Crucial Product Metrics for software platforms development and growth, which every product owner should know
KPIs are boring.
Who has time to track metrics of the product, when deadlines are chasing and the roadmap is growing every week
Why measure anything, when I know what my users want?
Lastly, my product got an investment round – isn’t it the best indicator, that it’s going well?
Well… let’s talk about the reality. KPIs don’t have to be difficult to gather and manage.
You will find here a list of mostly used KPIs, examples for certain types of businesses, and much more.
I’ll focus on the numbers for the software-based projects – that’s all I know, sorry to all the hardware / offline product owners, you won’t find too much here.
But, if you are managing the SaaS, e-commerce, AI platform, web / mobile application – let’s dive in.
How to choose the Key Product Metrics / KPIs?
In the land of the blind, the one-eyed man is king
– Desiderius Erasmus
Let’s be honest – we cannot measure every single aspect of the product. And this is OK.
But not measuring anything is also a bad decision.
So how to pick the right product metrics, numbers, indicators, and KPIs?
Firstly, it must be aligned with your product goals. For some types of business, it will be a single indicator, for others, a few. But what’s most important, stay focused.
You should start with figuring out the most significant KPI for your business, a north star metric that is crucial for your company.
Secondly, it must be connected with your monetisation model. It is because different ways of earning money will force different product metrics. Sometimes it will be the number of subscriptions bought, other times the amount of time spent watching ads.
It should also incorporate the users, but it’s not that straightforward.
For some cases, the number of new users will be crucial, for others, new users that don’t use the products don’t matter. In B2B platforms, getting a new client can cost a huge amount of money, but 3 new users a month is a great achievement.
Think about the key product metrics that will tell you if users are performing key actions your product delivers. Rides for Uber, bookings for Airbnb, searches for Google etc.
Your product might provide hundreds of features, but which one is the most essential?
Lastly, it should be fairly easy to measure and understand. If your KPI is a complicated Excel, that grabs the data from the database, converts it, calculates, push through a special secret algorithm to return some value – it might not be the best approach.
Why pay attention to the Product Metrics?
We know how to choose the metrics, but for a second, let’s focus on why measure anything at all. What is the role of product metrics in the project?
Firstly, it should help you drive your business forward. When it comes to the software, the roadmap is crucial for the project’s growth.
Additionally, it’s easy to go over the budget, and start building unimportant features, that, we think, are important or keep optimising, what is already working well.
Another approach to keep improving your product is constant feedback gathering, but the hard numbers are equally critical.
To give an example of such a situation: Let’s say you are great at gathering feedback. You constantly talk to your users, get their opinions etc. A long-time product user told you, that he is angry because he doesn’t get SMS notifications about X. On the other hand, 12 random users told you, a button in email notification is not working for them. Which action has a higher priority on the roadmap?
Without any strategy / KPIs or wider context, it can be very difficult to decide. It’s even harder, when you have a roadmap for 3 months, and every week it’s growing. Not deciding upfront, which tasks get priority, can quickly get to unhappy customers.
Long example, sorry 🙂
I can imagine the same situation with investments, marketing, sales, revenue growth, user segments, HR and any other decisions.
In business, we always have tons of options to take. KPIs should support you to take informed decisions, based on data, not feelings.
Difficult 3-letter abbreviations for product metrics explained.
When I was starting a business, I was watching some startup gurus talking about their projects. It was difficult to understand all these 3-letter shortcuts explaining how great their business was going.
Now I’m a bit older, have a bit more grey hair and I understand it, more or less.
I know everything is googlable, but I wanted to use them in the examples, so let’s use the list below as a cheat sheet for understanding the examples the way I understand them.
- Key Performance Indicator (KPI)
- KPI (if you get here not knowing this one – respect!) is a measurable value that demonstrates how effectively a company is achieving its key business objectives.
- But in business, this term is used much wider, to verify the effectiveness of any process happening in the company.
