Winning with Product Metrics
Metrics matter. Would any self-respecting product team disagree?
Maybe you’ve installed tracking in your product. The data is there, but what does it mean? It’s like staring at the Matrix. You’re drowning in data, but starving for insight.
Then you hear Melissa Perri talk about doubling acquisition with a meal kit delivery service. After digging into the data, they found that people were dropping off when they entered their address. Turned out that 33% couldn’t find the food menu. Melissa’s team addressed this issue, improved the accessibility of the menu, and saw a significant increase in conversion rates.
You listen to Melissa and can’t help but feel a pang of envy. They dug into their data, found an insight, made a change, and saw results. That’s what you want. But how do you get there? How do you figure out what to track? How do you pick and implement a tool to track it? And then how do you build this discipline into product management so data saves you time by focusing on the things that will really move the needle?
This article is your guide to answering those questions. We’ll dive into the world of product metrics, explore examples of product quality metrics, discuss how to measure product value, and differentiate between product metrics and growth metrics. We’ll also provide a list of tools you can use to track these metrics.
What Are Product Metrics?
Product metrics are quantifiable measures used to track and assess the status of a product. They provide insights into various aspects of the product, such as its usage, performance, and overall success. These metrics play a crucial role in product management as they help teams understand how their product is performing and where improvements can be made.
It’s important to use both quantitative and qualitative metrics. Quantitative metrics are numerical data that can be measured and analyzed. They provide hard facts about your product, like the number of active users or the conversion rate. Qualitative metrics, on the other hand, are more subjective and provide insights into user satisfaction, preferences, and behaviors. They can be gathered through methods like user interviews, surveys, and usability tests.
Marty Cagan emphasizes the importance of focusing on outcome-based metrics. These are metrics that directly relate to the strategic goals of your product. Instead of focusing on output (like the number of features shipped), outcome-based metrics focus on the impact of that output (like the increase in user engagement due to the new features). This shift in focus ensures that you’re not just building things, but building things that make a difference.
Product Metrics vs Growth Metrics
Recognizing the difference between product metrics and growth metrics helps you focus your efforts, make better decisions, and ultimately build a better product.
Product metrics are about understanding your product’s performance and how users are interacting with it. They help you answer questions like, “Are users finding value in our product?” or “Where can we improve the user experience?”
On the other hand, growth metrics are about understanding your business’s expansion and how you’re acquiring new users. They help you answer questions like, “How is our user base growing?” or “How effective are our user acquisition strategies?”
Dave McClure’s “AARRR” framework, also known as the “Pirate Metrics”, provides a blend of both product and growth metrics. The AARRR stands for Acquisition, Activation, Retention, Referral, and Revenue.
- Acquisition: This is about bringing new users to your product. It’s a growth metric that focuses on the channels through which you acquire new users.
- Activation: This is a product metric that focuses on the user’s first experience with your product. It’s about making sure the user finds value in your product from the get-go.
- Retention: This is another product metric that focuses on keeping users engaged with your product over time. It’s about creating a product that users come back to again and again.
- Referral: This is a growth metric that focuses on how users are promoting your product to others. It’s about turning your users into advocates for your product.
- Revenue: This is the ultimate growth metric. It’s about turning all the user engagement and growth into monetary value for your business.
How these metrics work together is crucial for any product team.
Examples of Product Metrics
Using the AARRR framework, let’s explore some examples of both product and growth metrics that you can track:
Cost Per Acquisition (CPA): This is the cost to acquire a new customer. It’s calculated by dividing the total cost of your acquisition efforts by the number of new customers acquired in a given period.
Traffic Source: This metric tells you where your users are coming from. It can help you understand which channels are most effective at driving users to your product.
User Onboarding Completion Rate: This is the percentage of users who complete your onboarding process. It can help you understand how well users are able to start using your product.
First Session Length: This is the duration of a user’s first session with your product. It can give you an idea of how engaging your product is right off the bat.
Daily Active Users (DAU) / Monthly Active Users (MAU): These metrics tell you how many users are actively using your product on a daily or monthly basis. They can help you understand how sticky your product is.
Churn Rate: This is the percentage of users who stop using your product over a given period. It can help you understand how well you’re retaining users.
