lifespan
If you’re tracking customer lifetime value, you’ll probably also want to track customer acquisition cost. They go hand in hand—if your customers are expensive to acquire but their CLV is high, it may be worth it. If your CLV is on the lower side though, high acquisition costs could be detrimental to your product and business. To calculate customer acquisition cost, divide the cost of your marketing and sales efforts by the number of customers those efforts acquired.
Customer acquisition cost: Cost of marketing + sales efforts / Total customers acquired
As a product leader, this revenue metric helps you get the biggest bang for your metric-tracking buck. It’s useful for several reasons—it gives you a good picture of how you’re doing overall and it’s helpful in communicating that to stakeholders. They want a quick overview, and MRR is a great way to give them just that. You can measure MRR by multiplying the average revenue per customer by the total number of customers you have that month.
Monthly recurring revenue = Average revenue x # of customers
Though it’s a powerful one, MRR isn’t the only revenue metric. Though they don’t typically fall specifically on the product org, many companies also track a number of other metrics related to customer revenue. Annual revenue and monthly revenue are the basics. Revenue churn, revenue growth rates, average revenue per customer segment, and average revenue per user are all important business performance metrics that product development teams play a hand in.
Once you’ve carved out the types of metrics your cross-functional product development team will track, your next step as a product leader is to build a daily practice around them. Tracking progress toward your goals on a daily basis—rather than monthly, quarterly, or at the end of each sprint—is a proven way to help your team make more consistent progress and drive towards continuous improvement.
So what might this look like? At Range, we recommend tracking progress asynchronously, through a written check-in that takes about 5 minutes each morning. Check-ins work well for product teams for a couple of reasons:
Especially on a cross-functional product development team, where folks may be working across many different areas, building a practice of daily goal tracking gives product managers (and everyone else on the team) more visibility into in-flight work and how it ladders up to what the team is working towards. Everyone can see how work moves from point A to point B and PMs can quickly step in and offer support if they need to. If something is off track, the team can spot it in its earlier stages and recalibrate before it becomes a major issue.
There’s real power in daily goal tracking. For product leaders looking to up-level your current product strategy and optimize team performance, it’s a proven path to product management success. Tracking the right product management metrics on the regular can help you reach your north star product vision a whole lot faster.
Got 3 minutes? Range check-ins were built for fast, effective daily goal-tracking. They make it easy to share what you’re focused on and what you’ve accomplished in just a couple of clicks—and link back to docs, tickets, and other reference points for context. Prompts help folks know exactly what to share and #tags make goals searchable over time. You can even track trends to see when a goal needs attention and steer things back on track.