- Customer Acquisition Cost (CAC)
- CAC is the total cost of acquiring a new customer, including marketing expenses, sales costs, and other related expenditures.
- Customer Lifetime Value (CLV)
- CLV is the total revenue you can expect from a single customer over their entire relationship with your company. It’s important to understand it for your business model because it will differ.
- Monthly Recurring Revenue (MRR)
- MRR is the predictable and recurring revenue from your customers every month.
- Net Promoter Score (NPS)
- NPS measures customer satisfaction and loyalty by gauging how likely customers are to recommend your product to others. It can be measured with surveys, scoring, or affiliate programs, where people can actually promote your platform.
- Average Order Value (AOV)
- AOV is the average amount spent each time a customer places an order.
- Churn Rate
- The churn rate is the percentage of customers who stop using your product or service during a given period. We measure it to predict after what time, we should encourage customers with some actions, promotions etc.
- User Engagement
- Metrics such as daily active users (DAU), weekly active users (WAU), and monthly active users (MAU) indicate how often users interact with your product. In some businesses, it will be much more significant than the huge number of new users.
- Retention Rate
- Retention rate is the percentage of customers who continue to use your product over a specified period.
- Conversion Rate
- The conversion rate is the percentage of users who take a desired action, such as signing up for a newsletter, making a purchase, or completing a form.
There are many more. And people love to use abbreviations to sound more professional, but also to be on the same page when talking to other businesses.
The most important factor is to know why are we measuring something and what impact it has on our business.
What are the best product metrics for…
I wouldn’t say there are best and worst KPIs for any business. If something works for you, brings value, and costs you nothing to keep measuring it – go for it.
But when you start, think about getting an investor, or simply want to improve the understanding of your business, I prepared a set of the most essential KPIs for different types of projects.
I hope this will help you establish a simple Excel which will tell you straight away how you are doing and make better decisions.
Product metrics for SaaS (Software as a Service)
Most SaaS products must focus on constantly growing their active user base, decreasing the cost of acquiring new ones. Other KPIs will differ a lot, depending on the problem they solve.
Basic KPIs to measure:
- MRR (Monthly Recurring Revenue) and ARR (Annual Recurring Revenue)
- Churn Rate – how many customers, when, and why are leaving you?
- CLV (Customer Lifetime Value) – how much, on average, do clients leave with you?
- CAC (Customer Acquisition cost)
- Customer Onboarding Time – can be essential, e.g. from the perspective of answering the question: How long should be the free trial period.
E-commerce platforms metrics
It’s all about the orders and buying processes.
Basic KPIs to measure:
- AOV (Average Order Value)
- Cart Abandonment Rate – no matter how your project defines a cart, it’s worth measuring what is the % of not finished orders. This is the first step to answering the question, of why people don’t buy.
- Churn Rate – in e-commerce can be understood in different ways – how many people ordered only once with you, or how many periodic buyers stopped buying from you?
- Return on Ad Spend (ROAS), and at the same time CAC – depending on your business model. But if you can calculate, that you spend $1 on ads, which converted to $2 earned – the sky is the limit.
- Conversion rate – As e-commerce is often a game of numbers, building a funnel that talks about your business condition and user flows is more important than ever.
- How many people landed on your website → How many built a cart → How many orders → How many paid → How many returned?
Uber for X (On-Demand Services)
This is a specific type of software platform, which in its roots has 1 goal: to take its user from point 1 to point b as seamlessly as possible. So we have 1 key activity, which will determine other product metrics.
- Number of trips – tells us how actively the app is used. Think about what determines if your platforms are needed and if people like it.
- Activation Rate – it is one of these apps, where the total number of users has a secondary role. What you want to measure are the activation rate and the number of people using it.
- CAC – I’d even add ‘A’ to the abbreviation – Active Customer Acquisition Cost, which might require an additional filter but will help design the sales and marketing campaigns to better segments of users.
- Order Frequency
- Supply-Demand Ratio – it is a very common issue in the marketplace apps, but here we also have 2 types of users: drivers and clients, which we need to grow in parallel.
