Week 27 - 📈 📊 How to Develop and Write KPIs: A Guide for Product Managers 📋
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KPIs are like a GPS for product managers, except they won't reroute you when you take a wrong turn, they'll just tell you how far away from your destination you are.
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📈 📊 How to Develop and Write KPIs: A Guide for Product Managers 📋
KPIs (key performance indicators) 📊 and metrics 📈 are critical tools that help you measure how well your product is doing and identify areas where you can improve.
In this blog post, we’ll dive into the world of KPIs and metrics, discussing what they are, why they matter, and how to choose the right ones for your product.
What are KPIs and Metrics?
Source: https://www.investopedia.com/terms/k/kpi.asp
KPIs and metrics are two different types of performance measurements that are used to assess the success of a product.
KPIs are high-level performance indicators that are tied to specific business objectives. For example, if your company’s goal is to increase revenue, a KPI might be the number of new customers you acquire each month.
Metrics, on the other hand, are more granular performance measurements that help you understand how well your product is doing in a particular area. For example, if your KPI is to increase the number of new customers, a metric might be the conversion rate of website visitors to new customers.
📈 📊 How to Develop and Write KPIs: A Guide for Product Managers 📋 🖊️
KPIs (Key Performance Indicators) are essential measurements that help product managers track progress toward their business objectives. However, creating effective KPIs can be challenging. To help you develop and write KPIs that are actionable, meaningful, and trackable, here's a step-by-step guide:
1️⃣ Start with your business objectives 🎯
The first step in developing effective KPIs is to start with your business objectives. What are the goals of your business, and how does your product contribute to those goals? You should have a clear understanding of your business objectives before you start defining KPIs.
2️⃣ Identify your product's key areas of focus 🔍
Once you have a clear understanding of your business objectives, you can identify the key areas of focus for your product. What are the most important aspects of your product that will contribute to achieving your business objectives? For example, if you're developing a social media app, key areas of focus could be user acquisition, engagement, retention, and revenue.
3️⃣ Define specific metrics for each area of focus 📉
Once you've identified the key areas of focus for your product, you can define specific metrics for each area. These metrics should be measurable, actionable, and tied to your business objectives. For example, if your key area of focus is user acquisition, you could define metrics such as the number of new users, the cost per acquisition, or the conversion rate from free to paid users.
4️⃣ Write KPIs that align with your metrics 📝
Once you have defined specific metrics for each area of focus, you can write KPIs that align with those metrics. KPIs should be simple, specific, and trackable over time. For example, if your metric for user acquisition is the number of new users, your KPI could be to increase the number of new users by 20% in the next quarter.
5️⃣ Monitor and adjust your KPIs over time 🔄
Once you have defined your KPIs, it's essential to monitor and adjust them over time. Regularly reviewing your KPIs can help you identify areas where improvements can be made and make data-driven decisions. If you're not achieving your KPIs, it may be time to adjust your metrics or KPIs to better align with your business objectives.
👍 Use this template for writing Effective KPIs:
Definition 📝: Provide a clear and concise definition of the KPI.
Objective 🎯: State the overall objective of the KPI.
Target 🎯: Identify a specific target value for the KPI. This should be a realistic and achievable goal that aligns with the overall objective.
Measurement 📊: Describe the method used to measure the KPI. This should include the data source, calculation method, and frequency of measurement.
Responsibility 👤: Identity who is responsible for tracking and reporting on the KPI. This may be a specific individual, team, or department.
Action Plan 📅: Describe the specific actions that will be taken to improve the KPI if it falls below the target value. This should include the responsible party and a timeline for completion.
Rationale 🤔: Explain why this KPI is important for the business and how it supports the overall strategy.
Related KPIs 🔄: List any related KPIs that are important to track alongside this KPI to gain a complete picture of performance.
Notes 🗒️: Include any additional information or notes related to the KPI that may be relevant for stakeholders or team members.
Let’s take an example of the Facebook marketplace here.
📈 KPI: Increase the Monthly Active Users (MAUs) of Facebook Marketplace by 10% over the next quarter
Definition 📝: The number of unique users who have made at least one purchase or sale on Facebook Marketplace within the last 30 days.
Objective 🎯: Increase monthly active users of Facebook Marketplace to drive revenue growth and user engagement.
Target 🎯: Increase MAUs by 10% over the next quarter.
Measurement 📊: MAUs will be measured using Facebook's internal data analytics platform and will be reported monthly.
Responsibility 👤: The Marketplace team will be responsible for tracking and reporting on MAUs.
Action Plan 📅: If MAUs fall below the target value, the Marketplace team will conduct user research to identify areas of improvement, implement targeted marketing campaigns to increase user adoption, and work with the Facebook Ads team to improve Marketplace visibility to users.
Rationale 🤔: Facebook Marketplace is a key revenue driver for Facebook and is integral to the company's long-term growth strategy. Increasing MAUs will drive more sales and user engagement, and also increase the value of the platform to advertisers.
Related KPIs 🔄: Average order value, conversion rate, and time spent on the platform are important KPIs to track alongside MAUs to gain a complete picture of Marketplace performance.
