Product Managers’ Guide for Selecting the Right Product Metrics Framework
What’s a product metrics framework? What are its best-known examples? And how to choose one?
If you’re after answers to these questions, you’re in the right place because that’s exactly what we discuss in the article! We also look at how product managers can use Userpilot to implement product metrics frameworks.
Let’s get right to it!
- A product metrics framework is a set of metrics used to measure the performance and success of a product so that you can improve it.
- The HEART Framework was invented by Google and groups metrics along five dimensions: Happiness, Engagement, Adoption, Retention, and Task Success. For each of them, you choose Goals, Actions, and Metrics.
- The Pirate/AARRR framework focuses on metrics at different stages of the customer journey: Acquisition, Activation, Retention, Referral, and Revenue.
- The North Star Metric is the single most important metric that guides the efforts of an organization.
- Defining and tracking counter metrics ensures you don’t neglect other aspects of product performance when focusing on your NSM.
- One Metric That Matters (OMTM) framework also encourages focusing on one metric, but these vary from team to team and employee to employee.
- The GAME framework helps you choose the right Metrics by aligning them with Goals and user Actions, and by providing ways to Evaluate their effectiveness.
- Impact Mapping is a visual way of presenting the connections between product goals, user persona, and different solutions.
- In the OKR framework, you break your overarching Objectives into smaller Key results and then pair them up with Initiatives that allow you to achieve them.
- Want to see how Userpilot can help you implement a product metrics framework? Book the demo!
What is a product metrics framework?
By regularly tracking and analyzing such metrics, product teams can make data-driven decisions and continuously improve their product.
Key product metric frameworks product managers can choose from
There are a few well-known product metrics frameworks used by product teams to structure their data tracking. Let’s look into each of them in detail.
The HEART framework was developed by Google to measure and improve the user experience of their products.
HEART is an acronym for the five dimensions along which teams work:
- Happiness: how satisfied users are with the product.
- Engagement: how often and how much users interact with the product.
- Adoption: how many customers use the product regularly to solve their problems.
- Retention: how many users return to use or buy the product again over time.
- Task success: how well can users complete their objectives using the product.
So, if your Happiness goal is to make the product helpful, fun, and easy to use, the Signals could be good customer feedback, perceived ease of use, and recommendations. To measure them, you could choose metrics such as NPS or CES and look at reviews.
Pirate metrics framework
The Pirate metrics framework, also known as the AARRR metric, is a model for measuring and optimizing the performance of a digital product.
It was invented by Dave McClure, a Silicon Valley investor, and entrepreneur. This framework groups the key metrics to track based on the stages of the user journey:
- Acquisition: when the users find and start using the product.
- Activation: when the users experience the value of specific features that are relevant to their use cases.
- Retention: when the users keep using the product regularly.
- Referral: when the users recommend the product to others.
- Revenue: how much money users spend on your product.
North Star metric framework
This is the primary metric a product manager tracks to measure product success and guide decision-making.
The metric you choose as your North Star needs to be aligned with your organizational and product goals. For example, for a social media platform, the North Star Metric might be Daily Active Users, while for an e-commerce site, it could be revenue per user.
Counter metrics framework
Ever heard of the Hawthorne Effect?
Basically, when you measure a behavior or process, it changes. So if you choose free trial signups as your North Star Metric, there’s a big chance that your team will improve it because that’s where their focus is.
However, it could be at the expense of other aspects of the product’s performance.
That’s why every NSM needs a solid counter-metric that will keep it in check. So if you’re concentrating on improving trial signups, make sure to track also other key performance indicators like free-to-paid conversion rate and retention.
One Metric That Matters (OMTM) framework
One Metric That Matters (OMTM) is very similar to the North Star metric in that it’s the primary focal metric that guides the daily work of the team.
The difference is that while the North Star metric is normally chosen at the product or company level, each team or even individual could have their own OMTM. All these metrics are relevant to their individual roles but also aligned with the NSM.
This is a simple model for defining product metrics. GAME is an acronym for:
- Goals: both the user goals and company goals.
- Actions: the things that you want your users to complete at different stages of the user journey to bring them closer to achieving their goals, like using a specific feature.
- Metrics: quantitative measures that enable you to track user actions and overall product performance in the context of the goals.
- Evaluations: how you will decide if the metrics really measure what is happening inside the product.
So if Userpilot’s goal were to boost customer satisfaction by 20%, we would look at what we can do for each of our main user personas to achieve this.
Some teams also include user stories as well as customer benefits in their extended impact maps.
OKR stands for Objectives and Key Results and is a popular framework for setting goals and tracking progress toward them. It can be used to set company-level as well as individual employee goals.
