Best Product Success Metrics to Track in 2023
Is it possible to measure success? Every company wants to achieve it, but how do you know where your business is heading at a given point in time: to prosperity or collapse? Product management metrics become genuine life savers. Let’s explore what indicators are a must to track to create win-win business strategies and accomplish success.
According to Startup Genome, 90% of newbie companies die. They use trendy labels and make loud statements, but it doesn’t help them meet their revenue goals. Enthusiastic and out-of-the-blue decisions and alterations in business strategies can lead to frustrating results. Instead of innovative, they should have been data-driven. Product success metrics is a source of ultimate information for product managers to build a win-win strategy and take action when required. Sometimes, they can indicate that the project's success is doomed, and the best way is to kill it, avoiding more financial losses. Let's dive into the world of figures and see how to measure product success.
Successful Product Defined
The concept of a successful product sounds somewhat subjective. People tend to measure it on a guesswork basis. The owner of an app can consider their product a success if they win awards or raise another round of investment. The product managers of the same app may disagree, arguing with figures and analytical data. If we take subjectivism out of this notion, a successful product is a solution that satisfies the target audience to the greatest extent possible and justifies the creator's expectations. If we translate this into theses indicators, we get the following:
- The product responds to market demand and occupies a niche;
- The product solves a real problem;
- The solution to the problem is relevant to as many people as possible, and they use the product regularly. There should be enough of them to meet the product's ambition;
- The product gets organic traffic;
- The product team working on the project understands the problems that might arise and is ready to solve them;
- The team knows the distribution channels and uses them effectively to engage and attract new customers;
- The product has a low churn rate;
- The company is growing and generating revenue.
Product success metrics is the go-to tool for product managers. They determine how to measure success and unveil if a team is on the right track.
How Do Success Metrics Depend on the Product Type?
Different products have different measures of success. An online store has one formula, while a weather app has another. Accordingly, you have to choose metrics based on the project type and generally accepted success measures.
App developers can estimate how many users installed the program and how many of those who installed it switched to paid services.
Stores can consider the number of buyers, the average buyer's receipt, time spent purchasing, additional services used, or how AR can enhance customer engagement. You can come up with a lot of variations of key metrics.
It is impossible to choose a universal set of metrics that works for any business. You must adapt and create something unique 100% of the time.
Why Do Product Success Metrics Matter?
Previously, we have already explained the importance of using metrics for company growth. Analyzing key metrics helps you understand what actions to take to get the desired result. By tracking the dynamics of these metrics over time, the business concludes the product success: its popularity, usage frequency, duration, level of user satisfaction, etc.
Key Product Success Metrics to Measure
We have divided all metrics into three large groups for convenience and logical correlation.
Product Metrics to Estimate Future Revenue
This category represents financial metrics. Their analysis can help a product manager to build a business strategy considering the estimated budget and forecast how much revenue a project is expected to generate.
Customer Lifetime Value (CLTV)
Customer lifetime value depicts the company's profit over the entire time it worked with one customer: from the first purchase (or website signup) to the last key action taken.
Studying LTV is necessary to segment the audience according to their value and to break down the communication strategy with each segment. For example, the most valuable customers who bring in the maximum profit can receive more bonuses like discounts, coupons, and promo codes or participate in limited sales.
Calculation methods may vary depending on the business model.
For example, for an online store:
LTV = Average Order Value x Frequency of Repeat Purchases x Customer Lifetime.
For a subscription-based business, a simple formula can be used:
LTV = Average Revenue per Customer per Month / Churn Rate.
Monthly Recurring Revenue (MRR)
It is one of the main product success metrics for SaaS businesses.
Since clients repeat payments every month, monthly recurring revenue is relatively stable. This allows for plans and development strategies. Business owners should ideally aim to increase MRR consistently. If it is declining or standing still, something needs to change.
A monthly MRR calculation indicates the rate at which a business is growing. When a product is in steady demand, the rate increases steadily.
Conversely, a decrease or a lack of change requires new research of your target audience and getting feedback based on the data obtained to make the product better and more attractive.
