Product Metrics: How & What

When you wok as a product manager, you ask yourself questions all the time. Most common amongst those are — Is my product working? Or if the product is already established, is my feature working? How many users are using it? When do they use it the most?
That list is never ending…

Software products today are much more complex (in a nice way). Some of this complexity comes with a treasure trove of data. We then integrate with other software & SDK’s which help us understand users behavior and experience.
This data is important and can help you understand product/feature performance. What is working well and what is not. If something needs a little nudge or a complete makeover.

Unfortunately this data is in its raw format. It is up to us to give it shape and understand it. The numbers are known by different names. The one that I use the most — KPI, metrics, user adoption.

How many metrics?

There is no single set of metric that works for everyone. Businesses and products (features pithing a product) are all unique and have different goals based on the state and ambition. For example, a startup will want to acquire new customers quickly, where as a 50 year old business would be more focused on retention and upset to an already established customer base.
Most organizations have a handful of metrics that sum up their product's (or service) overall performance. From these handful of metrics there is always one (or two) metrics that is slightly more important in comparison. These typically are termed as focus metrics.
These focus metrics are supported by a more granular metrics that teams and individuals spend their time on to drive the momentum of the focus metric. Once you identify and set them up; it forms a hierarchy with an upward flow of impact. Any individual granular or lower level metric that performs well, will advance the focus metric.

What should be my Focus Metric?

Let's talk about not one but more than one metrics. A "North Start" metric does not exists. Experts have mulled over this concept and have concluded that a business should have a constellation of metrics, rather than one single metric that matters. A North Star metric can be very limiting. For example, Facebook no longer has a single metric in Monthly Active Users. They follow a group of focus metrics that allows them to innovate and continue to grow their product.

Trying to maximizing your focus metric can hurt your product too. If YouTube cares only about videos watched, they might autoplay vides when you visit their website. Take it from me, that is an extremely frustrating user experience. You are basically trying to force your users to do something at random which has an impact on retention - which should be one of your focus metric.

Focus Metrics should be your top priority, not your only priority, and improving focus metric should be organic rather than accomplishing them at the expensive of harming other KPIs.

Focus Metrics Recommendations

Choose a focus metric tied to active usage such as Weekly or Monthly Active Users. They do a good job of summing up trending in other metrics - typically acquisition and retention. This number will show you if your customers are using the provide over time.

Once you have established your focus metric, its time to to start adding metrics that complete your focus metric. An easy way to validate that is to ask yourself a question “if we improve this number will the product’s long-term performance improve?”

At this point you start layering your metrics (like a layered cake) and you can go as many layers deep depending on the hierarchy and complexity of your product.
The first layer of metrics typically have checks to make sure that the product is growing in a healthy direction. For example, if your focus metric is WAU, a good layer 1 metric is a 7 day retention to ensure you aren’t spending previous funds to acquire new users who leave after a day or two.

The second layer onwards these metrics are more customized to your specific needs. Continuing the above example a layer 2 metric would be to check retention on your various platform like Desktop, Mobile, Web, etc. You can go one more layer below to break it down by region.

You can keep going as many layer deep you want but keep clarity in mind cause the more layers you add there is a tendency to add confusion. A good thumb rule is to focus on what matters. Too many goals can be just as ineffective as having none.

Key Metric Types

There is no secrete sauce here. The industry has a standard set of metric types/categories today.

Reach

This is the total # of people who have used the product in a recent time period. For consumer products, it could be the # of paid accounts, or users who have made a purchase in the last 3 months. For B2B, this key metric is often product install base or number of paid licenses within the past quarter or year.
Reach is important because it represents the maximum number of users who could reasonably become active, whether organically or thorough re-engagement campaigns.

Activation

This is the foundational step that primes a new user to become an active user. This was made famous by Facebook who identified adding 7 friends in the first 10 days as their activation metric when they were a startup. This metric drove their Active user key metric and they they focused adding friends as the central part of their onboarding experience.

It is recommended viewing the metrics as a % of new users rather than count in order to isolate it form natural user growth. That way you can know if you’re more successfully at activating users over time.

Active Users

Active users are users who take a key action and received value from your product within a recent time period. Here the value can be defined as one action – like uploading a picture or set of actions, such as uploading 3 pictures and tagging a picture.

A lot of consumer-focused products promote habitual usage (Twitter, Instagram) look at Daily Active Users. B2B is better viewed through the lens of Weekly Active users since it’s not always used every day (weekends are off).

Monthly Active users also is a good fit, if your product has a monthly billing cycle since bills are usually due monthly.

This is also one of the most common focus metric.

Engagement

This is all about how committed your customers are. It accounts for both the frequency and cadence of completing key actions.
This metric can be defined as the number of key actions taken, minute of video watched, or number of transactions completed. It’s important to divide this by your active user count to measure the depth of engagement per users with your product. Otherwise, user grown might mislead you into thinking your product is more sticky than it actually is.

Retention

This is all about checking if your product has staying power. Retention can be driven two ways:

1. Are you bringing in the kind of people who stick around?
2. Are you giving those who have already come through the door enough reason to come back?
   When deciding on the time frame for retention goals, pick a range that is long enough to capture the reasonable repeat visit cycle of your customers, yet short enough that teams can get feedback to iterate quickly.

Business Specific

It is possible that your product has specific needs or have a unique ability where the above metrics won’t work to capture the right number for you. In this case it is absolutely fine to define your metric.

Further Reading:

Product School - These are the metrics great product managers track