Product Metrics: How to measure product success

what is success for you when do you feel that you succeeded in well your job is it when you're promoted and get a raise or maybe when you're tasked with more important assignments and greater responsibilities or does success mean increased creative freedom to work on the jobs you enjoy we all envision success differently and we need some sort of north star to gauge if what we're doing is getting us closer or farther from it for businesses success is usually measured in monetary value but revenue alone is a third-rate guide to building a sustainable product that

brings value to both your company and customers how can a business find its north star and what might it be [Music] how to measure product success product management metrics [Music] take a look at hinge this dating app launched as an alternative to the fast swiping culture of tinder and is designed to be deleted for the national day of unplugging in march 2020 they even gave out a hundred dollars to couples who disabled their accounts and went on a date for hinge the number of leaving users is a metric of success it's called good churn good

because people leave after they found what they needed on the app churn rate is traditionally viewed as the metric of customer dissatisfaction or an appearance of a better cheaper proposition on the market the more superficial dating apps usually look at the number of downloads or active users and they're not wrong because every app website or software products has its own goals and an understanding of success which of course determines what metrics they will be using to track that success but before we lose you in the depths of product management terminology let's quickly summarize what metrics

actually are metrics or key performance indicators kpis are quantifiable data points numbers that show how well the product is doing and if there are any hurdles on your path to the goal numbers about revenue trends customer acquisition or user engagement when analyzed correctly will tell you many things about your users and the market overall which then will allow you to make informed business decisions metrics are also like shortcuts into your audience's mind that give you an aggregated view of how customers interact with the product for example at the beginning of the 2020 quarantine bubble noticed

a dramatic 56 spike in video calls people started chatting more and for longer times in april an average call lasted 28 minutes this drove the company to roll out even more virtual dating features in july tinder caught up to the trend and introduced video calls as well but as we already said metrics are very individual and have a lot to do with how you see the product journey product managers are very careful in choosing the right metrics that will determine everything from which updates to make to what marketing strategy to use in promotion which brings

us to the main point how do you determine your product metrics let's talk about your goals goals are specific steps in your business strategy sometimes your goal is simply to grow and acquire more users you need to know how effective your promotion channels are where people are coming from and how much it costs to attract them and for your existing user base you want to know how they engage with the product hinges overall mission is to help you escape the swiping cycle and find you a partner i met someone so its goals are to find

you better matches have you engaged in longer conversations and of course go on a date translated into metrics these goals help hinge know how well their matching algorithm works and whether to introduce changes and then they'd check on metrics to make sure the effort was worth it but inherently any product needs to earn money and keep cost low besides your stakeholders will look at financial indicators first and user satisfaction second vine a culture-defining app that dominated the internet in the mid-2010s was shut down in 2017 due to a lack of monetization attracting new customers retaining

them and making sure that you grow are three fundamental goals with metrics attached to them how do you know you succeed in each of these areas let's start with user acquisition metrics the most basic acquisition metric is traffic or if we talk about apps the number of users traffic is an excellent indicator that your marketing strategy is working or not suppose high traffic to e-commerce travel or service provider sites doesn't result in conversions it usually means that users bounce leave the website after visiting just one page and you either don't attract the right customers or

provide a poor user experience alternatively a high number of pages per session will tell you that your content or functionality is helpful engaging and targeted correctly customer lifetime value is the ultimate measure of customer experience multiplying an average value of the sale by the number of all transactions and the average customer lifetime say six months before an average customer stops using a product will give you an understanding of how much you should be investing in customer retention and acquisition say you're a niche online bookstore and you spend a hundred dollars on an advertising campaign on

facebook that brings you around 200 new buyers that means that it costs you 50 cents to attract one customer your average customer buys 10 bucks a year and has been using you for two years at least your profit margin on each book is 10 so this amounts to around 40 dollars in profit that you generate from that one customer over their lifetime this is your customer lifetime value that's a positive scenario that shows that your advertising efforts have been successful so far and it's worth investing in them more but if all those 200 people bought

just one book and never came back you'd have about two dollars in profit from one of them and you'd have to run another campaign each month to stay afloat if your customer lifetime value is low you should work on retention by improving customer experience and satisfaction better marketing improved ux and attractive discounts all to make sure the customers you already attracted keep bringing value which is where we turn to user engagement metrics user engagement shows how people choose to spend their time with your product high engagement such as leaving likes scrolling or writing comments correlates

with retention and loyalty you will often see mobile apps online games and social networks boast their numbers of active users active users are those who do some valuable actions on your website and app for example facebook's daily active users amount to 1.82 billion people on average this metric itself shows your growth but for a broader picture use a ratio of daily to monthly active users it shows the stickiness of your product a good ratio would be 20 at least insanely popular products like tiktok amount to 50 churn is the metric most closely associated with customer

satisfaction and engagement yet as we already discussed it's not sophisticated enough to help you learn why customers stay is it because they enjoy the product or because they can't seem to reach their initial goal to know for sure you must ask you've probably answered these questions before on a scale from 1 to 10 how likely are you to recommend this product to your friends if your answer was lower than seven know that it's considered just as bad as one the metric is called net promoter score the answers help product managers divide responders into three user

groups detractors neutrals and promoters and work with them accordingly if you have more promoters than detractors pretty good and if the number of promoters is twice the size of the number of detractors it's a huge success of course net promoter score isn't nuanced because without leading questions you have no idea why a person wouldn't recommend your product which is why companies often use a customer satisfaction score a customer satisfaction score allows you to ask multiple questions and make them as wide or narrow as you want from their satisfaction with using the whole product to the

unique benefits of a specific feature ask it after the download to rank the onboarding or right before the subscription renewal to introduce improvements and when you want to make sure that your interface is easy to use ask customers to rank how easy it was to find the information or complete the task how long people stay on those pages is equally important if users spend more time messaging than swiping hint considers it a success but if we're talking about tinder or swiping is the central part of the experience this requires some attention especially when your revenue

comes from ads and extra features available only on the main page regardless of how happy and involved your users are the fate of the product and the company will still depend on whether it can sustain itself financial metrics is how you know that it can software products especially the ones operating on the subscription model need to forecast how much revenue each user will generate in the long term one such important metric is monthly recurring revenue mrr allows you to consider different groups of customers the ones that joined this month the ones that were downgraded and

those who were upgraded to another payment model and of course the ones who churned dividing mrr by the total number of users you can calculate an average revenue per user a metric for understanding which subscription tiers drive the most revenue to learn how to optimize your pricing netflix's arpu numbers actually impact its regular price changes each year netflix shares streaming space with an increasing number of players when subscribers add slowly and their arpu doesn't increase it means that users are underpaying for the service netflix experiments with raising a fee by a dollar or two in

certain regions to balance the metric out hinge relies on the strongest form of advertisement word of mouth when you ask your friend how they met their partner and they say unhinge you're likely to try the app yourself this model although more sophisticated than traditional promotion works because of the well-oiled mechanism of transforming data into business decisions your north star metrics should always be available to report on the product's successes and failures choose a few that best reflect your business model relationships with customers and goals don't be afraid to change them if your product evolves differently

than expected the system of metrics will inherently help you make decisions based on data not guesswork decisions that will result in better product bigger value and success for all tell us what metrics you use for your online store app or software product and if there are any important metrics that we missed remember to leave them in the comments below [Music] you