Key performance indicators (KPIs) are the most potent and convincing tool for product managers (PDMs) to use when making decisions. No matter whether your product is an online game, Magento progressive web app, or some other digital product, KPIs reflect the team's performance, the product's popularity, and the company's general state.
The main problem with KPIs today is not how to measure them but rather which ones to track. This is crucial to spend less time on monitoring and more on acting. You should pick the appropriate metrics based on your goals, such as reaching a new client group, increasing customer satisfaction, or planning further improvements.
In this article, you'll find top product management KPIs and hopefully will be able to choose the ones relevant to your business.
Google Analytics is among the most widely-used tools for measuring product data.
Another great option is a product management KPI dashboard. It enables experts to monitor and evaluate their most crucial product KPIs on a single screen. Hubspot, Klipfolio, Databox, and Zoho are among the most popular KPI dashboard software.
Depending on the primary objectives, you can track your business’s revenue fluctuations, user satisfaction rate, reasons for retention, working and non-working tactics, and so on.
The average revenue per user (ARPU) tracks the profits generated on a monthly or annual basis. If you decide to modify your pricing strategy or launch a promotion campaign, you will need these KPIs to determine your future service revenue.
You can also use ARPU to assess your position compared to competitors, analyze various routes for client acquisition, or determine which segment of your audience is most valuable.
The ARPU formula is:
ARPU = Monthly Recurring Revenue / Total Accounts
This metric determines a product's total monthly revenue. It’s calculated by adding income obtained from new subscriptions to the MRR at the beginning of the month and subtracting money lost due to churned customers.
It's a useful KPI to track a company's present state, especially for SaaS businesses that operate on a subscription basis. In this case, you don't have to worry about one-time sales after getting a recurring client; therefore, MRR is easy to predict.
The average income you get from a client throughout the entire business relationship is known as customer lifetime value (CLV).
This KPI aims to demonstrate how much you can spend to acquire a new customer. The metric will help choose client acquisition methods and retention techniques.
This indicator's calculation is the most difficult, and many specialists recommend various formulas. One easy approach to compute the required amount is to multiply the average order value by the number of similar orders placed each year and then by the period a client is expected to do business with the company.
Customer acquisition cost (CAC) is money spent on winning over a target customer. A high CAC indicates that you're spending a lot of money advertising to a consumer.
This metric takes into account every expense used to draw in clients, including marketing expenses, sales team efforts, and advertising. It occasionally covers the salary of marketing and sales specialists as well. Determining the cost of acquiring a customer entails calculating the entire revenue and time frame.
The most straightforward formula for calculating CAC is: CAC = Sales and marketing spendings for a period of time / total number of customers generated for a period of time.
Consider both CLTV and CAC to determine whether consumers are costing you more money than bring and whether it is necessary to reevaluate your marketing approach.
Net Promoter Score (NPS) counts both the number of devoted clients who are inclined to endorse a product (promoters) and the number of dissatisfied users (detractors). Businesses tend to determine the number of customers in both groups by asking them to rate products, usually on a scale of 0 to 10. Detractors would rate it from 0 to 6, impartial users would give it 7-8 points, while supporters would give it 9–10 points.
By doing this, your product team can determine why some of your consumers aren't loyal and enhance the overall user experience for all your clients.
The formula to calculate NPS:
NPS = % of promoters – % of detractors.
The Customer Satisfaction Score (CSAT) measures a user's general contentment or dissatisfaction with a certain product or service feature. To learn this, product managers usually send out surveys that focus on particular areas and features.
The replies reveal which clients are dissatisfied and require more attention from your product management teams.
Here is a formula to calculate CSAT: number of positive replies/number of total responses x 100.
In contrast to NPS, CSAT measures customer satisfaction with a specific feature rather than business as a whole.
Customer retention rate (CRR) shows how many clients remain with your product over a period.
If your customer retention rate is increasing, you may determine if and how long you can keep new clients. If it's in decline, it would be wise to find out whether a new competitor has appeared on the market or if there's a problem with customer satisfaction.
Determine the CRR by the formula: CRR = Customers at the end of the calculated period – New customers / Customers at the start of the calculated period x 100.
The churn rate counts the number of people you've lost over a period of time. You can learn a lot about client satisfaction from the customer churn rate. After introducing a new feature, you may determine whether the clients liked it by measuring the KPI.
Take the total number of customers lost throughout a time period and divide it by the initial number of customers at the beginning of this period to calculate the metric.
The session duration KPI is applicable for digital products and measures how long people stay on a platform, website, or app. This number is crucial since it lets you know how valuable the content on your platform is. In the end, it will impact client loyalty and retention.
The session duration may provide insights into how to enhance user engagement. It’ll also be helpful for comprehending the reasons why they stopped using a product.
The most accurate approach to measure it is to take the total amount of time people spend on your platform and divide it by the total number of users.
These metrics show the number of users or visitors a digital product receives each day (DAU), week (WAU), or month (MAU). A unique visitor makes at least one visit to a webpage in a specific time frame. Mobile applications, online games, websites, and social networks are all subject to this KPI.
One way customer engagement metrics can give you a more detailed look at the performance of your business is by comparing daily active users with monthly active users to determine the retention or "sticking" of your customers.
The DAU/MAU ratio indicates the number of monthly customers interacting with your product or service in one day. The formula looks like this: DAU/MAU = The number of daily active users / the number of monthly active users.
This number is important because revenue is generated by a constant number of active users. Active customers are committed to your product or service and help drive growth. A number exceeding 20 percent is usually considered a good result.
DAU/MAU KPI is worth considering when allocating funds or deciding whether to introduce additional features.
This KPI helps to understand how frequently people return to the site. With the help of logins monitoring, this metric indicates whether the audience interacts with a product repeatedly. In contrast to session duration, the number of sessions per user displays the average for a given set of users during a certain period.
Comparing this data between distinct user or visitor groups (retained and churned) might help predict and avoid changes in user behavior.
In comparison to the number of sessions per user metric, this one measures more than simply how frequently a user opens an app. It shows the user's activities and the features they use in the program. This statistic determines how popular a feature has been since its introduction.
Additionally, you may monitor these data for customers who left and those who remained. This way, you'll understand what attracts people to the product and what repels them.
The number of user actions per session is a superb metric to use for new features performance assessment, UX components analysis, and customer behavior monitoring.
According to the survey by 280 Group, 1 out of 5 products fail to meet customer needs. To satisfy all the audience’s requirements, you need to monitor their customer journey, research what issues they face, and try to solve them. This is impossible without tracking KPIs.
Now that you know the key product management metrics, you can choose the ones relevant to your business and objectives to enhance the product's performance and increase revenue.