100+ Product Metrics: The Ultimate Guide for Product Managers
The definitive guide to product metrics for product managers who want to build better products.
Why do you need product Metrics in the first place?
Imagine you are on a cross-country road trip and the car you are driving does not have a dashboard! Without a dashboard, you are completely blind to how your car is doing.
It’s difficult for you to know about the speed of the car, Gas Level, and other warnings if something goes wrong.
Peter Drucker once said “You can’t improve what you don’t measure”
So product metrics are a critical tool for product managers that provide insights into how users are interacting with a product, which can help product managers make informed decisions about how to improve the product.
Well now that you understand the importance of measuring your product metrics. Let’s understand the user journey before you actually spend some time understanding product metrics.
To illustrate the user journey, let’s consider a person using Canva, a popular design tool. (I personally prefer Figma, but that’s a topic for another day.)
The best way to understand Product Metrics is by using the AARRR (Acquisition, Activation, Retention, Revenue, Referral) framework.
User Journey of an online tool like CANVA
If you have used CANVA or any online tool a typical customer journey would look something like this.
- Acquisition:
- Type “CANVA” or a related keyword like “Design online” on Google.
- Click on a search result to go to the Canva website.
- Sign up for a free account.
2. Activation/Engagement:
- Search for a design template.
- Customize the template to create a new design.
- Download the design.
3. Retention:
- Use Canva regularly to create new designs.
- Share your designs with others.
4. Revenue:
- Upgrade to a premium plan to unlock more features.
5. Referrals:
- Invite your friends and colleagues to use Canva.
Let’s break this down step by step and see which product metrics you need to track.
Step 1 Acquisition Metrics
There are two main ways users get to Canva: they can either type the URL directly into their browser or search for a design tool on Google.
Let’s take the example of a user who lands on the Canva website by searching for it on Google. If you closely observe the URL, you will see that it contains a UTM (Urchin Tracking Module) code. This code can be used to track the source of traffic, the campaign, and other important metrics.
A few important metrics your track here is your
1.Cost per click (CPC)
Cost per click (CPC) is the amount of money you pay when someone clicks on your Google ad. The CPC can vary depending on the niche and geography of your target audience.
2. Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the average amount of money you spend to acquire a new customer. In your example, if you spent \$10,000 on Google CPC ads and acquired 1,000 new customers, your CAC would be \$10.
3. Top and the bottom of the funnel
The top of the funnel (TOF) refers to the stage in the customer journey where users are first exposed to your product or service.
The bottom of the funnel (BOFu) refers to the stage where users are ready to make a purchase. The percentage of users who move from the TOF to the BOFu is known as the conversion rate.
4. Bounce Rate
Bounce rate is the percentage of visitors who leave your website after viewing only one page. A high bounce rate can be a sign that your landing page is not effective or that your targeting is off. You can improve your bounce rate by optimizing your landing page and targeting your ads more effectively.
5. Channel Effectiveness
Channel effectiveness is a measure of how well different marketing channels are performing in terms of driving traffic, sign-ups, or purchases. You can measure channel effectiveness by tracking the number of visitors, sign-ups, or purchases that each channel generates.
6. Traffic Source Distribution
The traffic source distribution is a measure of how your website traffic is distributed by different sources. You can track traffic source distribution by looking at the referring domains, search engines, or social media platforms that send traffic to your website.
I could write an individual article on these metrics, but that’s not the focus of this guide. Let’s move on to step 2.
Step 2. Activation/Engagement Metrics
After signing up for Canva, users can either start from scratch with a blank canvas or search for an existing template to customize.
When you use Canva, you’re using a collection of features that have been designed to solve your user pain points and give you the flexibility to create a wonderful design.
Whether you’re searching for a template, changing the color, or adding an animation, each of these features is designed to make your life easier.
The product team at Canva is constantly tracking, optimizing, and improving these features based on user feedback. They have a deep understanding of user pain points, and they use this understanding to create features that make a real difference.
This is what we call “user empathy.” It’s the ability to understand and address the needs of our users in a way that is both thoughtful and effective.
This is the list of metrics that a PM at CANVA might be Tracking
- DAU/MAU: These metrics show how many users are active on your app on a daily, weekly, and monthly basis. They are a good measure of the overall health of your product and can help you track your growth over time.
- Session length: Session length is typically measured in minutes or seconds. It can be calculated by dividing the total time spent by users on your product by the number of sessions.
- Time to value (TTV): TTV is typically measured in days, weeks, or months. It can be calculated by dividing the time it takes for a user to experience the core benefits of your product by the number of users who have experienced those benefits.
