Product Metrics Cheat Sheet: The Ultimate Guide

Introduction

There are two nightmare scenarios when it comes to metrics: tracking the wrong metrics  and tracking the wrong set of metrics. While the former means you would be distracted by noise, the latter means things when put together would make no sense. Picking the right metrics to track, then, is a real challenge.

That said, this set of crucial metrics is going to look different for every Product Manager, depending upon many factors like: your business strategy, your industry, your growth stage, and so on.

So to help you get started, we have listed some standard metrics ideal for all product teams. This article will be your go-to product metrics cheat sheet. We will also share a product metrics template at the end to help you map out key goals and enable informed decision-making.

What are Product Metrics?

Product metrics are quantitative performance indicators. Businesses use these metrics to gain insights into the health of their product development, pricing, perception, and more. They capture how customers or users interact with your product and in turn, show the line of sight between these interactions and your business objectives.

Used mainly by product teams, all arms of a business, like marketing, customer success, and analytics teams, rely on product metrics for insights.

Your Product Metrics Cheat Sheet

We have categorised your product metrics list into different types. These categories cover 20 product metrics examples to help you make rigorous product decisions. Let's learn about these different types of product metrics and which category they fall under.

1. Acquisition

Acquisition metrics measure how effective your business efforts are in acquiring new customers or users. They help you understand how well your product attracts and brings in new people.

Product Qualified Leads

This metric measures high-intent users — leads who are more likely to convert into customers. These users/leads have already experienced your product, like a free trial, and have shown a genuine interest in its potential. Ideal for SaaS businesses, this metric is a leading indicator of customer acquisition.

PQL conversion rate = Total number of PQLs that converted to a paid model / The total number of PQLs

Lead Generation Rate

This metric measures the total number of leads by a particular channel. All businesses target their potential customers through different touch points. The lead generation rate for the other channels helps you: 1. understand the most successful channels and 2. Identify low-performing channels that could be improved.

Lead generation rate on a particular channel (say social media) = Number of leads from social media / Total social media visitors or interactions ×100

Conversion Rate

It is the percentage of visitors who make it from one step to the next in your sales funnel. Their actions include:

• Contacting your business.
• Creating an account.
• Purchasing or showing interest in the subscription.
• Other actions that matter to your business.

Conversion rate = Number of conversions / The total number of visitors

Customer Acquisition Cost (CAC)

CAC is the average amount your organisation spends to acquire a new customer. This metric helps you understand if the amount spent to acquire new customers is worth the revenue they bring in. It also tracks the efficiency of marketing and sales activities.

CAC = Total cost of acquisition / Number of new customers

2. Activation

Activation is a foundational step that pushes a new user to become active (different businesses define this in their own way). This step can be signing up, making a first purchase, viewing 4-5 videos, or making certain deposits within a specified period.

Activation/Adoption Rate

Activation rate monitors the percentage of customers that convert to active users from simple signups. Defining an activation moment ('Aha!' moment) is imperative to measure this metric. Your 'Aha' moment can be when a customer subscribes to a particular plan, adopts a new feature within a product, or completes a desired action that increases the chances of them realising value from your product.

Activation rate = No. of users who take the desired action / No. of users who signed up x 100

Time to Activate

How many of your customers are activating matters. But you must also determine how long it takes for users to go through the onboarding to activation. When you measure your activation rate, you will notice that not every user goes straight from acquisition to activation. The longer it takes to activate your users, the longer you wait to generate revenue.

Time to activate = (Timestamp of activation event − Timestamp of first engagement) / Number of users activated

Free-to-paid Conversions

This metric measures how many users convert from free trials to paid subscriptions. This metric provides insights into product value perception, user behaviour, and potential revenue streams.

Free-to-paid Conversions = Number of users who upgrade to paid / Total number of users in free trial or using free version ×100

3. Engagement

Engagement metrics reveal how actively and effectively users interact with your product. The more engaged your users are with your product, the more likely they will become loyal customers.

Monthly, Weekly, and Daily Active Users

DAU/MAU provides insights into how frequently users use your product. It measures user engagement, i.e., the frequency at which users engage with your product. For SaaS companies, DAU/MAU is a key measurement of retention and growth. If you see a decrease in your DAU/MAU, it can be a sign of concern.

DAU = (Unique new users) + (Unique returning users)

Product Usage (sessions per user)

Sessions per user measures how often users use the product in a given period. This metric can provide insight into the product's stickiness and how important the product is to the user. If the number of active users or sessions is low, the product is not catering to the user's needs well.

Product usage = The total number of sessions in the given period / The number of users in that same period.

Session Time

Session time refers to your users' time on a blog article or landing page per visit. Long session lengths on landing pages can help marketing teams identify which products and features the audience is most interested in learning about. With this information, they can create new campaigns highlighting the specific pain points those products or features solve.

Session Time = Total duration of all sessions / The total number of sessions during the selected time.

