2023 Guide To SaaS Product Metrics For Product Growth Managers
Looking for product metrics that can offer you better product growth insights?
Look no further.
SaaS product metrics are like a compass for product growth managers, which can guide them where to steer the product. But picking the right metrics is no easy task.
So how do you know you’re tracking the right product metrics for your SaaS product?
In this article, we’ll cover:
- Key reasons to track product metrics.
- Different types of product metrics and why you should track them.
- Tracking product metrics using different frameworks.
Let’s get right into it!
- Product metrics are quantifiable data points that allow businesses to assess the success of their product.
- Product metrics allow Product Managers to make informed decisions about the product strategy and get valuable insights into what’s working and what’s not.
- Product management metrics are of two types: User-oriented (following the user journey stages) and Business-oriented (financial)
- Track product metrics using the Pirate metrics framework, The HEART framework, or The North Star Framework
- Pirate metrics or AARRR metrics is a framework for grouping and tracking metrics across different stages of the user journey. acquisition, activation, adoption, retention, revenue (expansion), and referral.
- The HEART framework also focuses on how users engage with the product and how happy they are.
- HEART stands for Happiness, Engagement, Adoption, Retention, and Task Success.
- The North Star Metric (NSM) is a single measurable indicator of a product’s long-term growth, while a Counter Metric ensures you don’t harm other aspects of your business while focusing on the NSM.
- Your NSM needs to point to crucial aspects of your business, such as average revenue growth, profit, and customer realization of value.
- Userpilot allows you to track engagement metrics without coding and is the perfect tool to measure and increase feature usage without using separate tools.
What are product metrics?
Product metrics are measurable data points that allow a business to assess the success of a product.
Product metrics like conversion rate, retention rate, and more are tracked and analyzed to generate insights that can fuel the growth of a business.
You can track specific metrics across different stages of the user lifecycle to understand how users interact with the product. Revenue metrics, on the other hand, can help you track the health of the SaaS product.
Why do product metrics matter?
Product managers use product metrics to make informed decisions about the product strategy.
Along with other key performance indicators (KPIs), It helps them understand how users interact with the product, essentially putting them in the users’ shoes.
Product metrics also offer valuable insights into what’s bringing value and what’s adding friction. This is an essential aspect of measuring these metrics, as you can then replicate what’s working and eliminate any friction – creating a better user experience overall.
Prioritization is a key skill of a product manager.
A PM needs to be able to prioritize features based on the product roadmap’s strategic goals and initiatives. Product metrics help PMs make better decisions in this regard.
What are the metrics used in SaaS product management?
You’ll find many product management metrics to track. But they mostly fall into two categories.
First, there are user-oriented metrics that allow you to analyze user behavior and product usage. Then there are revenue-related metrics that tell you the health status of your business.
User-oriented product metrics
User-oriented product metrics tell you how engaged users are with your product. These also help you identify what parts of the product are mostly used and needed.
Here are a few of the key user-oriented product metrics:
- Activation metrics: Measuring the user’s first value moment.
- Feature adoption metrics: Measuring the frequency and cadence of key actions.
- Product active usage metrics: Monitoring daily, weekly, monthly, or even annually active users and how they engage with your product
- Retention: Tracking the users coming back.
- Customer satisfaction metrics: Measuring loyalty, satisfaction, and user experience.
Business-oriented product metrics
Business-oriented product metrics help you measure the health of a SaaS business, along with its profitability.
You don’t want to invest more in getting customers than you make from them.
Business-oriented product metrics help you ensure you’re making smart decisions that ensure the long-term profitability of your business.
Besides, they also help you know where to focus your attention.
For example, suppose you want to reduce churn. You analyze the metrics to find that you’re losing too much money due to lost customers. In that case, you can focus on generating more from existing customers to tackle this issue.
Here are some of the key business-oriented product metrics:
Track product metrics using the Pirate Metrics Framework
Pirate metrics or AARRR metrics is a framework for grouping and tracking metrics across different stages of the user journey.
For SaaS businesses, the AARRR stages are acquisition, activation, adoption, retention, revenue (expansion), and referral.
Here’s what each of them means:
- A – Acquisition: Users start a trial period.
- A – Activation: Users realize the value (AHA moment) and experience it.
- A – Adoption: Repeated usage of key features in your product occurs.
- R – Retention: Repeated payments after the first subscription payment occurs.
- R – Revenue (Expansion): Users spend more money on your product (upgrading and adding add-ons).
- R – Referral: Users become advocates for your product.
Here are some of the metrics that are important for each stage of the pirate metrics.
Acquisition stage product metrics
When users decide to sign up for a free trial or a product demo, that moment is known as the acquisition stage and the most important metric you should be tracking is the visitor to trial signup rate.
The visitor-to-trial signup rate measures what portion of your website visitors are signing up for your free trial.
How it’s calculated:
Visitor-to-trial signup rate: (number of signups/number of visitors on the signup page) x 100
Activation stage product metrics
Activation is an important milestone in the SaaS user journey as it represents the point the user gets to experience value in your product through engaging with your product’s key features.
But measuring activation metrics isn’t as simple as it sounds.
SaaS products can be quite different, which means that the actions and experiences are also varied.
You can calculate the activation rate by dividing the number of users activated by the total number of new users who signed up in a given period and dividing it by 100.