There are different approaches to calculating monthly recurring revenue (MRR). You can add up the income from subscribers. If one client pays $10 and another pays $15, the MRR will be $25. This is convenient when there are few subscribers, but this calculation format will take forever if there are several thousand of them.
For the other method, first, find out the average income from the client, and the formula will look as follows:
MRR = Average Revenue Per User (ARPU) x Total Number of Customers (during the exact period)
Customer Acquisition Cost (CAC)
It indicates the amount a business pays to attract a single consumer who will use the product.
Beginner entrepreneurs sometimes think it is enough to “build it and they will come”. In fact, users need to be acquired; that is, you need to advertise your product to them. This is where CAC comes in when you need to maximize the number of consumers you attract within your budget.
You can calculate it using this recipe:
CAC = the amount of advertising budget spent on attracting new customers / the number of attracted customers
Average Revenue Per User (ARPU)
This is the revenue per one active user. It is used to evaluate project changes and compare products with each other. An investor is more likely to choose the one with a higher ARPU.
ARPU = Revenue / Number of Active Users
Product Success Metrics to Track User Behavior and Interaction
This category helps a product manager get to know an average customer better. These metrics reflect actual user behavior and how they interact with your solution.
Active Users (DAU, MAU)
It is the number of unique users who use the product during a specific time period without considering repeat sessions. The choice of the interval depends on the specific application. Daily active users will perfectly fit TikTok, Twitter, Instagram, and other social media platforms. Let's be honest — we all engage with these apps on a regular daily basis. E-commerce leveraging the Guided Virtual Try On feature can track both weekly or monthly active users.
You should consider these metrics only in a general context. For example, for a subscription-based business, it is important that users pay for a subscription rather than log into the product. However, if your product manager tracks the daily active users and realizes that the figure is dropping while the payments continue, it is a red flag that the users simply forgot to unsubscribe and stopped using the solution as it brings no value. Sooner or later, you will face a high customer churn rate.
Use your product analysis tool to track this metric, specifying the desired interval.
Traffic can cause real wars because website attendance should be at a high level. This is the main metric of promotion efficiency for all types of projects. Without good indicators, achieving the desired level of conversions, leads, and, of course, sales is impossible.
Traffic can be divided into organic and paid. Organic traffic is the number of visitors who visit the website through regular search results, not ads.
Logically, you get paid traffic through affiliate programs (with bloggers, for example), any online advertising, guest posts, and other paid methods of attracting your audience.
Analyzing the behavior of users who come through paid ads will allow you to determine the relevance of distribution channels. Rejection of low-impact ad campaigns and promotion channels will allow you to cut costs and focus on those paid traffic channels that increase conversion rates, for example.
Analyzing organic traffic helps companies build strong marketing strategies. For example, you can focus on developing this direction if you see that most quality traffic comes from social media.
The dream of every product manager is to have all the traffic on their website perform a targeted action. Unfortunately, it remains a fantasy. However, analyzing your website visitors and user behavior will help you evaluate the quality of the traffic you receive and, consequently, change your strategy if you are unsatisfied with it. To do this, we recommend tracking the following metrics:
This is the percentage of people leaving the website immediately after loading or only reviewing one page. Google Analytics considers any session when a user looks at only one page as a bounce, and the time does not matter.
It indicates if a person went deep into exploring the website by clicking on internal links, viewing other pages, etc.
Target Actions Taken
Each business has different objectives for its audience. It often includes placing an order, requesting a callback, subscribing to an email newsletter, or visiting certain pages. Google offers reports in this area.
This indicator shows the amount of time the user stays on the website. If visitors stick with you for a long time, it means they are interested in your solution.
It only makes sense in the context of a particular business. For example, for Netflix or Bookmate, session duration is important: the higher the user engagement with the content, the higher the subscription value. Uber's task, on the contrary, is to reduce session time. For example, using the Face AR SDK technology and offering various filters can increase users' time and engagement.
Traffic from Computers and Mobile devices
Thanks to web analytics, we can monitor the number of people who come to the site via desktop and the number of those who view you via mobile browsers.