Stickiness

This metric measures how often users return to an app. It's an important metric to provide increased context for user engagement and app retention. Stickiness blocks from Houseware measure the frequency with which your users are compelled to use your product within a specific time frame.

Stickiness is an excellent product metric because it indicates how often and consistently users engage with a product. It also enables PMs to make informed roadmap decisions.

Stickiness = DAU/MAU

Sessions Per User

This metric measures the number of times an average user has been active in your product. The healthy benchmark for the number of sessions may vary across the industry.

Sessions per user = Sessions / Total users

Feature usage

This indicator measures the percentage of users who use different product features. The insights from this metric are critical to your product strategy. It can help you prioritise and push the most important features to users and remove or deprioritize features that aren't.

Feature usage = The number of users who used a feature / The total number of users.

Net promoter score (NPS)

NPS measures long-term user satisfaction and the percentage of your loyal clients. This metric measures how likely customers will recommend your product to others. This metric helps you understand user actions, behaviours, customer loyalty, and engagement.

NPS = % of Promoters - % of Demoters

"The goal is to turn data into information, and information into insight."

— Carly Fiorina, Former CEO of Hewlett-Packard

4. Retention

These metrics measure your business’s ability to retain customers. It gauges the overall health of the customer relationship throughout the entire customer journey and is a leading indicator for your future business projections.

Retention Rate

Retention rate measures the percentage of customers who stick around and continue using a product over time. A high retention rate indicates your current customers value your product. While some attrition is inevitable, a low retention rate means you have a leaky bucket and weak product-market fit.

Houseware's retention visualisation helps you calculate and track your product's retention at any time granularity.

Retention rate = [(E-N)/S] x 100

Over a period of time:

S = Number of existing customers in the beginning

E = Number of total customers at the end

N = Number of new customers added

Churn Rate

The customers who stop using your product over a specific period are known as churned customers. Churn rate tracks your company's ability to retain customers by the effect of measuring customers who stop using your product. High churn signals issues, while low churn suggests customer satisfaction.

Churn rate = (Number of users beginning – Number of users end) / Number of users beginning

Customer satisfaction score (CSAT)

The CSAT measures the overall contentment of your users on a scale of 1 to 5. To calculate this well, we’d recommend that you instrument each event through customer surveys on a specific feature of your product. Doing it for particular features can be a great way to gather feedback for strategic product development. That indicator is also used amongst other product quality KPIs.

CSAT = Very Satisfied/Satisfied customers / The number of total respondents

Customer lifetime value (CLV)

Also known as CLTV or LTV, CLV is the total revenue you can expect from a customer throughout their entire journey with your company. This indicator helps you define how much you should spend to acquire, and helps you identify the customer cohort/segment you should focus on.

CLTV = Average Order Value x purchase frequency x customer lifespan

5. Revenue/Monetization

Revenue is the key metric for success and the ultimate goal of the other metrics. There are a lot of metrics to understand revenue streams. You can track revenue by audience, channel, product, etc.

Monthly recurring revenue (MRR)

Monthly recurring revenue (MRR) is your predictable total monthly revenue from all the active subscriptions generated by your business. It helps predict cash flow, financial health, and revenue trends.

There are two ways to calculate MRR.

MRR = Number of customers x amount each customer pays per month

MRR = Number of subscribers under a monthly plan x ARPU

Average Revenue Per User (ARPU)

The ARPU is a KPI commonly used in SaaS businesses. It tracks the amount of revenue you expect to get from an individual user. Tracking your ARPU can help you understand if you are targeting the correct audience and the correctness of your pricing strategies.

ARPU = Total revenue in a set period / the total number of users in the same period

6. North Star Metric

A North Star Metric is an excellent indicator that captures your product's core value to customers. It's a guiding metric that aligns the team toward a common goal. Take Uber, for instance. The North Star metric for Uber would be to increase the number of weekly rides. Similarly, the North Star metric for Airbnb would be to increase the number of nights booked.

Your North Star metric should consist of a product vision statement and a metric that serves as a critical measure of your current product strategy.

Instead of selecting lagging indicators that tell you what happened in the past, choose a metric that predicts future revenue. Your North Star metric should pinpoint the early actions leading to customer retention.

Always remember an excellent north star has three attributes:

• It gauges the moment when a customer finds value in your product.
• It encapsulates the core of your current product strategy.
• It is a leading indicator in predicting future business outcomes.

Conclusion

When people use your product, they share important information through their actions on the product. You need a cutting-edge product analytics tool like Houseware to make the most of this data. It keeps track of what people do in your product and helps product teams derive data-driven insights. With Houseware, you can quickly generate reports and analyse the data without being dependent on data teams and waiting for answers.

Always remember to tie your product metrics with strategic goals. Tracking these metrics regularly lets you stay agile as you optimise your product.

FAQs

How do you track product metrics?

Tracking product metrics involves using product analytics tools to monitor and analyze various aspects of your product's performance. Effective tracking of product metrics involves seamless data collection, robust analysis, and swift action. It's an ongoing process that requires adaptability.