Product Management KPIs Guide

software development kpis

Trying to make the best of the product management process in your organization? Focus on the product management KPIs (key performance indicators). You need to know the important ones. DevTeam.Space’s guide can help you, thanks to our extensive product development experience.

Here are a few projects we have recently completed:

  • DDKoin: A DevTeam.Space team developed DDKoin, a cryptocurrency/blockchain network.
  • An Intellectual Property Sharing and Verification solution: A development team from DevTeam.Space created an end-to-end IP sharing and verification system.
  • Visibook: A DevTeam.Space team created Visibook, a web and mobile appointment scheduling platform.

Read this product management KPIs guide and build great products!

Contents

Setting the context: Product management KPIs vs metrics
Which product management KPIs should product managers use?
Final thoughts

Setting the context: Product management KPIs vs metrics

You can improve your product management process with the help of KPIs. Product management metrics can help you too. Are the product management KPIs and metrics the same?

You use product management metrics to measure any kind of business goal. Many of these business goals might not be core objectives, however, KPIs focus on the core objectives only.

You can think of product management KPIs as subsets of product management metrics. Every such KPI is a metric. However, not all metrics are KPIs. 

Which product management KPIs should product managers use?

Your business context determines the product management KPIs that you should use. The following are the important KPIs and the corresponding categories:

1. Customer Satisfaction (CSAT)

Category: Customer KPIs

Whether you an enterprise or start-up, you need to find out if your customers are happy. Use Customer Satisfaction (CSAT) to find that out. Businesses use different methods to gather CSAT data, and a CSAT survey is a common method.

You design the CSAT survey questions in a manner that covers all aspects of your products and services. The customer satisfaction score and the survey responses tell you which customers are unhappy. The detailed responses indicate why they are unhappy. You can then take corrective measures.

The formula to calculate CSAT is as follows:

CSAT = (the number of positive responses x 100)/the total number of responses.

2. Retention rate, i.e., the rate of user/customer retention

Category: Customer KPIs

Retention rate helps you to measure how many customers stick to your product. It indicates whether you provide a positive customer experience in a sustained manner. Various stakeholders like product teams and sales teams find customer retention important.

You measure customer loyalty over a period of time. The formula to calculate retention rate is as follows:

Retention rate = {(the number of customers at the end of a specific period of time – the number of new customers onboarded during that period) x 100}/ the number of customers at the beginning of that period.

3. Conversion Rate

Category: Customer KPIs

Assume you offer a free trial to your potential customers. The conversion rate helps you to measure the proportion of the trial users that become paying customers. You can determine whether the strategy of offering a free trial works for you.

The formula to calculate the conversion rate is as follows:

Conversion rate = the number of paying customers)/the number of trial users.

4. Customer Lifetime Value

Category: Customer KPIs

Customer Lifetime Value is one of the highly important metrics. It tells you how much revenue you can expect from your customers in the long term. You need to measure the following two metrics for this:

  • How long does a client use your product;
  • Average revenue from a client.

The formula to calculate the Customer Lifetime Value is as follows:

Customer Lifetime Value = average revenue per user x average customer lifetime.

5. Customer Acquisition Cost (CAC)

Category: Customer KPIs

Customer acquisition cost (CAC) is one of the key metrics. This helps you to measure all of your costs to secure new customers or new users over a period of time. You need to measure a variety of costs and expenses here, e.g.:

  • Infrastructure costs;
  • Compensations and benefits to employees;
  • Marketing expenses, which include marketing and ad campaigns;
  • Onboarding costs;
  • Sales-related expenses.

You can revisit your product marketing strategy and pricing model based on CAC.

Use the following formula to calculate CAC:

CAC = operational costs, sales expenses, and marketing expenses for a period of time / the number of new customers acquired during that period.

6. The number of customer support tickets created

Category: Customer KPIs

This metrics shows you how much support your customers need. Measure this KPI over a period of time. For the same period, you can also collect other metrics. A few examples are the number of tickets resolved, average resolution time, etc.

You might enhance your product. Tracking these metrics after an enhancement will show whether customers faced disruptions. You can find out how your support team is coping with the support requests. These provide indications about the user experience of your customers.

To calculate the number of support tickets, sum up all tickets within a specified period. Use other parameters like severity to gain more insights.

7. The counts of Daily Active Users (DAUs) and Monthly Active Users (MAUs)

Category: User Engagement KPIs

These are among the important product management metrics. By measuring active users, you can find if your product engages users sufficiently.