Adoption stage product metrics
The product adoption stage starts when users are past the activation point and start discovering and engaging with secondary product features that are meant to provide additional value.
A product manager usually looks at two types of adoption – product and feature adoption.
Product adoption looks at the overall adoption, such as how users are interacting with your product. On the other hand, feature adoption helps you understand which part of your product users are engaging with.
Justin Butlion, the founder of ProjectBI, developed a four-step framework to illustrate the feature adoption funnel. In other words, it takes a look at how users adopt a feature.
These are metrics you can track for key features of your product and identify friction points. You can use feedback surveys, gather insights into what an average customer likes and dislikes, and then act on improving the product.
You need to measure the adoption rate at each stage of the feature adoption funnel.
We’ve already covered what adoption of a feature means. But as a product manager, you should also track repeated usage of important features over time.
This will help you make better strategies to increase user engagement.
Feature usage rate can be calculated by dividing the number of feature MAUs by the number of user logins in a given period and multiplying it by 100.
If you want to both measure and increase feature usage without using two tools, one for product analytics and one for in-app engagement, use a tool like Userpilot to track feature engagement without coding.
You can simply tag any feature using your product’s UI and track feature engagement without setting custom events.
Retention stage product metrics
Retention occurs when customers make repeated purchases of a product subscription. Customer retention metrics indicate how many users you can retain in a given period.
User retention rate is a straightforward retention metric that measures the percentage of paying users you are retaining at the end of a specific period (usually a month).
You can calculate the user retention rate of a specific period by dividing the number of paying customers at the end of the period by the total number of paying users at the beginning of that period and then multiplying it by 100.
Revenue stage product metrics
In the revenue stage, you should focus on generating more expansion revenue.
Expansion MRR rate
Expansion monthly recurring revenue (MRR) includes the revenue generated from upgrades and add-ons in a particular month. The expansion MRR rate is a metric that indicates the growth rate of expansion MRR of a company.
You can calculate the expansion MRR rate by first finding out the change in expansion MRR during the month and dividing it by the expansion MRR at the beginning of the month, and then multiplying it by 100.
Net promoter score (NPS)
Net Promoter Score, or simply NPS, measures customer satisfaction by using a survey that asks your customers how likely they are to recommend your product to others. Respondents answer on a scale from 0 to 10, with 0 being “Not Likely” and 10 being “Extremely Likely”.
You can divide the respondents of your NPS surveys into three categories based on their scores: Promoters (score of 9 or 10), Passives (score of 7 or 8), and Detractors (score of 6 or below).
Then calculate your Net Promoter Score by subtracting the percentage of Detractors from the percentage of Promoters.
Net Promoter Score (NPS) = %Promoters – %Detractors
Measuring NPS is important for product managers because it allows them to focus on the insights that can be collected using a qualitative follow-up question.
Such a follow-up question can help uncover product friction or missing features, as well as what your customers value in your product. Insights from the NPS survey can help you prioritize the product roadmap and improve your product overall.
With a tool like Userpilot, you collect both qualitative and quantitative NPS feedback.
Track product metrics using the HEART framework
Similar to the Pirate Metrics framework, the HEART framework also focuses on how users engage with the product and how happy they are.
HEART stands for Happiness, Engagement, Adoption, Retention, and Task Success.
Here are the metrics to track for each element of the HEART framework:
- H – Happiness: NPS, Customer Satisfaction Score (CSAT), Customer Effort Score (CES).
- E – Engagement: Feature Usage, Product Stickiness, Customer engagement score
- A – Adoption: Product Adoption Rate, Feature Adoption Rate.
- R – Retention: Retention rate, Churn rate.
- T – Task Success: Reaching Activation point or other relevant milestones in the User Journey.
Track product metrics using the North Star Metric Framework
The North Star Metric (NSM) is a single measurable indicator of a product’s long-term growth.
Your NSM needs to point to crucial aspects of your business, such as average revenue growth, profit, and customer realization of value.
Using the North Star Metric framework, you can help your company get a singular focus, prioritize customer experience, better define your product roadmap, and improve transparency and accountability.
You can have one long-term company-wide guiding metric and multiple OMTMs (One metric that matters) for each team.
You need to choose OMTMs based on how best each team can contribute towards the North Star Metric at a particular time.
A North Star metric needs to check the following boxes:
But having an NSM isn’t enough. You need a counter metric too.
A Counter Metric ensures you don’t harm another aspect of your business when you’re fixated on optimizing your north star metric. Most of the time, it can offer context to any assumptions you measure. This gives you a valuable birds-eye view of your data.
Here are a few examples of counter metrics used with north star metrics:
- NSM: Trial signup conversion rate, Counter metric: Paid subscription conversion rate.
- NSM: Monthly Active Users (MAU), Counter metric: Product feature usage.
- NSM: Development Velocity, Counter metric: Development Velocity.
If you can pick the right product metrics to track for your SaaS product, you can make the right decisions to improve customer experience and drive growth.
You can assess how users behave within your product with user-oriented metrics that are focused on Activation, Feature adoption, Product active usage, Retention, and Customer satisfaction.
If you want to take a look at the bigger picture, you have business-oriented metrics like Customer Acquisition Cost (CAC), Customer Lifetime Value (CAC), Net Revenue Churn, and Expansion MRR.
Want to start measuring the key metrics for SaaS products? Get a Userpilot Demo and see how you can get actionable growth insights for your product.