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November 7, 2022

 mins to read

Product Management KPIs to Help You Ship Great Products

The set of product management KPIs is not carved in stone. There are so many of them, but not all will be meaningful for your product. Overloading your reports with data is not good either, as it makes it harder for one to focus on things that really matter.

Some people start by researching all the product management KPIs and metrics and choose the ones that they think would be relevant to them. Often they go with the ones that are already available or are easier to track. This way will likely lead you to confusion.

To make a considered choice, you have to start with a question: "What do you need to know about the product?" Describe your product in simple words, without thinking of particular KPIs and the ways and costs of calculating them.

Only after answering this initial question should you think of specific KPIs that will be useful for your information request. When going through this list of popular KPIs for product managers, ask yourself if they would help to get the information you need.

To help you orient through all these product management KPIs and metrics, we split them into groups, following the division that Marty Cagan suggested in his book Inspired: How to Create Tech Products Customers Love.

User behavior analytics

User Engagement

product managements kpis. User engagement = No of engagement actions x Frequency

This is one of the trickiest product metrics to measure, as it is rather abstract and the measurement would be different for different products. In my opinion, the best way of measurement is the one suggested by Inner Trends: counting how often users receive value from your product, not just how often they open the app.

The formula may not be clear at first glance. We have a detailed explanation of how it works in the dedicated article about user engagement.

Click-Through Rate (CTR)

product managements kpis. CTR = Clicks / Impressions x 100%

CTR indicates the percentage of website visitors who click on a certain link. It is most representative when used in A/B testing, as it allows to know exactly what impacted the metric.

Click-through rate is one of five metrics, also known as AARRR that help measure the effectiveness of a SaaS sales funnel. If you are asking “What are the 5 key performance indicators?”, AARRR is the answer.


Business analytics

Churn rate

product managements kpis. Churn rate = No of churned users / Total No of users

This is one of the most popular KPIs in product management. It shows the percentage of customers who left your product over a certain period. The established benchmark for this metric is about 5-7% annually. 

To learn the difference between annual and monthly churn and tips on reducing the rate, you're welcome to read about essential aspects of churn rate that business should know.

CLV — Customer Lifetime Value

In order not to focus on the scary materialism of the term, we’ll call it just CLV. It stands for the amount of revenue each customer will generate until they stop being a customer. There are different formulas for CLV, but here is the most common one:

product managements kpis. CLV Customer lifetime value = Average order value x urchase frequency rate x Average customer lifetime

Calculating in “lifetime” looks a bit like fortune-telling. There are two ways of finding CLV: historic CLV, based on previous data of existing customers, and predictive CLV, based on historic data but estimating the future behavior of customers. You should be careful with this one, as it is easy to fall into bias.

Financial analytics

MRR Monthly Recurring Revenue

product managements kpis. MRR Monthly recurring revenue = Monthly users No x Monthly ARPU (Average revenue per user)

For proper financial planning, it is crucial to estimate how much revenue you will have in the following months — and compare it with the past periods of time. For big companies, yearly or quarterly periods of time are more common, but for dynamic startups, the monthly period is just as relevant.

Each product analytics metric is more than just one formula. To understand all the nuances of MRR, check our article.

Average Growth Rate

product managements kpis. Average growth rate = (2nd month revenue - 1st month revenue) / 1st month revenue

Growth rate measures how quickly your revenue is growing over a defined period of time. Most companies have from 15% to 45% year-to-year growth range. However, it depends largely on the size of the company. We have more detailed info on benchmarks in our article about average growth rate.

Performance

Single Ease Question (SEQ)

This is probably the easiest metric you can get to measure product usability. However, this single question sums up user experience quite comprehensively:

If you’re looking for more complex product performance KPIs to measure effectiveness, efficiency, and satisfaction of users working with a product, learn about them from our article on usability metrics.

Bounce rate

product managements kpis. Bounce rate = No of bounces / Total number of visits x 100%

This number reflects the percentage of users who enter your website, but abandon it without performing any action. How to establish the benchmark of bounce rate? Look at the competitors. For example, on our website, there are thousands of people entering to read our blog, but we don’t expect all of them to convert. While for a website like Airbnb, bounce rate should be much lower.

Average session time

product managements kpis. Average session time = Total duration of sessions / Total number of sessions

This metric does not need much explanation, but be careful with it. The reasons behind prolonged session time can be complicated UI or slow loading time. And for some products, it won’t be relevant at all.

Operational costs

Employee turnover

product managements kpis. Employee turnover rate = No of employees who left / Average No of employees during period of time  100%

For the software development sector, fast employee turnover is a common thing. However, the objective of each Team Lead is to keep this metric as low as possible, as it can slow the processes. Apart from that, high turnover may be a signal of an unhealthy team atmosphere, which should be managed respectively.

