Home / Product / Product Success Metrics: How to Measure the Success of a New Product
We all know that kid from middle school, which everyone had big hopes for, but didnât turn into an extraordinary genius, or vice versa; the lazy kid in class becoming an unexpected successâ¦Â
Come to think of it; itâs not always only people that prove other peopleâs expectations wrong.
Thank goodness there are ways to measure Product Success in the early stages so that you donât keep wasting your money on something useless.
Or donât give enough attention to a side feature that actually is the key feature of your product which you didnât realize.
Defining and measuring product success is crucial for any product manager. But with so many potential metrics to track it can be overwhelming to know which ones to focus on.
In this comprehensive guide, we’ll cover the most important metrics and key performance indicators (KPIs) to measure product success across four key areas:
- Business Performance
- Customer Engagement
- Product Usage
- Customer Feedback
Properly tracking and analyzing these metrics will provide invaluable insights into how your product is performing, where there are opportunities for improvement, and whether you’re achieving your strategic goals. Let’s dive in
Business Performance Metrics
While qualitative feedback from customers provides important insights, quantitative business metrics offer hard data on how your product is impacting the company’s bottom line. Here are the key ones to track
Monthly Recurring Revenue
For subscription software or SaaS products, monthly recurring revenue (MRR) is the best metric for tracking business performance. MRR simply shows how much subscription revenue your product brings in each month. Monitoring changes in MRR shows whether your product is growing or shrinking over time.
Customer Lifetime Value
Customer lifetime value (CLV or LTV) measures how much revenue a single customer will generate for your product over their lifetime. This metric helps you understand the long-term value of your customers. Products with higher CLV have greater potential for profitability and growth.
Customer Acquisition Cost
Knowing your customer acquisition cost (CAC) is key for optimizing marketing spend. CAC represents the average cost to acquire a new customer. Compare CAC to CLV to ensure your product generates enough value to justify your sales and marketing expenses.
Customer Engagement Metrics
While business metrics show the revenue impact, customer engagement KPIs indicate how users interact with your product. High engagement suggests you’re meeting customer needs. Key metrics include:
Product Usage Frequency
Measuring how often customers use your product shows whether it’s providing ongoing value. Usage frequency could include logins per period, sessions per period, or transactions per period. Increased usage frequency generally indicates greater customer satisfaction.
Feature Adoption
Monitoring feature adoption shows whether customers are leveraging all that your product offers. This requires tracking usage of key features. Low adoption of a feature indicates it may not be useful to customers or that more training is needed.
Churn and Retention Rates
Customer churn and retention rates help quantify customer loyalty. Churn rate shows the percentage of customers you’re losing in a period. Retention rate is the opposite—the percentage of customers retained. Lowering churn and increasing retention should be ongoing goals.
Product Usage Metrics
Product usage metrics provide granular data on how customers specifically engage with your product. This allows identifying successes, problem areas, and opportunities for improvement. Helpful usage metrics include:
Active Users
The number of active users is a basic but important metric. Active users are customers who have logged in or otherwise interacted with your product within a recent period. More active users suggest your customer base is expanding.
Adoption Funnel
An adoption or onboarding funnel tracks how many customers complete key signup steps and milestones. This reveals dropout points in your onboarding flow where customers are getting stuck.
Feature Usage Rates
Feature usage rates examine what percentage of users engage with specific features. Low usage rates indicate poor feature adoption. You can then focus on improving these features or training customers on them.
Engagement by Cohort
Analyzing engagement metrics (e.g. retention, usage frequency) by user cohort shows whether newer customers engage differently than longer-term ones. This helps identify where you’re improving with new user onboarding.
Customer Feedback Metrics
While usage metrics show how customers interact with your product, feedback metrics capture direct customer perspectives. This qualitative data is crucial for truly understanding the customer experience. Useful feedback metrics include:
Net Promoter Score
Net Promoter Score (NPS) measures customer loyalty and satisfaction through a simple survey question: “How likely are you to recommend this product to a friend or colleague?” Responses range from 0-10. Those rating 9-10 are “promoters”, 7-8 are “passives”, and 0-6 are “detractors”. Subtract the percentage of detractors from promoters to calculate your NPS.
