Important KPIs for Product Managers to Track

Product managers should keep an eye on a number of crucial KPIs as they assess how well their websites, mobile applications, and other software solutions are performing. Product managers may find it difficult to identify which metrics are key performance indicators, but they cannot afford to ignore the data gathered about their digital products and users.

This article will define KPIs and discuss some of the most important metrics that product managers should monitor.

What Are KPIs?

It’s likely that you’ve heard of the term “KPIs” (key performance indicators). Do you understand the distinction between a KPI and a metric, though? While all metrics are KPIs, not all KPIs are metrics. If a metric addresses a primary business objective, it is regarded as a KPI. For instance, your website’s conversion rate would be a KPI if one of your business’s primary goals is to boost online sales by 20%.

A metric need not be significant just because it is not a KPI. For instance, even if increasing web traffic isn’t your company’s primary goal, the number of new visitors is still an important metric to monitor when gauging the success of your website and brand. A KPI can be any metric. Your company’s management will choose the metrics that will serve as KPIs based on the particular goals of the company.

Product managers should use KPIs to test new concepts and enhance product offerings in addition to monitoring progress and goals. Remember that information is useless if it is not used. Therefore, selecting the appropriate KPIs is essential to creating a product roadmap that is successful over the long term.

Important KPIs to Track

There is nothing wrong with your key performance indicators (KPIs) being different from those of your peers and competitors. We’ll look at some of the most popular KPIs that are significant to businesses. This does not necessarily imply that your business will care about each of these KPIs, though. Once you’ve established your company’s fundamental goals, the KPIs that matter most to your operation should become clear.

In the meantime, some of the most common KPIs product managers focus on include: 

• Customer lifetime value 
• Customer acquisition cost
• Monthly recurring revenue 
• Average revenue per user 
• Traffic
• Daily/monthly active users
• Net promoter score 

Customer Lifetime Value

Customer lifetime value is a measure of how much money a company can expect to make from a customer over the course of their patronage. The phrase lifetime refers to the typical period of time a customer spends making purchases from your company or subscribing to your services. Customer lifetime value is a tool used by businesses and product managers for financial forecasting and business stability planning.

Customer lifetime value is a crucial metric to take into account in addition to financial forecasting when deciding how much time and money should be put into campaigns to draw in and keep customers. Product managers don’t want to invest more money into acquiring and keeping customers than they are making from them.

Customer Acquisition Cost

The cost of acquiring a new customer for the company is measured by the customer acquisition cost. Turning leads and prospects into paying customers requires not only financial investment but also time, effort, and occasionally additional resources. Salaries for the sales and marketing teams, advertisements, marketing software, etc. are a few factors that may affect customer acquisition costs.

Employee time and effort is the hardest component of customer acquisition cost to quantify. Yes, their salaries help to measure this in part, but it can be challenging to determine how much of their time and effort is spent on this task when it could be put to better use. To make sure that customers generate enough revenue to cover the cost of acquiring them, the customer acquisition cost is a crucial metric that is used in conjunction with customer lifetime value.

Monthly Recurring Revenue

A metric used to measure a company’s predictable revenue streams is monthly recurring revenue. For product managers of subscription-based products, the monthly recurring revenue metric is very useful because these sales are distinct from one-time transactions and are much simpler to forecast.

Product managers assess monthly business growth or decline using recurring revenue. Leaders can easily understand how customers upgrade, downgrade, or cancel their subscription services when they have monthly recurring revenue. As a result, if they are losing money or subscribers, they can prepare to make changes or offer unique incentives month after month.

Average Revenue Per User

Customer lifetime value and average revenue per user are similar but different. The amount of revenue a company can expect from a single user is measured by average revenue per user. In contrast to customer lifetime value, which takes a long-term perspective, this metric is based on a short-term basis.

By breaking down their customer base into distinct groups and identifying those that bring in the most money, product managers can maximize the value of this metric. The product can then be optimized and tailored toward the market that is bringing in the most money for the company using this knowledge.

Traffic

Although applications use number of users, a metric that is similar to traffic, traffic is a metric that is mainly used for websites. Traffic counts the number of visitors a website receives from all customer acquisition sources, including paid and organic search results, social media, and other channels. Segmentation is where the traffic metric’s value lies.

Product managers can determine the effectiveness of their paid advertising campaigns or SEO efforts by knowing where their customers come from. They can decide to devote more time and effort to paid advertising, SEO, social media, or any other channel they think will bring in the most valuable traffic for their product using this information.

Daily/Monthly Active Users

Even though the quantity of users or subscribers is a crucial metric, it doesn’t provide all the information. The active users metric shows how many actual users are interacting with the product of your company. Product managers typically gain from studying daily and monthly active users.

However, for some companies, yearly active users may be a more accurate metric to assess the effectiveness of their initiatives. An app like Airbnb, which isn’t used by people every day, will benefit more from yearly active user figures, whereas a mobile game product will pay closer attention to daily and monthly active users.

Net Promoter Score

The Net Promoter Score (NPS) gauges the proportion of customers who would tell others about your enterprise, service, or good. A high NPS clearly indicates that your company is doing something right and delighting customers. However, a low NPS can let product managers know that something is wrong with the user experience. When it comes to making critical product decisions, NPS is frequently used to gauge how well-liked specific app design decisions, features, functions, etc. are.

Conclusion

Other metrics than those we’ve discussed in this post could serve as key performance indicators for your business and its goods. However, the majority, if not all, of the metrics discussed here will be crucial performance indicators for your business. Contact a skilled app development partner if you want to learn more about the KPIs that product managers should pay attention to or need assistance deciding which metrics are most important for your company.