You can make executive decisions intuitively, but relying on analytical data is more effective in high-risk and information-overload environments. Advanced tools and technologies allow you to collect the most detailed statistics and perform analytics to adapt your product management and increase your business revenue. Let's review the essential product metrics to track for an effective growth strategy and see how AR and AI boost them.
Product Metrics Defined
Product metrics are key performance indicators measuring the success of a company's products. Analysis of product metrics allows companies to monitor and alter their approach to marketing or business development. Proper choice of KPIs and tracking them to take action increases the odds of building and sustaining a successful company.
They relate to the product explicitly but do not affect its performance. Metrics require a project-specific perspective and a close correlation during analysis to bring results. A business that uses product metrics correctly reacts to changes quickly and grows effectively.
Cure for Project and Product Management Pains
Statistics have it that only 10% of startups succeed. One of the main reasons for failure is marketing problems (56%), mainly misinterpreted market demand. Small businesses also fall into this category, with 50% closing in the first five years. Nearly 46% can't evaluate their marketing and growth strategy, staying afloat and gradually drowning.
Product Managers' Nightmares
Product managers are like the nervous system of a business. They work at the intersection of marketing and technology, synchronize the work of all departments, and report to the C-level. Their main task is to create and maintain a profitable product, which will bring customer success and make the management happy. It's not hard to guess that their own nervous systems suffer in return.
They can work for months to improve a product, add a new feature, or change the design to enhance the customer experience, but the business often wants lightning-fast results. That said, the product manager needs to ensure deadlines are met, stay within budget (or better yet, miraculously optimize and reduce it), speed up the development process, and get the entire team working like clockwork.
With only 43% of companies finishing their projects within a budget and 47% tracking their project success, product teams often work blindly. Companies that adhere to value delivery and monitor metrics achieve their goals 21% more often.
How Do Product Metrics Boost Business Success?
Introducing and applying correct product metrics and monitoring them on a dashboard regularly can optimize the product manager's workflow and allow to:
- Track the effectiveness of processes and decisions made and validate new ones;
- Reduce reaction time to market or customer behavior;
- Separate guesses and speculation from facts;
- Convey their thoughts and ideas to the management in an argumentative way;
- Adapt easily to the sector, industry, and segment;
- Implement technology to automate processes;
- Save human resources.
Analytical and critical thinking allows the product manager to interpret the metrics correctly before, during, and after project delivery.
Google Analytics, deep research, and other metrics can help establish a detailed product roadmap and find ways of shortening the delivery. For example, Weat App cut its dev time by 50%, leveraging a ready-to-use Video Editor SDK from Banuba instead of hiring dedicated developers and building a solution from scratch.
Essential and Universal Metrics
Product metrics vary depending on the industry and business type. However, universal key performance indicators fit any project and company. Let's take a closer look at them.
Customer Acquisition Cost (CAC)
Customer acquisition cost indicates the cost of attracting one user. The lower the CAC — the better. Companies can decrease customer acquisition cost by optimizing their sales funnel and developing their marketing.
This product metric reflects how successfully a business retains customers for a certain period: a day, week, month, etc. Customer retention rate affects lifetime customer value (LTV), so you should constantly assess the two in correlation.
It is the opposite of the retention rate and reflects customer churn, not attraction. You can decrease the churn rate through loyalty programs and product quality. Remember that customer loss is a natural part of business, and you can't reduce it to 0%.
Customer Lifetime Value (CLV)
This metric indicates the total profit you get from one user over the entire interaction cycle. It can help estimate how much to invest in retaining your customers. Customer lifetime value figures should always be higher than CAC.
Net Promoter Score (NPS)
NPS depicts the customer loyalty index. The metric displays how customers feel about your company — whether they would recommend it to others and continue using its services or product. Net promoter score should be measured in the long-term run.
Customer Satisfaction Score (CSAT)
Compared to the previous metric, the customer satisfaction score expresses the level of client happiness after each meaningful touchpoint, such as completing a transaction or an important milestone, such as renewing a subscription.
Daily Active Users (DAU)
It indicates the number of unique consumers per day. It's also vital to measure monthly active users (MAU). The higher these product metrics are, the more active the company's audience is.
Product Metrics by Industry
Industry product metrics are tailored to the specifics and scope of your business. You should apply them together with universal KPIs to track your performance better.
The eCommerce market value reached an astonishing $5.55 trillion in 2022, creating a competitive field. The success of running an online store depends largely on how you enhance the customer journey, increase user engagement, and choose and analyze the performance metrics of your business. These quantitative measures help you know the number of orders, the frequency of purchases, or the cost of acquiring a new customer. Analyzing these metrics allows you to adapt your growth strategy, develop new ways to attract new and retain customers, and make your marketplace more user-friendly. Manifest (MNFST) analyzed user behavior and implemented the Face Filters SDK on their app to help users engage with the help of augmented reality. This decision boosted their engagement and led to over 1 million downloads within a short time period.