Customer Effort Score
The Customer Effort Score (CES) survey asks “How much effort did you personally have to put forth to get your issue resolved?” using a 5 or 7-point scale. Lower scores indicate the product takes less effort for customers to use effectively.
Customer Satisfaction Score
The Customer Satisfaction Score (CSAT) survey simply asks customers to rate their overall satisfaction with the product on a 1-5 or 1-7 scale. The percentage of customers rating 4 or above represents your CSAT.
Social Media Sentiment
Monitoring social media is a free way to gather candid customer feedback. Social listening tools can analyze sentiment toward your product on platforms like Twitter and Reddit. More positive sentiment indicates higher customer satisfaction.
Key Takeaways for Measuring Product Success
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Focus on metrics tied to business goals like revenue growth, customer retention, and profitability. Don’t measure metrics just for the sake of measuring.
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Combine quantitative usage data with qualitative customer feedback for the full picture. The “why” behind metrics is just as important.
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Regularly review metrics, but don’t react rashly to each short-term fluctuation. Watch for sustained trends.
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Segment metrics by factors like customer type, cohort, geography, marketing campaign, etc. to uncover specific opportunities.
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Share key metrics cross-functionally to align teams around goals. But avoid “vanity metrics” that don’t actually indicate success.
Properly tracking and analyzing the right product metrics provides tremendous visibility into customer needs, product performance, and business impact. But focus on quality over quantity with the metrics you measure. Refine your metrics and KPIs over time as goals evolve.
With these best practices, your product metrics will provide the actionable, insightful data you need to continuously improve and truly measure product success. What metrics have you found most valuable for your product?
Customer Satisfaction Score (CSAT)
Being very similar to NPS, this time, you ask your customers to evaluate a feature rather than the whole product.
There are several significant benefits of using CSAT:
- It helps to determine the key features of your product,
- The customers like to be heard, and developing according to their opinions make it more likely to turn them into promoters,
- You donât have to do a lot of complicated calculations; you just need to ask the customers to rate a feature and get exact results and feedback, which is like the cherry on top.
The use of CSAT is similar to Customer Effort Score (CES), and it is not complicated, I promise.
Customer Acquisition Cost (CAC)
If your expenses per customer are more than the customerâs profit, your business will likely go down.
To prevent such a thing from happening, you can calculate your CAC by:
Mark Thompson, the co-founder of PayKickstart.com, warns us that CAC is often miscalculated and misinterpreted since calculating CAC monthly could be highly misleading.
ââYou should calculate your CAC monthly, quarterly, bi-annually, and annually, compare the results, and move accordingly,ââ he says.
Product Success Metrics | A Complete Tutorial
What are product success metrics?
Product success metrics provide measurable, objective insight into customer behavior and help product managers to ask questions and find answers. Using product success metrics, you can: Product success metrics allow you to measure success and failure in order to build products faster, smarter and better. How Do Product Success Metrics Work?
What does product success look like?
A successful product is one that fulfills the creators’ expectations and pleases the user in every possible way. To be more precise: And has a relatively lower churn rate. What does product success look like for different products? So, first of all, there are tons of Key Performance Indicators (KPI) that are used to measure product success.
How do you measure product success?
Here’s a list of steps you can follow when measuring product success: 1. Assess lead management metrics Lead management metrics can provide an organization with crucial information regarding new leads and the effectiveness of their generation strategies. They can help a company understand whether its approach could benefit from improvement.
What product management metrics should you track?
To help you achieve all your goals as a product manager, we’ve compiled a list of product management metrics that you need to track: Customer KPIs are all about your customers. These product metrics keep track of how satisfied your customers are and how much value they bring to your company. 1. Customer satisfaction