Net Promoter Score (NPS): This is a measure of how likely your users are to recommend your product to others. It can give you an idea of how many of your users are potential advocates for your product.
Referral Rate: This is the percentage of users who came to your product through a referral. It can help you understand the effectiveness of your referral program.
Average Revenue Per User (ARPU): This is the average revenue generated per user. It can help you understand how much value each user brings to your business.
Lifetime Value (LTV): This is the total revenue a user is expected to generate over the duration of their relationship with your product. It can help you understand the long-term value of your users.
These are just a few examples of the metrics you can track. Remember, the key is to choose metrics that align with your product goals and provide meaningful insights into your product’s performance and growth.
Metrics to Measure Product Value
Measuring the value of your product can be complex, but certain metrics can provide a clearer picture of how your product is delivering value to users. Here are a few key metrics:
- User Retention: This metric measures the number of users who continue to use your product over a certain period. High user retention indicates that your product is delivering consistent value to its users.
- Conversion Rate: This is the percentage of users who complete a desired action, such as making a purchase or signing up for a trial. A high conversion rate can indicate that users find value in your product and are willing to take the next step.
- Customer Satisfaction (Net Promoter Score, NPS): NPS measures how likely your users are to recommend your product to others. A high NPS score suggests that users find significant value in your product.
Brian Balfour, founder of Reforge and former VP of Growth at HubSpot, emphasizes the importance of retention as a key metric for measuring product value. According to Balfour, retention is the core of product value and the key to sustainable growth. If users continue to use your product over time, it’s a strong indication that they’re deriving value from it.
Tools for Product Metrics
To effectively track and analyze product metrics, you’ll need the right tools. Here are some that you might find useful, categorized into quantitative and qualitative tools:
- **Google Analytics:** A comprehensive tool that allows you to track a wide range of metrics, including user acquisition, behavior, and conversions.
- **Mixpanel:** This tool focuses on user behavior analytics, providing insights into user journeys and retention.
- **Amplitude:** Similar to Mixpanel, Amplitude provides detailed insights into user behavior, with features for tracking retention and conducting cohort analysis.
- **Heap:** Heap automatically captures all user interactions in your web or mobile app, allowing you to analyze user behavior without needing to define events upfront.
- **Pendo:** Pendo combines powerful product usage analytics with user guidance, communication, feedback, and planning tools to help you improve your product experience.
- **Qualaroo:** This tool allows you to gather qualitative data through targeted surveys, helping you understand why users behave the way they do.
- **Open Text Fields:** These can be used in user surveys or feedback forms to gather qualitative data, allowing users to express their thoughts and feelings in their own words.
- **Intercom:** Intercom is a messaging platform that allows you to communicate directly with your users, making it a great tool for gathering qualitative data.
- **UserTesting:** This platform allows you to get video, audio, and written feedback from users as they use your product, providing rich qualitative insights.
- **Hotjar:** Hotjar combines quantitative and qualitative tools, offering heatmaps, session recordings, and user surveys to help you understand user behavior and feedback.
Remember, choosing the right tool depends on your specific needs and the metrics you want to track. Often, a combination of several tools is needed to get a complete picture of your product’s performance.
The Power of Product Metrics
In the world of product management, metrics are more than just numbers. They’re the compass that guides your decisions, the mirror that reflects your product’s performance, and the yardstick that measures your growth.
Dave McClure’s “AARRR” framework reminds us that a blend of product and growth metrics – Acquisition, Activation, Retention, Referral, and Revenue – can provide a comprehensive view of our product’s journey. It’s about understanding not just how many users are coming to your product, but how they’re interacting with it, how often they’re coming back, and how they’re driving growth.
Marty Cagan’s emphasis on outcome-based metrics underscores the importance of focusing on the impact of your product. It’s not just about what features you’re building, but how these features are influencing user behavior and driving business outcomes.
And Brian Balfour’s focus on retention as a key metric for product value serves as a powerful reminder that sustainable growth comes from consistently delivering value to users. It’s about creating a product that users don’t just try out, but come back to again and again.
We hope you use metrics to guide your decisions, understand your product’s performance, and measure your growth. But most importantly, use them to deliver a product that consistently provides value to your users. Because at the end of the day, that’s what truly matters.