- Average Response Time – which in use along with the previous point can tell you more locally, where the balance is not kept.
Booksy for X (Service Booking Platforms)
This popular business model can be easily translated into many areas of business.
And although in each industry we have at least a couple of established platforms, they don’t solve 100% of the people’s issues, which leads to the idea of building your own.
But, ideas are a topic for a different article. Let’s talk about KPIs.
- Booking Rate / Active users rate – a definition of active user will differ between the platforms, but I believe you can set up the parameters to decide whether the user is active or not (1 booking a month, returning at least 2 times a quarter etc.). It is important to measure not only the total number of users but also the active users rate – these are the ones that make you money.
- Customer Retention Rate – how many people stop using your service in a given period. Again, you need to know what is an ‘average’ usage and what it means that a user stopped using your platform. It is a first step to take action by engaging them at a certain point or reviewing the problem.
- Service Provider Utilisation Rate – booking platforms are a bit like marketplaces – you need service providers and users. Measuring how much business you generate for the providers is a critical factor.
- Cancellation Rate – measuring how many no-shows were on your platform is significant. High numbers can be handled from different angles, but first, you have to know that your platform has an issue with people booking, but not showing.
- Net Promoter Score – sounds scary, but it’s basically about measuring, how likely your users would be willing to recommend your platform to others. It’s important to know it because word of mouth is usually the cheapest and most efficient way to grow.
Actual examples for the biggest (used to be) startups
| Amazon | Purchases per month |
| Airbnb | Booked nights |
| Monthly Active Users | |
| Hubspot | Weekly active teams |
| Monthly Active Users | |
| Quora | Number of answers to questions |
| Slack | Daily Active Users |
| Spotify | Time spent listening |
| Uber | Rides per week |
| Messages sent |
How to Measure It
All right, we discussed the KPIs and their examples for the most popular startup ideas, but now, the question is: what tools to use to easily measure it?
Free Ways
- Google Analytics: Track website traffic, user behaviour, and conversions.
- Mixpanel: Analyse user interactions with web and mobile applications.
- Hotjar: Understand user behaviour through heatmaps, session recordings, and surveys.
- Although HotJar is free, more advanced options are paid. As an alternative, we can suggest looking at Clarity, from Microsoft.
- UptimeRobot: Monitor the uptime and response time of your web services.
- Integration and automation tools like Zapier, Make etc. which will push the data to your spreadsheets or other dashboard solutions. Try to plan upfront, how you plan to use given automation. They can quickly reach paid tier or suddenly stop working, because of high usage.
Paid platforms
Taking as an example, a Metabase. It is a powerful, open-source business intelligence tool that allows you to:
- Create Custom Queries: Write SQL queries to fetch specific data from your database.
- Visualise Data: Generate charts, graphs, and dashboards to visualise key metrics.
- Share Insights: Share dashboards and reports with your team for collaborative decision-making.
- Set Alerts: Configure alerts to get notified about significant changes in your metrics.
A technical tip – it’s much easier to set it up on your own, e.g. in AWS or other cloud. It’s straightforward, and you keep all your data in your infrastructure.
Alternatives to Metabase are Tableau, Power BI, Looker, Google Data Studio and probably there are tons more – choose the one you like the most.
Programmatic Ways
- Custom Dashboards: Use programming languages like Python or R to create custom dashboards and reports.
- API Integrations: Leverage APIs from various analytics platforms to consolidate data and gain more profound insights.
Summary
Tracking and analysing the right product metrics is vital for growth and success. By understanding the key metrics relevant to your industry, leveraging both free and programmatic measurement methods, and utilising tools like Metabase, you can make data-driven decisions that enhance user experience, increase revenue, and drive long-term growth.
Stay focused on your key metrics, continually refine your measurement strategies, and use the insights gained to propel your product to new heights.
With this guide, you’re well-equipped to master product metrics and steer your business towards sustained growth and success.