10 Key Product Management Metrics & KPIs That Every Product Manager Needs To Track & 5 Effective Strategies To Improve Them
Are you tracking product management metrics to evaluate your product and monitor its progress?
SaaS products are becoming increasingly data-driven which makes it critical to evaluate product growth using the right metrics. However, an enormous amount of available data makes it challenging to select these metrics.
In this article, we’ll discuss 10 product management metrics that you can’t do without. So, let’s dive in!
- Product management metrics are data points you can quantify, track, and analyze to measure your product’s success.
- Tracking product management metrics helps you improve your product, identify and remove friction in the user journey, and make data-driven decisions.
- The 10 key product management KPIs and metrics are Customer Acquisition Cost, Trial to Paid Conversion Rate, Customer Lifetime Value, Customer Satisfaction Score, Daily Active Users/Monthly Active Users, Feature Adoption Rate, Monthly Recurring Revenue, Net Promoter Score, Customer Retention Rate, and Customer Churn Rate.
- To improve these metrics, use interactive walkthroughs to guide users to the activation point, use secondary onboarding to boost retention, drive account expansion using modals, analyze NPS feedback to proactively reach out to detractors, and offer in-app self-service support to reduce churn.
- Here are the 3 best tools to improve product management metrics
- Userpilot – for in-app feature tracking and segmentation
- Mixpanel – for product analytics
- Heap – for product insights
What are product management metrics?
Product management metrics are data points you can quantify, track, and analyze to measure the success of your product. They are the key to delivering the highest value and outstanding user experience.
Why should you track product management metrics?
Tracking product management metrics is crucial. Here are some of the benefits it can provide.
Measure the success of product management
A successful product needs to have a great product-market fit, be engaging, and have high retention rates. Tracking these metrics can show whether you’re on the right path and whether your product meets the needs of your customers.
You should develop a product that solves people’s problems, which they may not be aware of.
The more engaging your product is, the more likely users are to pay for repeat subscriptions. Highly satisfied customers tend to become loyal customers and brand advocates.
Identify friction points in the customer journey
Customers are always going to find friction points in the customer journey. Thus, it’s important to ensure there’s as little friction within your product as possible.
Monitoring product metrics allows you to identify these points of friction and take steps to remove them.
Make data-driven decisions
As previously mentioned, software products are becoming more data-driven by the way. This is why your business decisions should be data-driven as well.
The product management KPIs and metrics offer a huge pool of data that you can analyze to find patterns in consumer behavior and any underlying issues inside your product. You can even proactively reach out to customers with solutions they didn’t know they needed.
10 Product management metrics and KPIs you should track as a product manager
If you’re confused about what metrics to use, here are 10 product management KPIs and metrics to make your job easier.
- Customer Acquisition Cost (CAC)
- Trial to Paid Conversion Rate
- Customer Lifetime Value (CLV)
- Customer Satisfaction Score (CSAT)
- Daily Active Users (DAU)
- Monthly Active Users (MAU)
- Monthly Recurring Revenue (MRR)
- Net Promoter Score (NPS)
- Customer Retention Rate
- Customer Churn Rate.
Customer Acquisition Cost (CAC)
The customer acquisition cost is the average amount of money a company spends to acquire new users. For SaaS businesses, these new users only include paying customers.
To calculate the CAC, divide your total sales and marketing expenses over a particular period (monthly or annually) by the number of new paying customers acquired.
Monitoring CAC can help you prepare a budget, keep it on track, and develop strategies to keep the cost as low as possible.
This metric can be combined with the customer lifetime value to find your LTV: CAC ratio.
The right ratio depends on the type of product and industry. However, a SaaS company should have an LTV: CAC ratio of 3 to maintain a financially sound business.
Trial to Paid Conversion Rate
The trial-to-paid conversion rate refers to the percentage of users who subscribe to a paid plan after their trial run is over.
It is equal to the ratio of the number of free trial users converted in a particular period by the total number of free trial users within that period, multiplied by 100.
A high trial-to-paid conversion rate suggests that your users are reaching their activation point faster. The activation point is where your users finally experience the value of your product.
A low conversion rate means either your product is failing to deliver value or you’re not attracting the right users. As a product manager, your responsibility is to find the reasons behind the former.
Customer Lifetime Value (CLV)
The customer lifetime value (CLV or LTV) is the average revenue stream a company earns from a user during the period they are a paying customer.
One way you can calculate LTV is by dividing the average revenue per account by the customer churn rate.
Tracking CLV improves the overall profitability of the business. CLV has a high predictive value, allowing you to estimate project investments and revenues in the future.