In fintech, the core benefit is payment, while in design tools, it’s design output. A shorter time to value (TTV) leads to higher user satisfaction, engagement, and retention. - User Activation Rate : The percentage of users who successfully complete a certain milestone in your onboarding process. For a design tool like canva activation happens when you finally download the design after picking a template and editing it.
- Product Stickness — This shows how sticky is your product and are people really using it regularly. It is usually calculated by this formula (DAU/MAU*100)
For example — If 100k people have used your app in one month and 20% are using it every day. Then your sickness is 20% (20k/100k*100). Sickness is usually higher for social media apps and lower for software products.
5. Feature usage — This shows the usage of a specific feature or functionality in the product
- How many designs were downloaded every day?
- How many templated were browsed by a user?
- How much search feature is used by people?
6. Funnels and Drop-off rates — This usually Shows how much it takes for a user to do an action and what’s the drop-foof rate
- The average time taken by a user from Editing a design to downloading it?
- Time taken from signup to downloading a design
and many others……there are countless KPIs and Metrics you can track for a product. Now let’s look at step 3 which usually determines the growth of a product.
If you want to Deep-Dive into all the metrics, KPIs, and Concepts then I recommend you to watch my FREE course on Product Management: Product Analytics for Decision Making
Step 3. Retention Metrics
There is a famous saying that
If people are using your product over time they will eventually pay for it.
This may or may not be true depending on the industry and geography but usage and retention are probably the most important factors that drive the success of the product. For retention, you majorly need to understand about retention cohort.
Retention Cohort — A retention cohort reflects the business's health and it will help you understand the percentage of users retained on your app.
The above screenshot is a retention cohort of App users over 10 days. So if 1098 people have used your app on Jan 25, 12% of users will come back on Day 10.
You can also create a retention cohort on a Weekly, or monthly basis for metrics like the design downloaded. For example:- If 200 people downloaded the design on Jan 25, how many of them came back and download the design on Day 10?
Here is the list of metrics that a PM at CANVA might be measuring
- Dollar Retention — This shows how much your business revenue has grown or shrunk within a particular period from the same set of users. For example:- If your company was making $100k per year (ARR) from 10k users and got reduced to $80k/per year from the same users then your dollar retention is down by 20%.
- Usage Retention — It shows how much a specific feature is used by the customer over time.
For example — If 100 people have used the search feature on Jan 25, how many of them are using it after Day 10 - Churn Rate — Churn means how many people have stopped paying for your product. High churn often means that the product is not good enough for the price point. One can calculate it on a monthly or yearly basis.
So the main goal here is to ensure more and more people use your product and how will you be would be able to retain them over time.
Step 4. Revenue Metrics
Now that people have started using your product you have to figure out ways by which you can make money from your product.
In the case of CANVA if you want to use Premium Assets (SVG, PNG) or a Premium template then you have to take their paid plan. CANVA is a great example of the Freemium business Model.
Want to learn more about the different business models and pricing strategies that startups can use? Check out my deep dive article on 31 Startup Business Models and Pricing Strategies.
- Trial-to-Paid Conversion Rate
The percentage of trial users who convert into paying customers.
For example — So if 1k people signed for Free-trial and only 50 of them took your paid plan you have a Trail-to-paid conversion rate of 5%.
2. Paying user percentage —
So if 100k customers are using CANVA and only 10k are paying then paying user percentage is 10% (100k/10k).
The benchmark for this metric varies a lot based on industry, business model, and pricing strategy. A design tool like CANVA would have a paying user percentage of 5% while a tool like Google Drive may have a lower paying user percentage of 1%.
But overall it is quite useful when you are iterating the product and making changes to the business model.
3. No. of paid subscribers —
If you are building a Freemium tool like Canva or an app like Spotify then you would see how your paid subscriber is growing over time. You can create a line chart using Excel or create a board using Mixpanel, Amplitude, or PowerBI.
4. Time to the first transaction —
Once the user has signed up on your app or software how much time does it take to make their first purchase?
In the case of a fintech or a food delivery app the product value realization is quite fast (Sometimes under 1 minute) but it may take up to a month for a software product. So look out for industry and category benchmarks before you make up your mind.
5. Average order value —
As the name suggests AOV shows the average value of an order. This is a widely used metric in e-commerce and food delivery. To lift these metrics companies often use product bundling and discounting.
For example — Buy 1 Get 1, Add 1 more unit and get a 15% discount, Buy for X Amount and you would get a 20% discount. All of these hacks are used to increase the AOV across various categories
6. Average revenue per user (ARPU) —
This shows the average amount of revenue you are generating per user. To calculate this you need to divide your total revenue by a total number of users.
