Product metrics are quantitative measures that help evaluate the performance and success of a product. They provide insights into how a product is being used, how it’s perceived by customers, and how it’s contributing to the overall business goals.
“If you can’t measure it, you can’t manage it.” – Often attributed to Peter Drucker, this quote emphasizes the importance of metrics for effective management. If you don’t measure what matters, how can you tell if your product is working?
The problem with metrics is that it’s easy to measure a lot of them. Some studies show that companies and teams often measure hundreds of metrics. But when the number is so big, it is hard to take a look and decide which metric is really important to track. When everything matters, nothing is important.
A Google search for “Examples of Product Metrics” returns many results. Here is an example of different metrics that can be measured:
Product Managers use a variety of metrics to measure the value and performance of their products. Here are some other examples:
Customer-Centric Metrics
- Customer Satisfaction: Measures how satisfied customers are with the product or service.
- Customer Lifetime Value (CLTV): Calculates the total revenue a customer generates over their lifetime.
- Net Promoter Score (NPS): Measures customer loyalty and willingness to recommend the product.
- Customer Churn Rate: Measures the rate at which customers stop using the product.
- Retention: Measures how many customers keep coming back to use your product.
Product Usage Metrics
- Daily Active Users (DAU): Measures the number of users who use the product on a daily basis.
- Monthly Active Users (MAU): Measures the number of users who use the product on a monthly basis.
- Time Spent in App: Measures how long users spend using the product.
- Feature Usage: Measures how often specific features are used.
Product Performance Metrics
- Conversion Rate: Measures the percentage of users who take a desired action, such as making a purchase or signing up for a subscription.
- Bounce Rate: Measures the percentage of users who leave a website after viewing only one page.
- Customer Acquisition Cost (CAC): Measures the cost of acquiring a new customer.
- Return on Investment (ROI): Measures the financial return of a product or feature relative to its cost.
Business Impact Metrics
- Revenue: Measures the total income generated by the product.
- Profit Margin: Measures the percentage of revenue that remains as profit after deducting costs.
- Market Share: Measures the percentage of a market that a product controls.
By tracking and analyzing these metrics, product managers can gain valuable insights into the performance of their products, identify areas for improvement, and make data-driven decisions to drive growth and success.
Value versus Vanity metrics
A value metric is a quantitative measure that assesses the value or worth of something. A value metric is directly connected with the value that your product is delivering to your customers and to your business. A value metrics measures the outcomes generated by your product.
Not all metrics are value metrics. In fact, value metrics are typically limited in number. Everything else can be considered a vanity metric.
Vanity metrics are metrics that look impressive or easy to track, but don’t provide meaningful insights into the actual performance or value of a product or initiative. They often focus on superficial or easily manipulated data, rather than on metrics that truly reflect the impact or effectiveness of a strategy.
Examples of vanity metrics include:
- Follower count on social media: While a high follower count may seem impressive, it doesn’t necessarily indicate engagement or influence.
- Website traffic: High website traffic doesn’t necessarily translate into conversions or revenue if visitors are not taking desired actions.
- Email open rates: High open rates don’t guarantee that emails are being read or that they are driving desired results.
While vanity metrics may be tempting to track, it’s important to focus on metrics that provide actionable insights and drive real business value. By avoiding vanity metrics and focusing on metrics that truly matter, organizations can make better decisions, improve performance, and achieve their goals more effectively.
A litmus test to understand if what you are measuring is a vanity metric is to ask yourself these two questions:
1 – Does this metric drive actionable decisions on the product?
2 – Do the customers care about this metric?
(if you answer no to either question, then the metric may be a vanity one)
Let’s take pageviews on a website as an example. If you are selling ads on your pages, the more pageviews you have the more revenue you generate. There is a correlation between pageviews and revenue. However, if you see a drop of pageviews, what action can you take to reverse that? The metric may not guide your decision.
Another example, if you are an e-commerce company and you measure the pageviews of your website, that may be a vanity metric: your customers don’t care about how many pageviews you have, they care about getting their order shipped on time.
Rather than measuring too many things, or metrics that are two or more degrees away from what actually matters, you should focus on a few valuable metrics.
Valuable metrics
A valuable metric is one that provides meaningful insights and drives informed decision-making. It should be relevant to the specific goals and objectives of an organization or product.
Not all value metrics are valuable: Valuable metrics are a subset of value metrics that are considered particularly important or useful for achieving specific goals. Product Managers should measure metrics that are valuable so that they can inform decisions on the product.
Here are some characteristics of a valuable metric:
- Relevant: The metric should directly relate to the key performance indicators (KPIs) of the organization or product. If you have a Product Goal, the metric should be connected to that goal.
- Outcome-based: The metric should be directly correlated to outcomes that you want to deliver to your customers and to your business.
- Measurable: The metric should be quantifiable and able to be tracked over time.
- Actionable: The metric should provide actionable insights that can be used to improve performance or make strategic decisions.
It’s important to regularly evaluate the metrics being used and eliminate those that are not providing value. By selecting and tracking valuable metrics, Product Managers can gain a deeper understanding of their product’s performance, identify areas for improvement, and make data-driven decisions to achieve their goals.
What to measure
“It is worse to measure too many things, than it is to not measure anything at all.” – Mark Graham Brown
Author: “Keeping Score”
Metrics should follow these guidelines:
- Be valuable, to inform actionable decisions on the product
- Fewer is better
- Linked to the factors needed for success or specific outcomes expected by the customers
- Be based around needs of customers
- Be adjusted as the environment and your strategy changes
- Have targets or goals established, based on research and not on arbitrary numbers
Questions and Answers
What are product metrics?
