[ \n ](https://www.mustafanafees.com/wp-content/uploads/2020/04/success-metrics.jpg)

There is a famous saying:

> “If you can’t measure it, you can’t improve it.”
>
> Peter Drucker

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As a product manager, your role revolves around the idea of measuring something at one point or the other. Metrics are also referred to as KPIs (Key Performance Indicators) or Success Metrics, they are valuable because they can accurately tell you if your current strategy is working. If results are not as expected, you can always go back to your metrics and establish a new hypothesis.

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These data-driven metrics are defined based on your product strategy, which is further aligned with the company’s strategic objectives and goals. For instance, if your company wants happy customers who share their experiences with their friends and family, then you should measure customer gratification.

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When your company changes its market/business strategy (i.e., switching from growth to revenue), you should readjust your product success metrics as well.

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Here, I will introduce you to different categories of success metrics and how are they used in a broader sense. Nobody uses all of them, it all depends on your industry, type of product, stage, and product maturity. The most significant point is to focus on a few metrics that really matter.

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First and foremost, you need to understand how to ask the right questions before you start measuring anything. Here are a few examples of recognizing your goals so that you can choose the right metrics:

* If we imagine an exemplary customer who is getting value from your product, what actions is he taking?
* What are the key steps a user takes in your product to achieve a goal?
* A particular feature designed to solve a problem that all our users have, or just a subset of our users?

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## 5 categories of product metrics

Product Performance metrics fall into one of the 5 types.


1. Product Flow
2. Actionable value-based indicators
3. Customer Satisfaction
4. Customer Relationship Funnel
5. Customer Lifetime Value

Let’s discuss each of them.

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### **1. Product flows**

These metrics measure the friction in your user experience when users navigate from point A to point B. Do they achieve their goal, and if yes, how?

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**Why?**

* To remove complexity
* Whenever your user finds something confusing, it causes an opportunity for him to abandon and leave.

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**How?**

* Examine screen-by-screen user interaction from the point of entry to the end goal.
* Track on a session-by-session basis (each visit).

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**Actions?**

* Reduce friction and simplify the UX for crucial tasks.

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### **2. Actionable value-based indicators**

These leading indicators identify and measure user *behaviors/interactions* that demonstrate that they obtain value from your product.

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**Why?**

* Repeat, frequent, and lasting usage is a proxy for successful customer-value creation
* They align the goals and best interests of the user with the activities of the product development team.
* Leading indicators enable quicker detection and resolution of issues.

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**How?**

* Target the most critical user-centric goals of your product and pinpoint behaviors that illustrate progression toward them.
* Track by user group over various sessions.
* Use comparative metrics.

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**Actions?**

* Understand why users do not use your product as often as you might like.
* Focus on those changes to encourage repeat usage.
* Regularly remeasure using new users to track improvements over time.

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### **3. Customer satisfaction**

Is your product meeting, failing, or surpassing customer expectations? What specific areas need more attention?

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**Why?**

* Not all customers feel loyalty to your product
* Customer satisfaction is a leading indicator of long-term retention.

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**How?**

* Conduct regular surveys of both occasional and habitual users of your product.
* Measure the product’s benefits and functionality-both overall and in specific areas-to pinpoint root-cause issues.

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**Actions?**

* Use poor results to improve the product.
* Prioritize adding or improving features that have low satisfaction but high importance.

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### **4. Customer relationship funnel**

How well do you optimize each stage of the journey to guide customers toward a more meaningful relationship with your product?

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**Why?**

Customers differ in their level of engagement and their understanding of why and how to use your product. Your product must transition gently from one stage to the next to avoid abandonment.

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**How?**

* Split all users into lifecycle sub-segments, such as leads, trial users, paid users, and long-term users.
* Track users who move successfully from one stage to the next, to identify where they abandon and require to improve.

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**Actions?**

* Discover which steps suffer the most dropouts (lowest rates).
* A|B testing will help push more users incrementally to the next stage.

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### **5. Customer lifetime value (LTV)**

How to bring new customers cost-effectively and retain them long enough with high-enough gross margins to keep your business successful in the long run.

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**Why?**

* You must be able to extract business value over the lifetime of each customer to scale a sustainable business.
* Avoid short-term thinking (such as solely focusing on quarterly revenue targets).

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**How?**

* Calculate the average revenue per user, less variable costs, taking into account churn over the lifetime of paying customers.
* Monitor each channel or customer segment separately so you can optimize customer acquisition costs (CAC).

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**Action?**

* Understand which customer segments are most valuable (useful when deciding which features to prioritize).
* Provide information about which channels to invest in and scale, and when to do so (where CAC<LTV).

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## Qualities of Good Metrics


1. Great metrics are actionable and frequently measurable
2. Successful metrics are aligned with product goals
3. Averages destroy the underlying user behavior and trends.
4. Choose simple metrics with clear, precise definitions for shared understanding.

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I hope it was a valuable introduction to product performance metrics.

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**Further reading:**


1. [The Influential Product Manager](https://www.amazon.com/Influential-Product-Manager-Essential-Management/dp/1523087463)
2. [Finding the metrics that matter for your product](https://www.intercom.com/blog/finding-the-metrics-that-matter-for-your-product/)
3. [Data-Driven Product Management: Choosing the Right Metrics for Your Product](https://productcoalition.com/data-driven-product-management-choosing-the-right-metrics-for-your-product-5b85352b3500)

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Also published [here](https://www.mustafanafees.com/measure-and-improve-products/).

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