This metric would not be on the list of 10 main metrics for product managers, but if you want to take care not only of users but also of team members, it is a must.

Specific operational expenses

These can be anything that is relevant to your product: price of storage, hosting, and so on. Strictly speaking, it might not be called product management success metrics, and may not require any action, product manager responsibilities often include tracking these as well. After all, it’s not that hard.

Go-to-market costs

Magic Number

product managements kpis. Magic number = ARR (Annual recurring revenue) / Sales&Marketing expenditure

Magic number is a ratio of money spent on Sales and Marketing to Annual Recurring Revenue. The benchmark is around 0.75. When magic number is over 0.75, it means that you have achieved product-market fit and are ready to invest more in sales and marketing.

Customer Acquisition Cost (CAC)

product managements kpis. CAC Customer Acquisition cost = Sales&Marketing costs / Customers won

CAC allows you to measure the efficiency of marketing in relative numbers. When you realize that each new user costs you too much in marketing investments, it’s a signal that the strategy should be reassessed. This metric may also reflect the efficiency of the sales team.

This KPI is particularly important for SaaS products. If you're curious to learn more, we have a dedicated article that discusses other key SaaS metrics.

Sentiment

Net Promoter Score (NPS)

On a scale of 0 to 10, how likely are you to recommend this company's product or service to a friend or a colleague? 1-6 - detractors 7-8 - passives 9-10 - promoters. NPS = No of promoters - No of detractors

NPS measures the probability of users recommending the product to others. In the times when many traditional methods of marketing lose efficiency, personal recommendations are paramount to product success. And naturally, high NPS signals a good user experience. This is one of the key metrics for product management.

Customer Satisfaction score (CSAT)

product managements kpis. CSAT Customer satisfaction score = No of satisfied customers / Total No of respondents x 100%

This is another single-question metric. There can be 5 or 10 points maximum.

Although we promote collective ownership approach, where all the team assess metrics and see what all of them can do to improve them, some KPIs are intentionally specific to separate departments and should be owned by them.

Customer success

First Call Resolution Rate (FCR)

product managements kpis. FCR First call resolution rate = No of calls resolved at first contact / Total No of calls x 100%

The number of calls (or chat messages, or contact form requests) that are resolved within the first contact. Measures the quality of customer service.

Average customer support ticket resolution time

product managements kpis. Average customer support ticket resolution time = Total resolution time of all tickets  No of tickets

No need to explain that fast answers and resolution raises customer satisfaction significantly. Although for some products, the tickets are not as urgent as for others, this metric works well for measuring performance of customer service over time.

Design

Time per task

product managements kpis. Average Time per Task = (Task time 1 + ... + Task Time X) / (X - Total No of users tested)

While we can argue if time per task depends majorly on UX design or other factors, one thing we can say for sure is that time per task is one of the most relevant UX testing metrics. It works very well when you have to compare two versions of design with A/B testing.

Error rate

product managements kpis. Error rate = No of errors / Total No of attempts x 100%

This one might be even more important than time per task. If the error rate is too high, there is no point in measuring any other usability indicator.

Although many people find it hard to measure design quality in numbers, we know a few tricks on that. Check out our article about UX design KPIs.

Engineering

Number of bugs

Number of bugs directly relates to the quality of code, but don’t aim to make it 0. Errors are a sign of productive work. Just tracking the dynamics and noting cases when there is a spike is enough. In the end, if there are no bugs, maybe they are just not detected yet?

Code cycle time

Measures the time period between code deployments. Code cycle time can be measured including or excluding non-working hours, as well as holidays.

One of the most popular ways of measuring the speed of engineers’ work. Of course, quality should be prioritized over speed, but tracking both is essential to increasing the overall productivity of the team.

Marketing

Number of leads

Lead is a prospective customer who shows active interest in the product. For example, for Eleken, a lead is someone who left a message in the contact form. Our marketing team reviews and analyzes contacts with leads regularly. As the number of leads is an absolute number, you can calculate lead conversion ratio to assess how many leads become customers.

Cost Per Click (CPC)

product managements kpis. CPC Cost per click = Total cost of advertising / No of clicks that came from the campaign

This metric is used to evaluate the efficiency of different marketing channels. However, the choice should not be based on CPC only. Some channels may bring lots of cheap “clicks”, but these would be the visitors who don’t convert and thus this metric should be related to CAC, listed above.

To sum up

This list of product manager KPIs is neither exhaustive nor comprehensive. We have selected only a few of them in this article and grouped them, so that you wouldn’t get lost in the ocean of metrics. Take it just as product management KPI examples, not a guide to act accordingly.

To successfully apply KPIs, getting them all in one table is not enough. There is so much to discover about each one. If you are serious about data-driven approach, we strongly recommend you to read something from our list of best books on SaaS metrics.

product management kpis. How do I feel about "click here"? I don't have feelings. I have data

Masha Panchenko

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