Websites not adapted for mobile versions are rare these days. But sometimes, users abruptly stop visiting the site from their smartphones. In this case, it's worth checking whether the mobile version works. After all, the loss of such visitors will not have the best effect on your business.
Product Success Metrics to Track Client Retention and Happiness
Customer success equals product success. These metrics evaluate overall clients' satisfaction and find weak points to fix in your solution.
Customer Retention Rate (CRR)
The metric shows how many users continue to use the product after a certain period of time and directly affects the client lifetime value (LTV).
Retention rate = number of active users at the end of the period / number of active users at the beginning of the period x 100%
Net Promoter Score (NPS)
Net Promoter Score is a loyalty metric that shows how users are willing to recommend a product to their environment. The data is sourced from user surveys.
A user with average expectations, having received a good impression, will definitely share his opinion on social networks or in personal communication with friends and, as a result, will bring new buyers. If, for example, each paid user brings another free user, CAC is reduced by half.
You need a survey to collect user feedback. Ask them how much they would recommend your product on a scale from 0 to 10, where 0 means they would never recommend it, and 10 means they would definitely recommend it. The answers will reveal three groups of customers - critics (0 to 6), neutrals (7-8), and promoters (9-10).
NPS = total number of promoters (%) - total number of critics (%)
A net promoter score (NPS) of more than 50% is considered good.
This metric is the opposite of the client retention rate and shows the churn rate.
Usually, the churn rate curve is sharp in the first month and levels off by the sixth month. This point is called retention rate plateauing. In the first months, users who don't see the value in the product or sign up by mistake are the most likely to unsubscribe. After that, the business continues to work with those customers it could retain. The company's goal is to earn enough from them to pay off the CAC of 100% of their existing customers.
In order to reduce the client churn rate, businesses need to provide customers with the best possible user experience.
Churn rate = (number of users at the end of the period / number of users at the beginning of the period) x 100%
But before calculating the figure, it is necessary to determine which customers are regarded as lost. These can be those who haven't bought for a long time or those who have completely abandoned the company's services. It depends on the business. For example, e-commerce stores selling kitchen appliances can't expect the same customer to return monthly. Even if they haven't bought anything for six months or a year, they may not need the product right now, but they will return for it later. However, if you sell necessities or offer services of habit tracking, for example, the shortage of usage can be a red flag.
Unlike CAC, this product success metric specifies the number of leads you turn into active consumers. The acquisition rate depends on your marketing efforts.
AR = Number of New Users / Defined Time Period
Customer Satisfaction Score (CSAT)
It's a way to measure customer satisfaction with a company as a whole or a specific segment or experience, such as pricing, service, customer service, and more.
Customer satisfaction is linked to a company's success. Happy consumers are more likely to become loyal customers. They help build a strong brand reputation and keep CAC low.
It is cheaper to retain customers than to acquire new ones because existing customers already trust the company. New or potential clients, however, require a company to invest in getting them through the early and costly stages of the buyer lifecycle.
The most common way to assess customer happiness is to conduct surveys.
CSAT = Number of positive answers / total number of answers x 100%
What is a good CSAT score? In general, it should be over 75%. But it depends on the industry and the company's goals.
How to Select Success Metrics for a Product?
Focus on the Project's Development Stage
The stage of your product development influences the choice of the right metrics. For example, the product may have just been released on the market and be looking for its first customers. Or it may be at the stage of market saturation when consumers have too many offers from different market players.
Analyze the Product Peculiarities
It is also worth paying attention to the product itself. It can be crucial for one company to measure how many key actions the user has taken on the website. And for another, the only thing that matters is whether or not the main target action was achieved.
A product manager should choose metrics based on the project development goals. Let's say two companies are working on identical products — a SaaS solution for psychological help. One of them is to attract as many new users as possible, regardless of the customer lifecycle. The other wants to lower the churn rate and increase loyalty. The metrics to measure their success will be different, exactly like the concept of success.
Thus, you should form them on the goals, not the other way around.
Product success pairs with in-depth analysis, constant evolution, and adaptation to market needs. Be flexible, apply proper metrics, and find new ways to enhance your customers’ experience. Banuba AR and AI-based off-the-shelf solutions are ready to make your business successful.