ARPU = Total Revenue/ Total users
To increase ARPU companies usually tries to sell multiple products to their customers to increase their prices altogether.
If your product is used by people internationally then you can also break down your ARPU by country wise as countries may have different purchasing power.
7. Customer Lifetime Value(CLTV) —
CLTV is the total net profit a company can expect to generate from a customer throughout their entire relationship.
CLTV helps you understand how much to spend while acquiring a customer. If you are spending $1000 to acquire one customer and sell them a $20 monthly plan then it will take 50 months for your company to break even.
Thumb rule — The LTV/CAC ratio should be 3:1, which means you should make 3x what you would spend on acquiring a customer.
8. Revenue by Category/Segment/Vertical —
It is widely used by companies who are managing multiple products or categories, hence they need to know how well are they doing product or category-wise.
For example — A company like Amazon may track its Category wise Revenue, profit, and market share.
Similar Amazon may also be tracking its product-wise revenue to understand how well its cloud computing and e-commerce verticals are doing
9. Gross Margin —
Gross Margin is the portion of a company’s revenue left over after direct costs are subtracted. In short, It’s the portion of business revenue left over after you subtract direct costs, such as labor and raw materials
I am sure you would have heard terms like Top-line and Bottom line. The loosely held term Top-line means Revenue/Sales and the bottom line usually means EBITA or Profits.
10. Profit Margin —
Profit margin is the portion of a company’s sales revenue that it gets to keep as a profit, after subtracting all of its costs.
As you can see in the above diagram the revenue from sales was around $330,000 but the profit after tax is just $19,250.
So the main goal here is to ensure your product is making money and you are making money for your investors.
Step 4. Referral Metrics
If you use any tool or mobile app you would have seen a tab like “Refer and Earn” that asks you to invite your friend so that you can earn money. This is considered the cheapest source of customer acquisition and has worked really well for some early stages for Uber, Amazon, etc.
Now the alternative to this approach is collaboration, which is the powerhouse of CANVA. You can share your design and add as many team members as you want. The more people you invite the better it is for CANVA.
Here is the list of metrics that a PM at CANVA might be measuring
- Virality Coefficient
The viral coefficient is a metric that determines the number of new users generated by referrals from existing customers.
Virality is the inherent incentive for customers to refer friends to a new app or software they like and earn some reward if their friends use the product.
The number of new users acquired through referrals by existing users. Often expressed as a ratio (<1, 1, >1).
2. Customer Referral Rate — The percentage of customers who refer others to the product.
3. Referral Conversion Rate — The percentage of referrals that convert into active users.
4. Net Promoter Score (NPS) — A measure of customer satisfaction and loyalty based on how likely users are to recommend the product to others.
Warning: NPS measures customer attitude and sentiment, not the actual behavior.
Average Referral rewards won (Canva doesn’t have it anymore)
- Average user Invited in one Account
- Paid user with Invitation code
and many others……Now let’s look at the 4th step which usually determines the long-term success of the company.
You can read more about 100+ Product Metrics given in the sheet, but let’s also understand Product analytics tools to measure these metrics.
Tools you use to measure product metrics
When it comes to analyzing data and looking into product metrics, oftentimes the data is quite scattered when it comes to measuring these metrics so companies use CDP tools like Segment to store all these data in a single warehouse so that people can analyze it.
Here is the list of tools companies use across the product journey to measure product metrics.
These tools will help you understand the different types of active Users based on how much they engage with your product.
- Power User — The cohort of active users with the Highest Engagement
- Core User — The cohort of active users with the Medium engagement
- Casual User — The cohort of active users with the lowest engagement
These tools will also help you understand the Frequency Breadth and Depth of the Engagement.
Which metrics to prioritize and which ones to ignore
There are constellations of metrics. So not every metric can be used at the same time.
So let’s understand which to prioritize and how to figure out your business goals and your product value.
So here is the framework you can use to avoid tracking vanity metrics.
- North Star — This reflects the prime value you give to users
- Primary/Level 1 Metric — Complement the north star/focus metric
- Supporting/ Level 2 Metric — Shows that the product is growing in a healthy direction (Leading indicators to your north star and L2 metrics.)
North Star Metric is the most important metric for the long-term success of your product. NSM lies in this simple statement, “If a company brings top value to its customers, then growth and success are inevitable”.
Let’s Understand North — Star and L1, L2 with some example
To break this down further let’s pick Uber Eats.
Sector Specific Product Metrics
Here are the Most important product metrics for e-commerce
If you want to Deep-Dive into all the metrics, KPIs, and Concepts then I recommend you to watch my course on MBA in Product Management: Become a Product Manager
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