10 Metrics every Product Manager should know, understand and optimize.

Product metrics are data that captures the various ways customers or users interact with your product and show how those interactions affect your business. Selecting the right metrics to serve as key performance indicators is vital for the product development process.

Product Metrics to Track

1. Customer Satisfaction(CSAT): Customer satisfaction is a measurement used to quantify the degree to which customers are satisfied with a product, service or experience. The very reason why businesses measure CSAT is retention, which is a vital factor in long-term business growth.
Formula: (Sum of Satisfied Customers/ Total responses) x 100

2. Active Users(AUs): Active users metric counts the number of unique users who engage with a product within a particular period of time. Active user counts are a vital product metric to measure churn rate, growth, and product stickiness.
Formula: Users who do X on the product in a day, week or month.

X could be users who perform a certain number of actions or transactions on a product.

3. Churn Rate: Also known as attrition rate, is a metric that shows the rate customers stop using a product over a certain period of time.
Formula: (Number of churned customers / Total number of customers) x 100

4. Customer Retention Rate: The retention rate measures the proportion of customers you have retained over a specific time period.
Formula: (customers at the end of period — new customers acquired) / customers at the start of period x 100

5. Conversion rate (CVR): Conversion rate is the percentage of visitors who take action on your product that achieves the company’s desired goals out of the total number of interactions.
Formula: (Conversions / total visitors) x 100

6. Cost Per Acquisition: Cost Per Acquisition is a marketing metric that measures the total cost of acquiring a new paying customer via a specific channel or advertising platform.
Formula: (Total marketing costs/number of new customers acquired)

7. Net Promoter Score(NPS): The NPS is a metric that measures the likelihood of customers to recommend your businesses to others. It is the most common metric used for measuring customer loyalty.
Formula: (%Promoters — %Detractors) / Number of Respondents x 100

8. Contribution Margin: A contribution margin is a metric that shows the profitability of a specific product or product line produced by a company.
Formula: (Revenue — Variable Costs) / Revenue

9. Customer Lifetime Value(LTV): The LTV metric indicates the total revenue a business can reasonably expect from a single customer over the predicted customer lifespan.
Formula: Average Transaction Size x Number of Transactions x Retention Period

10. (Net) Revenue Retention Rate(NRR): NRR is the percentage of recurring revenue from existing customers you retained over a given period.
Formula: (Starting revenue + expansion — contraction — churn) / starting revenue x 100

Metrics are powerful when used well. Choosing and observing metrics over time requires discipline, and focus. And that’s what you need to build and manage successful products.