As product managers, many of us are obsessed with numbers: retention rate, activation rate, active users, monthly recurring revenue… We constantly consider which product metrics are the best fit for our product.
Of course, this obsession isn’t without reason. PMs bear two significant responsibilities: achieving product-market fit and driving growth, and we must understand how users interact with our product to reach these goals.
Without the right numbers, product management can feel very much like groping in the dark. Teams can get caught up in the daily grind of development and releases, failing to measure the true impact of their work.
Unfortunately, you can just as easily fall into the trap of tracking everything, creating a form of information overload and analysis paralysis.
Thankfully, none of these have to be your case. This article will explore how PMs can choose the right metrics for their specific goals while escaping the track everything equals track nothing trap.
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What are product metrics and why do they matter?
Product metrics are quantifiable data points and key performance indicators that provide insight into how users interact with your product and how that interaction impacts your business.
For example, imagine you’ve just developed a new feature for your product, which you expect to be a game-changer. To confirm its impact, you may consider the feature usage rate, adoption rate, and task success rate.
Now, you may have heard from a few users that the feature is spectacular. However, if it isn’t frequently used or only a small user segment uses it, its overall impact on your business will be minimal.
And herein lies the importance of product metrics. They help you to:
- Understand product performance: Product metrics empower you to see what’s working and what’s not, helping you track progress toward your goals.
- Understand user behavior: Product metrics reveal the average customer’s needs, preferences, and pain points. This insight can help improve user experience, onboarding flow, and more.
- Identify areas for improvement: By analyzing product metrics, you can uncover the weaknesses and strengths of your new product or feature. For instance, a low task success rate with a new feature might suggest that it is buggy or lacks essential elements.
How do you define good product metrics?
Not all metrics are created equal. Indeed, what you consider a “good product metric” will differ depending on your product type, industry, target market, purpose, etc.
That said, there are a few factors to consider when deciding what constitutes a good metric for your product.
1. Good product metrics close links to business success metrics
Product metrics shouldn’t exist in a vacuum. They must contribute to and align with overall business objectives.
For instance, if your business goal is to increase revenue, your product metrics should monitor factors that drive revenue, such as conversion rates, average revenue per user (ARPU), or customer lifetime value (LTV).
2. Good product metrics help in root-cause analysis
A good metric should provide a holistic picture of things. It shouldn’t just tell you what is happening but also help you understand why. This means it needs to be granular enough to help you drill down to the root cause of any situation—good or bad.
For example, if you notice a sudden drop in user engagement may reveal a drop in daily active users. But while both those numbers reveal the problem, they say nothing of its cause.
Could there be a spike in user frustration due to feature errors or slow load times? Or, perhaps specific user segments are disengaging more than others due to problems with the features they depend on?
3. Good product metrics help you determine product/feature effectiveness:
Good metrics should help you answer two key questions:
- How embedded is the product/feature in the users’ ecosystem?
- How much time does the product save customers in their jobs?
Both questions help you understand your product’s value and stickiness. The more integrated your product in users’ workflows and the more time-saving it is, the more likely it will be adopted.
So, instead of focusing solely on the number of active users, you can consider the product’s usage frequency and the number of team members per organization to determine how embedded it is in your users’ ecosystem.
You can also consider task completion times with and without the product and the number of manual steps it eliminates from users’ workflows.
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Some common product metrics that we track
Okay, by now, you may be wondering what metrics to track. So, let’s go over some of those we track at Userpilot, how to calculate them, and why they’re useful.
Trial sign-up rate
What is it? The percentage of website visitors who sign up for your product’s free trial.
How to calculate it?
Trial sign-up rate = (Number of sign-ups / Number of visitors on the sign-up page) x 100
Why is it useful? It indicates the effectiveness of your marketing efforts and website in attracting potential customers. This key metric can reveal problems with your messaging, offer, or website design.
Active users
What is it? The number of users actively engaging with your product over a specific timeframe. Of course, “active” could be as simple as logging in or as complex as performing a series of actions—depending on your product.
How to measure it?
Active user = A customer with a high engagement score who actively uses the product
Why is it useful? It measures user engagement and user growth (when used as a lagging metric). A growing number of active users is a positive sign, but a declining one indicates problems with the user experience or product value.
Customer satisfaction score (CSAT)
What is it? Measures how many customers are satisfied with your product or a specific interaction.
How to calculate it? Conduct a survey asking users to rate their satisfaction (on a scale of 1-5), then calculate the percentage of satisfied customers (4 or 5).
CSAT = (Number of Satisfied Customers / Total Number of Responses) x 100
Why is it useful? It provides insights into customer happiness and helps identify areas for improvement. High CSAT scores correlate with customer loyalty.
Net Promoter Score (NPS)
What is it? Measures the number of loyal customers and their likelihood to recommend your product to others.
How to calculate it?
NPS calculation = Percentage of promoters – Percentage of detractors
Why is it useful? It indicates long-term growth potential. Promoters are most likely to become return customers and product advocates.
Customer retention rate
What is it? The percentage of customers that remain with your business over a period.
How to calculate it?
User retention rate = ((Number of paying users at the end of the time period – Number of users acquired during the time period) / Total number of users at the beginning of the period) x 100
Why is it useful? It’s a key measure of product value and loyalty. High retention rates sustain product growth.