- Average order value. It reflects the company's profitability and is essential in the long run. For example, if the average check is low, it is more profitable for the company to stimulate its growth rather than acquire new customers.
- Conversion rate. This is the central metric for online sales. The conversion rate displays the number of users who performed a certain target action. In the case of e-commerce, it is the number of users who have placed an order.
- Average customer lifetime. This is the average time period between the first and the last order date of all your customers. Convert the average number of days to years by dividing the resulting number by 365. This metric affects CLV and helps determine how much revenue you can expect from buyers.
- Customers repeat rate. It reflects the number of visitors who repeatedly performed the target action — a purchase. The metric indicates how many customers the business retains. The higher the CRR, the more effective and stable the online sales are.
- Shopping cart abandonment rate. It reflects the number of visitors who have added products to the cart but haven't placed an order. Use push notifications or e-mails to remind users about forgotten items to lower CARs.
Applications need advanced and more accurate metrics to track their effectiveness. Total revenue or the number of downloads alone won't help you track user churn or a revenue decline. The product metrics we'll describe below, combined with universal ones, can help you quickly detect a decline in user activity and take action. Reading user feedback and studying the trends, product managers can come up with features to win a new customer segment and decrease the churn rate. Thus, the South Korean company Bermuda reached astonishing results by adding a Face AR SDK to their app — users interact with AR features over 15 million times per month, and the downloads reached 20 million.
- Downloads. If this metric is low or declining rapidly, reconsider your marketing strategy and work on your app pages in markets. The more downloads an app has, the higher its position at the top is.
- Sticky Factor. The metric shows how often users return to the app. You can use it to assess audience loyalty, engagement, and interest. Loyal and active users tend to pay more; these KPIs can help you improve your application to increase stickiness.
- Uninstalls. The metric shows how many users downloaded the app but didn't sign up for it and deleted it from their devices. The lower the uninstalls are, the larger the audience. Monitor this metric to identify factors that prevent people from using your app.
Over the last seven years, SaaS companies have grown by 500%. Leveraging proper product metrics can boost your project’s success.
- Monthly Recurring Revenue (MRR). This is one of the key metrics for subscription-based services. With its help, you will understand how well the company is developing and what revenues are expected in the future.
- Annual Recurring Revenue (ARR). It works similarly to monthly recurring revenue but is more suitable for companies that offer services or products on a yearly subscription basis.
- Average Revenue Per Paying User (ARPRU). If one user has several subscriptions, combine them into one to calculate the metric correctly.
- Average Revenue Per User (ARPU). It differs fundamentally from the previous one as it shows not the cost of a customer but the cost of an active user.
How to Choose Product Metrics
Don't rush to use all the product metrics in your business at once. Not only is it useless, but it can lead to unfavorable results. They will distract your attention from the relevant indicators you need to keep track of, and you will lose valuable time.
Here's how to choose effective metrics for your business.
First Goals, Then Product Metrics
The first thing to do is to define the objective of the product and only then select metrics to evaluate it. If you care about the volume of orders, you should prioritize the customer conversion rate; if you want to attract new clients, you should track the number of new users; if you want to generate profit, stick to CLV and customer acquisition cost.
A common mistake is to choose metrics first and set goals based on their results. This scheme is effective only if everything is so well-oiled that the only thing left to do is to improve business processes.
Take Project’s Stage into Account
Always consider your project's stage of development when choosing a metric. If we're talking about a startup, the key product metrics are the number of customers attracted and the initial response.
If you evaluate a long-established product, look at how customers interact with it, whether they make repeat purchases, and what total profit they bring in over the entire period of interaction.
Each product is unique. No universal formula can assess it. While stores must look at AOV and CRR, app developers must look at downloads and stickiness.
Adapt the right metrics to your product's specifics for 100% efficiency.
How to Use Product Metrics
Metrics application patterns depend on your product, goals, and strategy. Project and product managers decide how often and in what form to evaluate different indicators.
A general pattern for using product metrics:
- Determine a set of product management metrics that you will regularly use to evaluate any business type;
- Use them to measure the quantitative and evaluate the qualitative parameters of the product;
- Evaluate metrics not independently but in correlation. This will allow you to view the holistic spectrum rather than the isolated details;
- Check metrics at regular intervals (e.g., once a month) to understand and track progress;
- Decide what you will do with the data: take it into account or make changes in product, service, or marketing;
- Continue to analyze product management metrics to assess the project, how it evolves, and what changes await it in the future.
Product metrics are essential elements for a product team and managers. They boost companies to apply innovative solutions that will reduce costs and time but also increase business engagement and revenues.