What are OKRs?
- Objectives: high-level goals aligned with the overall product vision.
- Key results: the steps that measure progress towards an objective. For each of them, you need KPIs that help you determine whether you’ve achieved the key result or not.
- Initiatives: specific actions that help you achieve the key results.
So if your Objective is to grow the user base, the key results would be growing the customer base by 5%, while a referral scheme could be an initiative that will help you achieve this.
Example of a SaaS business adopting a product metrics framework
Now that we’ve discussed various product metrics frameworks, let’s see how we can use one of them to track product performance.
We’ll be looking at a SaaS email automation tool as an example and will be using the AARRR framework to map out which product metrics matter at different stages of the customer journey.
The North Star metric
Before we dive into the various Pirate metrics, let’s pick our North Star metric to give the rest of the exercise the necessary focus.
So, in our case, the goal is to boost the number of Monthly Active Users (MAUs).
This metric is relevant for a SaaS automation tool because it provides insights into the engagement and adoption of the product. A high number of MAUs is an indication that customers find the product valuable.
The MAU count will also matter if you’re trying to secure a new round of funding or the buy-in of internal stakeholders. That’s because it’s a leading indicator of future revenue and customer retention.
At the acquisition stage, we’ll be looking at 3 metrics:
- Number of signups or demos booked
- Visitors to sign up rate
- Customer Acquisition Cost (CAC)
The number of signups/demos booked is an indicator of how effective your marketing strategy is. You can use it to identify the most effective marketing and acquisition channels. When combined with conversion rates, you can use it to work out the ROI and forecast revenue.
The visitor-to-sign-up rate is the percentage of total visitors who sign up for your product. It’s relevant because it helps you optimize your landing page and sign-up flow to boost new customer acquisition. It’s also an indication of the perceived value of the product at this stage.
Customer Acquisition Cost (CAC) is the average cost of acquiring one customer. It matters for product-led companies because it tells how well the product is at driving organic growth. Also, the lower the cost, the higher the profit margins.
The key metric at this stage is the activation rate.
To be able to calculate it, you first need to define the key activation milestones in the customer journey. For email automation software, the milestones could be:
- Creating an account
- Importing and segmenting contacts
- Designing and launching the first campaign
- Integration with a CRM
Once users activate and adopt the product, your focus should shift on tracking:
- User retention rate
- Customer churn rate
The user retention rate is the percentage of users retained over a period of time. It’s normally calculated on a monthly basis and it’s an indication of the product value and the effectiveness of your user onboarding. As it’s cheaper to retain customers than acquire them, it also has an impact on profitability.
The churn rate is the percentage of customers who have abandoned your company or product. Naturally, this will have a negative impact on the MAU count and could be an indication of issues such as technical problems or perceived lack of value, which you must address.
At the referral stage, we will track just one metric – the Net Promoter Score (NPS).
NPS is a recognized metric that tracks user sentiment and loyalty toward the product. The higher the score, the more likely your users are to promote your product to their social and professional circles.
To arrive at the figure, you launch a survey with ‘How likely are you to recommend the product to your friends/colleagues?’ on a 1-10 Likert scale. You can use a calculator or a let your analytics tool do the job.
Finally, at the revenue stage, we focus on tracking 2 more metrics:
- Monthly Recurring Revenue (MRR)
- Customer Lifetime Value (CLV or LTV)
Monthly Recurring Revenue (MRR) is a metric used to measure predictable product revenue. Apart from helping you make budgeting and strategic product decisions, it also tells you how effective your acquisition and retention efforts are. That’s because it depends on the MAU count.
Customer Lifetime Value (CLV or LTV) is the total revenue an average customer brings from the moment they subscribe to the moment they churn. It’s normally used along CAC to determine how profitable your product is. A healthy LTV:CAC ratio is 3:1.
How to track product metrics with Userpilot?
Userpilot is a digital product adoption platform.
In addition to the engagement layer and user feedback functionality, it offers a range of analytics features. Without writing a line of code, it allows you to track aspects of user in-app behavior like:
- Daily and Monthly Active Users
- Feature usage (feature tagging and tracking)
- User engagement (with heatmaps)
- Trial to paid conversion and activation rate (with custom event and goal tracking)
- NPS (both quantitative and qualitative data)
A product metrics framework provides a structure that enables you to choose the right metrics to track and improve the performance of your product.
Your chosen framework will depend on your goals, product, and organizational culture. Best in mind they’re not mutually exclusive. In fact, more often than not, using a combination of the frameworks at different levels may be the best approach.
If you want to see how Userpilot can help your team track your success metrics, book the demo!