Product metrics are quantitative measures that help evaluate the performance and success of a product. They provide insights into how a product is being used, how it’s perceived by customers, and how it’s contributing to the overall business goals.
How do I choose the right product metrics to track?
Choosing the right product metrics depends on your specific goals and objectives. Consider these factors when selecting metrics:
- Align with Product Goals: Ensure your metrics directly contribute to your overall product strategy and to your Product Goal. For example, if your goal is to increase revenue, track metrics like customer lifetime value and average order value.
- Reflect customer behaviors and outcomes: Choose metrics that provide insights into how customers are using your product. This might include daily active users, time spent in app, and feature usage. Even better, be clear about what outcomes your customers expect to get from your product, and tie your metrics to those outcomes.
- Measure Key Performance Indicators (KPIs): Focus on metrics that directly impact your KPIs. For example, if your KPI is customer satisfaction, track metrics like NPS and customer support ticket volume.
- Consider product stage: The stage of your product’s lifecycle will influence the most relevant metrics. For example, early-stage products might prioritize user acquisition and engagement, while mature products might focus on retention and revenue.
- Avoid vanity metrics: Be cautious of metrics that look impressive but don’t provide meaningful insights. Focus on valuable metrics that drive action and decision-making.
- Keep it simple: Don’t overwhelm yourself with too many metrics. Prioritize the most important ones and track them regularly.
How often should I measure product metrics?
Metrics should be measured and updated as frequently as you need to inform product decisions. If you are working in Scrum, the boundary between the end of a Sprint and the start of another is typically a good time to decide what to do next on the product. Therefore, it could be a good time to revisit your metrics to inform your decisions.
Most importantly, product metrics should not be measured at the end. You should not wait for the full product to be built before you measure its impact: by then it would be too late. Instead, measure incrementally, as you build it.
What are the most important product metrics?
The most important product metrics will vary depending on your specific goals and the stage of your product’s lifecycle.
To establish a few key product metrics, start from the customer outcomes you’d like your product to generate. Once you are clear about these outcomes, define what you need to measure to assess if you are delivering those outcomes. If you follow this process, the metrics you select will be valuable.
To summarize, the process is:
1 – Identify the key customer outcomes your product should deliver
2 – Define how you measure these outcomes
3 – Identify the valuable metrics that you can use to measure
What are the common challenges in tracking product metrics?
Tracking product metrics can present several challenges. Here are some of the most common ones:
- Data Quality Issues: Ensuring data accuracy, completeness, and consistency can be difficult, especially when dealing with multiple data sources.
- Metric Overwhelm: It’s easy to get overwhelmed by the sheer number of potential metrics to track. Prioritizing the most important ones can be challenging.
- Vanity Metrics or not Valuable: Focusing on metrics that look impressive but don’t provide meaningful insights can lead to wasted effort.
- Lack of Historical Data: For new products or features, historical data may be limited, making it difficult to establish benchmarks and track progress.
- Data Privacy and Security Concerns: Collecting and storing user data must comply with privacy regulations, and ensuring data security is essential.
- Technical Difficulties: Integrating data from different sources, building data pipelines, and maintaining data infrastructure can be technically challenging.
- Organizational Challenges: Aligning teams on the importance of metrics, ensuring data accessibility, and fostering a data-driven culture can be organizational challenges.
Addressing these challenges requires careful planning, effective data management practices, and a clear understanding of the goals and objectives of your product.
How can I avoid vanity metrics?
Here are three strategies to avoid them:
- Align metrics with goals: Ensure your metrics directly contribute to your overall Product Goal and customer outcomes. This helps you focus on metrics that drive real value.
- Consider customer behavior: Focus on metrics that reflect how customers actually use your product. Be careful that quantitative metrics may answer the question “what are customers doing with the product?” but may not answer the question “Why are customers doing what they are doing?”. You may need to connect with your customers to find out.
- Avoid metrics that are easily manipulated: Be cautious of metrics that can be inflated or deflated through artificial means, such as social media followers or website traffic.
What’s the difference between value metrics and valuable metrics?
The terms “value metrics” and “valuable metrics” are often used interchangeably, but there is a subtle distinction between them.
- Value metrics refer to any metric that measures the value or worth of something. They can be used to assess the effectiveness, efficiency, or impact of a particular initiative, product, or service.
- Valuable metrics are a subset of value metrics that are considered particularly important or useful for achieving specific goals. They are metrics that provide meaningful insights, drive informed decision-making, and contribute to the overall success of an organization or initiative.
In essence, all valuable metrics are value metrics, but not all value metrics are valuable. A valuable metric is one that is relevant, outcome-based, measurable, and actionable. It should provide insights that can be used to improve performance or make strategic decisions on a product.
How can Product Managers’ performance be measured?
Often, companies struggle with the decision on what metrics to measure to evaluate the performance of Product Managers. They should resist measuring outputs (e.g. promoting the Product Manager that delivers the highest number of features).
Measure of outputs are “busy” measures: they quantify how much work we have done or how many widgets we have produced. The problem with outputs is that they may not have any correlation with value (in fact, many examples exist of products that have a ton of features, but still deliver no value).
Product Managers are knowledge workers. And knowledge workers cannot be measured by output. Meaningful outputs for professionals include ideas, strategies, information, and problems avoided. These outputs are very difficult to measure. So companies resort to measuring the number of features (or something similar) and follow in the trap of measuring output versus value.
Instead, Product Managers should be measured with valuable metrics against the outcomes that their product delivers to both the customers (primary outcomes) and the business (secondary outcomes).
See the article on measuring the performance of Product Managers.