Customer churn rate
What is it? The percentage of customers you lose over a period. It’s the opposite of retention.
How to calculate it?
Customer churn rate = (Number of lost customers during the period / Number of customers at start of period) x 100
Why is it useful? High churn rates signal a problem with your product, pricing, or service. Understanding churn, thus, helps you identify why customers are leaving.
Customer acquisition cost (CAC)
What is it? The average cost of acquiring a new customer.
How to calculate it?
Customer acquisition cost = Total sales and marketing expenses / Number of new customers acquired
Why is it useful? It helps you understand the efficiency of your sales and marketing efforts. The lower your CAC, the easier it is to achieve profitability.
Feature usage
What is it? Tracks which of your product’s features are being used and how frequently. Also known as product usage frequency.
How to measure it?
Product usage frequency = Number of user sessions with a performed key action event within a specific time period
Why is it useful? It provides insights into product adoption and helps you identify valuable features. This can guide product development and prioritization.
Session duration
What is it? The average amount of time users spend on your product during a session.
How to calculate it?
Average session duration = Total time spent across sessions / Total number of sessions
Why is it useful? It indicates user engagement and product stickiness. Longer session durations mean users are spending more time with the product, suggesting a more valuable product.
How to pick the right product metrics and avoid the “tracking everything means tracking nothing” trap
As useful as product metrics are, if you track everything without a clear strategy or focus, you’ll end up tracking nothing.
The truth is, the metrics you need depend on your product specifics, and should evolve as your product matures. Good metrics should also complement each other and bring some good insights when combined.
At Userpilot, for example, we choose our metrics based on what aligns most with our goals and customer journey. Early on, we focused on trial signup rates and activation metrics to ensure users were experiencing value quickly.
As the product matured, we prioritized metrics like feature adoption rate and NPS to assess long-term engagement, loyalty, and overall satisfaction. By combining these metrics, we could identify patterns and root causes.
Here’s how you can replicate our process:
1. Know your goals
Start by asking, “What are we trying to achieve?” Whether you want to boost revenue, keep users engaged, or improve retention, your goals should guide your metrics.
For example, if you are focused on retention, track metrics like churn rate, daily/monthly active users (DAU/MAU), or customer lifetime value.
2. Look at the customer journey
Map out the user journey, from sign-up to retention. Identify key points you want to measure, like how many users convert from a free trial or how often they use specific features.
3. Focus on actionable metrics
Only track data you can actually use to make decisions. Metrics like “total signups” might look impressive, but they don’t tell you much if those users aren’t sticking around. Instead, focus on things like feature adoption rate or NPS.
4. Keep it simple
You don’t need a million metrics. Pick 2-3 metrics that directly align with your goals. The fewer, the better, you will stay focused and know exactly what to act on.
5. Check in regularly
Always remember to monitor and take action: Regularly review your goals and reports. Creating goals and dashboards without consistently monitoring and acting on them is a waste of time and effort.
Are product metrics enough?
At the end of the day, product metrics are just numbers. While they provide invaluable quantitative data about customer behavior, you need other data types to paint a complete picture.
A high feature usage rate, for example, might seem positive. While that’s typically true, it could also be that the feature is causing frustration, which is making users return to it often in hopes of figuring it out.
Thankfully, Userpilot enables you to paint that full picture. You can track key metrics on your analytics dashboard, monitor trends over time, and view session recordings of real customers to understand their journey and reveal bottlenecks in the user experience.
Userpilot also enables you to launch surveys to capture your users’ thoughts. The opinions, suggestions, and pain points you gather can reveal needs and areas of improvement that you may have skipped over.
Best practices we implement to track what matters
If you want to track your product metrics with an analytics tool like Userpilot, there are a few more best practices to keep in mind.
- You need to define the Events you want to track from the start. Obviously, these events should align with your pre-selected metrics.
- Segment your users or decide how to segment your users based on the metrics or KPIs you want to monitor.
- Plan Reports and Dashboards you need to build to analyze the data effectively. Note that the insights you get will only be as good as the data your report or dashboard captures.
- Lastly, always remember to monitor and take action: Regularly review your goals and reports. Creating goals and dashboards without consistently monitoring and acting on them is a waste of time and effort.
Are your SaaS product metrics telling the right story?
Ultimately, you and I can agree that product metrics matter. For your metrics to tell the right story, though, they must be relevant, actionable, and reliable.
Once you’ve selected the right metrics to track, Userpilot can help you track them accurately. It can help you track both quantitative and qualitative metrics that tell the whole story of your product’s success or challenges.
Ready? Book a demo right away to get started!
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FAQ
What are product metrics?
Product metrics are measurable data points that track how users interact with a product. Key metrics help teams make data-driven decisions to improve user experience and business outcomes.
How to define success metrics for a product?
Define success metrics by aligning them with business goals and user needs. Identify key outcomes (e.g., user retention, revenue growth), track relevant engagement and adoption metrics, and continuously analyze performance data to refine goals.
Which metrics do not indicate product quality?
Vanity metrics like total sign-ups, page views, or social media likes do not directly measure product quality. Instead, focus on retention rate, feature engagement, and user satisfaction scores to assess true product value.
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