Notes 🗒️: Facebook Marketplace is currently available in over 70 countries and is a key part of Facebook's e-commerce ecosystem, which includes Instagram Shopping and WhatsApp Business.
By following these steps, you can develop and write KPIs that are effective in tracking the performance of your product and contributing to your business objectives. Effective KPIs can help you make data-driven decisions, communicate performance to stakeholders, and ultimately drive success for your product. 🚀
👨💼 💼 📈 Why KPIs and Metrics Matter for Product Managers 📊 📉
Source: https://www.geckoboard.com/blog/what-is-a-key-performance-indicator-kpi/
Here are a few key reasons why KPIs and metrics matter for product managers:
📈 📉 They help you measure progress: KPIs and metrics provide an objective way to measure how well your product is doing. By tracking your performance over time, you can see if you’re making progress toward your goals and identify areas where you need to improve.
📊 🧐They help you make data-driven decisions: By gathering data on how your product is performing, you can make informed decisions about what changes to make. For example, if a metric shows that users are struggling to find a particular feature, you can use that information to prioritize improvements to that area.
💬 👥 They help you communicate with stakeholders: KPIs and metrics provide a common language for communicating with stakeholders about the performance of your product. By sharing data on how well your product is doing, you can build trust and support for your initiatives.
Choosing the Right KPIs and Metrics 🎯
Choosing the right KPIs and metrics can be a challenging task. There are hundreds of potential measurements to choose from, and it can be not easy to know which ones are most relevant to your product.
Here are a few key considerations when choosing KPIs and metrics for your product:
🎯 Tie them to your business objectives: Your KPIs should be directly tied to the objectives of your business. For example, if your company’s goal is to increase revenue, your KPIs should focus on metrics like customer acquisition, conversion rates, and average order value.
📈 Make sure they’re actionable: Your metrics should be actionable, meaning they should provide insights that you can use to make improvements to your product. For example, if you’re tracking user engagement, you should also be looking at how to improve that engagement through changes to your product.
🤔 Keep them simple: Don’t overcomplicate your KPIs and metrics. Focus on the most important measurements that will help you track progress towards your goals. Too many KPIs and metrics can be overwhelming and make it difficult to focus on what’s most important.
📊 Track them over time: Make sure you’re tracking your KPIs and metrics over time so you can see how your product is evolving. This will help you identify trends and patterns that can inform your decisions about what changes to make.
Some Common KPIs and Metrics for Product Managers
The KPIs you choose will depend on the objectives of your business and the nature of your product, there are some common measurements that many product managers track. let's take Facebook Marketplace as a product and see how KPIs and metrics vary based on objectives.
If you are not familiar with Facebook Marketplace it is a platform that allows users to buy and sell items from each other
Source: https://www.ixxocart.com/uk-facebook-market-place-the-step-by-step-guide-for-marketers-2020/
🚀 Acquisition
This measures how many new customers you’re bringing in. Metrics to track might include the number of website visits, the number of signups, or the number of app downloads.
For example, The primary goal of Facebook Marketplace is to bring in new users who are interested in buying and selling items on the platform. The number of new users is an important KPI, and metrics to track could include the number of downloads of the Facebook app, the number of Marketplace visits, or the number of new user registrations.
👍 Engagement
This measures how engaged your users are with your product. Metrics to track might include time spent in the app, number of pages viewed, or number of actions taken.
For example, Once users are on the platform, Facebook wants to keep them engaged by making it easy to find and buy the items they’re interested in. Metrics to track could include the number of searches performed, the number of listings viewed, or the time spent on the platform.
🔁 Retention
This measures how many users continue to use your product over time. Metrics to track might include user churn rate, average user lifetime value, or number of repeat purchases.
For example, Facebook Marketplace wants to ensure that users continue to use the platform over time. Metrics to track could include the number of repeat purchases made by users, the average lifetime value of users, or the number of users who return to the platform after a certain amount of time.
💰 Revenue
This measures how much money your product is generating. Metrics to track might include average order value, conversion rate, or total sales.
For example, While Facebook Marketplace doesn't charge sellers any fees to use the platform, it does make money through ads and promoted listings. A key KPI for Facebook is the total revenue generated by Marketplace. Metrics to track could include the number of promoted listings sold, the average cost per click, or the total ad revenue generated.
😊 Customer satisfaction
This measures how happy your customers are with your product. Metrics to track might include Net Promoter Score, customer reviews, or customer support ticket resolution time.
For example, To ensure that users are happy with their experience on the platform, Facebook Marketplace could track metrics such as the average rating of sellers, the percentage of listings that receive positive reviews, or the response time of customer support tickets
By tracking these KPIs and metrics, Facebook Marketplace can better understand the performance of the platform and identify areas where improvements can be made. This data can be used to make data-driven decisions, communicate performance to stakeholders, and ultimately drive success for the product.
Conclusion
KPIs and metrics are critical tools for product managers. By choosing the right measurements, you can track progress toward your business objectives, make data-driven decisions, and communicate the performance of your product to stakeholders.
When selecting KPIs and metrics, it’s important to tie them directly to your business objectives, make sure they’re actionable, keep them simple, and track them over time. By following these guidelines and focusing on the most important measurements, you can drive continuous improvement and success for your product.
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