We should be able to track, measure and analyze different product metrics to gauge the success of any product. In most cases, the product metrics are quantifiable and are often called Key Performance Indicators (KPIs).
According to me, the following are the top 5 product success metrics - which we should measure to gauge the response:
Product Usage:
We are in the era of an experience economy - for a product to be successful - customers need to make a habit of using the product. According to a study on "The State of Product Leadership" published by the Raleigh-based cloud tech startup - Pendo, almost 80 percent of product features are “rarely or never used.”.
In that context, it is important for us to measure what is actually working in our product. We should measure:
- How many times the product is being used?
- How much time the user is spending on the product?
- Which feature is liked or disliked by the user?
Net Promoter Score:
Once the user makes a habit of using the product, there are chances that they will use the product without actually being prompted to do so. The use of the product will become intrinsic and makes a part of their daily routine. The more a product is used - the chances of users referring the product to their friends and family increase.
We use the Net Promoter Score (NPS) metric - how motivated or loyal the customers are in promoting the product to others. We can use the NPS survey to measure - how likely or unlikely a customer would promote the product. This is measured on a scale of 1 to 10
(1 = Very Unlikely, 10 = Very Likely).
Customers selecting 9-10 are considered - Promotors.
Customers selecting 7-8 are passives.
Customers selecting 1-6 are considered detractors.
NPS : % Promoters - % Detractors
Our goal is to achieve higher NPS and a value of 50 and above are normally considered excellent.
Churn Rate:
Depending on the product type - there will be chances that the customers will stop using the product after a specified amount of time. For us to improve the overall product experience, it is important that we look for the Churn Rate metrics - which will give us an indicator of features that are working and what we can possibly change to improve the product.
We can calculate the churn rate as followed:
The number of Churned Customers/Number of existing Customers.
Average churn rates are normally in the range of 2-8%. A churn rate in the lower range (2%) is considered good.
Traffic:
Traffic is a key product metric - that will give a closer insight into the customer demographics and their usage patterns. Traffic metrics will also help us understand - how many customers turned in organically and how many came through paid marketing campaigns.
Traffic metrics will help us understand what strategies are actually working for our product, and what the traffic sources are. Which campaigns are most effective? By understanding the factors that are driving more revenues - we will be able to make informed decisions in using the right mediums to reach the end customers.
ARPU
Average Revenue Per User (ARPU) shows how much revenue we are able to produce per user on a monthly and annual basis. We will normally calculate ARPU for existing and also new customers. ARPU is an indicator for us to measure business profitability.
A good ARPU indicates the customer's trust in our product and also helps us understand the customer base and their willingness to pay for the features.
ARPU is calculated as followed: Monthly Recurring Revenue (MRR) / Total Number of Accounts
What are some of your product success metrics and how are you measuring them?
I am a product management professional based in Halifax, Canada and I write about technology, innovation, entrepreneurship, and business strategy. You can learn more about me at the following link: https://iamgrt.com