SaaS businesses are heavily reliant on repeat subscriptions to recoup the investment made in building and maintaining the product. Therefore, the higher the retention rate, the more the revenue generated, and the lower your costs per customer, the greater the CLV will be.
Customer Satisfaction Score (CSAT)
One of the most important retention metrics, customer satisfaction score (CSAT) measures user sentiment regarding specific interactions a customer has with your teams.
You can use customer satisfaction surveys to obtain the CSAT. The CSAT is an instant measure of the level of a customer’s satisfaction with a particular feature, product, or interaction with the support agents.
The customer satisfaction score helps reveal friction points by providing insights into the presence of potential loopholes. You can segment customers according to their feedback and personalize the responses for each of them.
While CSAT is necessary for gauging customer sentiment, you should use it along with other product analytics to get a balanced view of customer engagement and health.
Daily Active Users (DAU)/Monthly Active Users (MAU)
The DAU/MAU ratio is a measure of product stickiness. The DAU is the number of active users who engage with your product daily, while MAU tells how many users interacted with your product in a month.
The stickiness metric shows how often customers return to your product. High stickiness indicates your customers are getting repeated value, which leads to increased retention.
Your goal should be to maintain a stickiness ratio of 1. This means that the whole customer base gets value from your product all day, every day. However, the ratio can be lower for complex products since customers don’t have to engage every day.
Feature Adoption Rate
The feature adoption rate gives the percentage of customers who use a specific feature. It’s the ratio of the number of feature MAUs to the number of logins in a given period multiplied by 100.
This metric offers an in-depth view of how your product is used and which features deliver the most value. The greater the feature adoption rate, the faster your product adoption.
You can track feature usage based on customer cohorts to know which features matter to which persona. Tracking feature usage also helps you identify your power users and use personalized onboarding to boost customer engagement among the underperforming segments.
Monthly Recurring Revenue (MRR)
The monthly recurring revenue is the expected revenue you can earn from all active subscriptions every month. It’s equal to the average revenue per account multiplied by the number of accounts in a month.
Repeat purchases are vital to the survival of SaaS companies, making it crucial to constantly track your MRR.
Expanding accounts through upsells, cross-sells, and add-ons can improve your MRR. As more customers purchase higher-priced plans, your renewal rates will increase, and so will your MRR.
Net Promoter Score (NPS)
The Net Promoter Score (NPS) is a measure of user sentiment and loyalty. You get this score through an NPS survey that asks users how likely they are to recommend your product to others on a scale of 1-10.
The NPS metric is the difference between the percentage of promoters (respond with 9 or 10) and the percentage of detractors (respond with 6 or less).
Promoters are your most loyal customers and are more likely to become brand advocates. On the other hand, detractors are dissatisfied with your product and might churn if prompt action is not taken. The passives, who rate you 7 or 8, are indifferent to your product and may switch to competitors.
NPS feedback reveals areas of improvement that you can fill up to convert passives, and even detractors, to loyal promoters.
Customer Retention Rate
The customer retention rate is the percentage of users retained over a specific period. To measure this metric, divide the number of paying customers at the end of that period by the total number present at the start and multiply the ratio by 100.
There are 4 important retention rates:
- Day 0 retention rate
- Week 1 retention rate
- 7 days range retention rate
- 1-month retention rate.
A high retention rate makes room for sustainable revenue growth. SaaSScout revealed that increasing retention by 5% can improve your profits by at least 25%.
This metric should always be used in conjunction with the churn rate to get a bird’s eye view of your company’s renewal rates. It enables you to estimate future revenue earnings more accurately and provides directions to your customer success teams.
Customer Churn Rate
The customer churn rate is on the flip side of the retention rate and shows how fast you are losing your users.
It’s equal to the number of users lost during a given period divided by the number of users at the beginning of that period, then multiplied by 100.
In combination with retention metrics, the churn rate helps you develop retention strategies. The metric lets you know how and why some customers are leaving and even where in the funnel they are churning. This helps you improve in-app experiences to reduce churn.
You can track customer churn monthly, quarterly, and annually to get an overview of the performance of your organization.
5 Strategies that product managers can use to improve key metrics and KPIs
Now that you know the 10 key product management metrics, let’s see how you can improve them and make your product successful.
Use interactive walkthroughs to guide new customers and help them understand the value of your product
Product tours aren’t as useful as you may think. They pour down a lot of information at once. However, most customers don’t have the attention span or memory to retain all that information.
This is where interactive walkthroughs come in.
