Week 5 - Week in Product Series - Product Metrics
Quote
Just because you have existing metrics doesn’t mean that are the right ones - Clement Kao
💯 Framework // Concept // Mental Model - Product Metrics
Product metrics are data points to understand the ways users interact with your product, and show how those interactions affect your business.
Let's do a small recap before we get into product metrics. First, you define the Vision for the product which is the WHY, Then you come up with a strategy on HOW you would reach the vision for the product and the Roadmap is the WHEN you implement features. Product strategy will lead you to the vision or long-term goal. To read more on how vision, Strategy, and roadmap all relate to each other checkout Product Strategy, Vision and Roadmap
Product metrics will tell you if you are moving in the right direction to reach your long-term goal. if the metrics are not helping you to achieve your business goals or reach your long-term vision then you might have to pivot or makes changes to the product strategy to get you in the right direction.
Metrics will help you to:
Set product roadmap
Evolve product strategy
Understand user behavior
Evaluate the success of a product
Measure impact of product features
Test hypothesis and experimentation
Step 1: First, you start by defining the north star metric for the overall product:
The North Star Metric (NSM) is a metric that a company uses as a focus for its growth. This number best reflects the amount of value that your company brings to your customers. In addition, the North Star Metric gives direction to your company’s long-term growth versus short-term growth
Examples of NSMs
Spotify = Time spent listening
Airbnb = Number of nights booked
Uber = Number of rides completed
Youtube = Total watch time
Benefits of north star:
Alignment between teams
Transparency
Customer value
Credits: https://growwithward.com/north-star-metric/#:~:text=focus and energy.-,What is a North Star Metric%3F,growth versus short-term growth.
Step 2: One metric that matters
North star metrics are used by the complete company but the one metric that matters is intended to be used by a team and for the short term to reach a specific goal. OMTM is always supportive of the north star metric and ties back to it. Determining OMTM varies by the stage of your product so the best way to pick an OMTM is to pick appropriate metrics from the pirate metrics mentioned below based on the stage your product is, the stage your company is in, and your overall vision.
Metrics by stages of the customer journey
For product teams, in particular, the pirate metrics (AARRR!) are a great way to measure and improve your product, and track interactions across the full customer journey. They’re great for focusing on different parts of the business, and for evaluating your product’s ability to attract users, meet their needs, keep them engaged, and get them to pay you.
Based on the stage of your company you concentrate on a specific segment of the user journey, as your organization becomes more mature you watch over the complete funnel. For example for a startup user acquisition can be the most important metric but for mature products, retention and monetization can be very important.
Acquisition
Acquisition describes your ability to attract people to your product, and start transforming them from visitors into users
Example: Let's take the Uber example for all the types of metrics.
App downloads or Signups
Activation
Activation captures the moment when a user first gets value from your product—usually the moment when that user first does the thing your product is built for them to do
Example: Number of bookings
Retention
Retention describes your product’s ability to keep users engaged over a longer period of time
Example: Weekly rides per user, Daily active users, Weekly active users, Monthly active users
Referral
Referral measures your product or company’s ability to induce customers to advocate for your product and bring other customers in
Example: Referral per user
Revenue
Revenue is the key metric for business success and the ultimate goal of the other metrics. It tells you if the product provides enough value for the customers to pay for it.
Example: Dollar per user and Dollar per ride
Step 3: level 1 and level 2 metrics
There is typically a metric that is slightly more important than the rest, which is the north star metric at a company level and OMTM at a team level. Then there are more granular metrics that teams and individuals spend their time on to drive movement in the focus metric. these are Level 1 and Level 2 metrics.
If a company’s metrics are set up well, there is a natural hierarchy and upward flow of impact. An individual achieving their goal should advance the team toward its goal, which should, in turn, get the department or company closer to its goals
Level 1 metrics
Level 1 (L1) metrics should either directly contribute to the focus metric or act as a check to make sure the product is growing in a healthy direction
Example: let's assume the product's focus metric is Weekly active users, a good L1 metric would be 7-day retention to ensure you aren’t spending precious marketing funds to acquire new users who leave after a day or two.
Level 2 metrics
Level 2 metrics are specific and drive L1 and the Northstar metrics
Example: To take the retention example one step further, the Level 2 metric could be iOS app retention, and nestled under that could be a Level 3 metric such as the retention of a regional iOS app or a specific feature within the app. While it’s possible to keep adding layers of metrics, be careful about creating confusion around what actually matters
Guard rail metrics
Guardrail metrics keep organizations and product teams on the right track and are used as a tool to ensure that what you’re doing is aligned with your business goals and objectives. They define boundaries and help guide the decision-making process.
Conclusion
There is no single formula to select metrics for products it all depends on what your vision and business goals are. whichever metric you select the ultimate goal is to help your product move in the right direction to reach its long-term vision so selecting your metric and tying them back to the overall goals is very important. You might not get the metrics right the first time as you might not know what is the actual reason why your user is using your product so experimentation will help you choose the right metric.
Sources:
📚 Book
Lean Analytics: Use Data to Build a Better Startup Faster (Lean (O'Reilly))
Lean Analytics can help. By measuring and analyzing as you grow, you can validate whether a problem is real, find the right customers, and decide what to build, how to monetize it, and how to spread the word. Focusing on the One Metric That Matters to your business right now gives you the focus you need to move ahead--and the discipline to know when to change course.
🎧 Podcast:
😎 Meme
I spend a lot of time researching on topics to give you the best content, If you like my work please like and share it with others. If you have any feedback for me or want me to write on other topics please leave a comment below. Thanks for your continued support.