Chapter 16 – Product Metrics – What to measure?

As product managers, data is very important to track the performance of your product and derive insights from the analysis. These insights enable the team to be responsive and improve the product. However, collecting or measuring data is not an issue. The more vital part is to understand and identify which metric to measure. Let’s understand how to identify metrics to track –

Step 1 — Identifying business metrics based on business goals

Here’s list of Business oriented metrics:

• Customer Acquisition Cost (CAC)
• Lifetime Value (LTV)
• Monthly Recurring Revenue (MRR)
• Annual Recurring Revenue (ARR)
• Average Revenue per User (ARU)
• Conversion (e.g. site visit to lead conversion)
• Revenue Growth
• Gross Profit

Step 2 — Identifying product metrics based on business metrics

Based on the identified business metrics, identify which product engagement or customer success metrics you should focus.

• Product usage/adoption (sign-in frequency, sharing, etc.)
• Percent of users who take a specific action that matters
• Feature usage (usage vs. other features)
• Which customer type is using certain features
• Retention or churn rate
• Quality (e.g. average bugs, net promoter score)

The two approach for defining product metrics are –
AARRR framework
HEART framework

AARRR (Pirate Metrics)
AARRR framework (by Dave McClure) helps you understand your customer funnel and optimize it for better performance.
It stands for each phase of customer funnel or conversion lifecycle:
– Acquisition
– Activation
– Retention
– Revenue
– Referral

HEART Framework
Google’s HEART is “a framework for user-centered metrics for web applications, which can be used to measure progress towards key goals, and drive product decisions.”
The framework uses Goal-Signal-Metrics Matrix to prioritize which metric you’ll need to track a Sprint.
GOAL: What are you trying to help users do? What problem are you trying to solve?
SIGNAL: What change in user behavior or opinion would indicate you’ve been successful in your goals. There may be multiple signals for each of your goals.
METRIC: How to measure the size of any change in user behavior or opinion.

The order to follow the HEART metrics in terms of how a customer uses a product is –
1. Adoption
2. Task Success
3. Engagement
4. Retention
5. Happiness

The metrics should be:
– Mutually exclusive, collectively exhaustive
– Should be in a ratio format

Product Analytics Resources 

1. Read “27 Metrics that Pinterest track”

2. SaaS Metric dashboard

3. Calculating Customer Lifetime Value
blog.kissmetrics.com/how-to-calculate-lifetime-value
blog.smile.io/easy-way-to-calculate-and-increase-customer-lifetime-value