A walkthrough offers a step-by-step guide to using specific features. It’s contextual since every step is triggered only when a customer has performed the former one. Segmenting customers helps select the features relevant to the use case.
Moreover, it shortens the learning curve and drives the adoption of these features. New users can reach the activation point faster, experience your product’s value, and convert to paying customers.
Here’s an example of Rocketbot’s walkthrough built using Userpilot that doubled its activation rate to 30%.
Use secondary onboarding to retain existing customers
Onboarding is a continuous process that needs to be present at each stage of the user journey. And secondary onboarding is the key to user retention.
Once your users convert to paying customers, they need to be introduced to secondary features. With secondary onboarding, you can set different in-app messaging elements like tooltips and checklists to let customers know about new feature releases, product updates, and any existing features they’re missing out on.
For example, you can use tooltips to help users discover new features contextually and without hindering their natural workflow.
This keeps driving value and shows customers more and more ways in which they can engage with your product. Secondary onboarding gives you more use cases, which, in turn, leads to greater product stickiness and user retention.
Use modals to prompt customers to upgrade their accounts and drive account expansion
Account expansion lets you increase the revenue of existing accounts through upsells and cross-sells. It’s an easier and more cost-effective way of boosting revenue than acquiring new users.
You can use a modal, like in the example given below, to encourage customers to upgrade to a higher-priced subscription plan.
If a customer browses a feature that belongs to a more expensive plan, send them an in-app message offering them to upgrade. Setting up triggers causes modals to appear contextually whenever a user completes a task limited by a free or lower-priced account.
Use NPS surveys to identify detractors and proactively reach out to them
As we’ve already discussed, NPS surveys allow you to identify detractors who are more likely to leave your product. Segmenting customers based on the NPS feedback can help you find where most of your detractors come from.
You should add an open-ended follow-up question to your survey to know why users gave you a low score. With a tool like Userpilot, you can analyze and tag NPS responses for additional context.
For instance, if a customer complained about high prices, you can tag this response, drop it in the “too expensive” category, and conduct further analysis.
Grouping responses based on themes help you notice recurring patterns in the feedback from detractors. You can then prioritize the most common problems faced by detractors, and solve them.
Offer in-app self-service support to remove frustrations and reduce churn
An in-app help center gives customers self-service resources and decreases friction in getting help. Users can save a lot of time by solving certain issues on their own and feel accomplished. This increases customer satisfaction and reduces churn.
Providing self-service support also gives support agents free time to focus on more pressing matters and get back to these users quickly.
The following is an example of a resource center with a link to the knowledge base, 1-click get-in-touch chat launcher, FAQs, and more.
Best tools to analyze and track product management metrics
Now it’s time to list the best 3 product management software for tracking and analyzing product management metrics.
First introduced as an onboarding platform, Userpilot now offers a wide range of SaaS solutions, such as product management, product adoption, and product growth.
With Userpilot, you can create microsurveys, build in-app resource centers, and provide in-app guidance with elements like checklists without needing to code.
Its powerful analytics offers real-time insights to feed your strategies. You can combine and cross-reference results from product usage analytics with NPS data to understand key trends in usage.
For example, you can find something that promoters have in common so that you can replicate it and improve retention.
Userpilot also offers multiple integrations with other products like Google Analytics and Amplitude. Common use cases for integrations include building and comparing analytics funnels for end-users according to their completion of flows.
Userpilot offers a 14-day free trial with 3 paid plans – Traction, Growth, and Enterprise. The Traction plan starts at $249/month paid annually.
Mixpanel is a product analytics software that gives deeper insights into engagement, adoption, and retention across the whole user base.
You can better understand product usage patterns, identify friction points, and discover customers who are about to churn or ready for upsells. You’ll get interactive reports and customizable dashboards to monitor your key metrics.
Mixpanel offers a 7-day free trial with 2 paid plans – Growth and Enterprise. The Growth plan starts at $25/month.
Heap is a digital insights platform that provides solutions in funnel optimization, product adoption, user behavior, and product-led growth.
The platform captures all user interactions and performs self-service analytics. Even non-technical teams can find and manage an entire set of customer events without coding. You can hypothesize, test, and measure the outcomes of upgrades in real-time.
Heap offers a 14-day free trial. It has 3 paid plans – Growth, Pro, and Premier, but the pricing is not publicly disclosed.
Wrapping it up
As a SaaS product manager, you’ll need to track the right product management metrics and KPIs to make informed decisions and drive product growth.
The right product management tool will make the process much easier and more efficient.
Want to get collect in-app user engagement data and track product management metrics? Get a Userpilot demo and see how you can get valuable growth insights!