You need to consider the following parameters when defining active users:

  • The duration;
  • The interaction.

Subscribers of users that perform the above-mentioned interaction during the specified duration are active users. Now, you can measure the following:

  • DAUs: The number of active users in a day;
  • MAUs: The number of active users in a month.

To get an idea of how engaging your product is, compare DAUs/MAUs against the total number of daily/monthly users.   

8. Stickiness

Category: User Engagement KPIs

This product management KPI helps you to understand how often users engage with your product. You analyze the product usage data here. This metric shows whether users are returning to your product.

You can calculate it by using a method that suits your product. Consider the example of a SaaS product intended for daily use. You can calculate the stickiness as follows:

Stickiness ratio = DAUs (Daily Active Users)/MAUs (Monthly Active Users).

This indicates what percentage of monthly active users utilize your product daily. A universal benchmark for stickiness doesn’t exist. The nature of your product influences stickiness, and you should monitor the trends. 

9. Session Duration

Category: User Engagement KPIs

Among digital product management metrics, session duration tells you how long users spend on your product. You can find out how users value your content. Improve the content to improve the session duration.

You can calculate session duration as follows:

Session duration = the total time spent by users on your product / the total number of users.

10. Bounce Rate

Category: User Engagement KPIs

Bounce rate refers to the percentage of users that visit only one page of a website or app and leave it. Do you need users to visit multiple pages of your website and app? A high bounce rate isn’t good news for you then. It means too many users are leaving your website or app without taking the actions that you need.

You need to optimize your product, website, or app. That will increase the attention of the average user. Popular analytics tools like Google Analytics measure bounce rate. The formula is as follows:

Bounce rate = (the number of single-page sessions) x 100 / the total number of sessions.

11. Number of User Actions per Session

Category: User Engagement KPIs

This KPI provides a measurable way to understand how usage patterns change when you add new features or change features. You can track how many actions users take when using your website or app. You can also track which actions they take.

First of all, determine which actions you want to track. Choose actions that align with the key functionalities. You can then count these actions. Categorize actions for more insights based on your requirements.

12. Monthly Recurring Revenue (MRR)

Category: Business Performance KPIs

Many companies including several SaaS businesses use Monthly Recurring Revenue (MRR) to monitor their profitability. You calculate the revenue earned by your product on a monthly basis. If nothing changes, then you can expect this amount of revenue every month.

SaaS businesses need a predictable and recurring revenue stream. By measuring MRR, they can find how their revenue is changing over time.

The formula to calculate MRR is as follows:

MRR = average revenue per user on a monthly basis x the total number of users in a month.

13. Percentage of Revenue from New Products

Category: Business Performance KPIs

You can use this key process indicator if you have multiple products including a new product. This KPI helps you to understand how much of your revenue comes from new products. If you don’t earn enough revenue from new products, then you need to revisit your product strategy.

E.g., you might need to enhance your product. You might also need to conduct more market research. The formula to calculate this KPI is as follows:

Percentage of revenue from new products = (revenue from new products) x 100 / total revenue.

14. Average Revenue per User (ARPU)

Category: Business Performance KPIs

SaaS businesses often use this KPI. You can use it to monitor the revenue generated per user. This KPI helps you to validate important product decisions, e.g.:

  • If the average revenue per user is low, then you might not have targeted the right audience;
  • You might not have decided the price of the product correctly.

You can calculate this KPI as follows:

The average revenue per user = total revenue generated during the observation period / the number of users during the same period.

15. Net Promoter Score (NPS)

Category: Business Performance KPIs

You can use this KPI to find out the number of existing customers that might promote your product to other potential buyers. Additionally, you can find the number of detractors. Detractors didn’t experience the kind of product quality to promote your product.

You can find the Net Promoter Score by doing the following:

  • Ask your customers to rate your product from 1 to 10.
  • Establish a uniform standard to identify promoters and detractors. E.g., customers rating your product 7 or above are promoters. The other customers are detractors.
  • Find the % of promoters and detractors.
  • The Net Promoter Score (NPS) is (% of promoters – % of detractors).

Use this KPI to improve the user experience of your product.

16. Roadmap Scoring

Category: Roadmap Validation and Scoring

You have a product roadmap, however, how do you prioritize the work in it? Product roadmap scoring is a helpful KPI for this. You can use your own methods for product roadmap scoring, however, you should use them consistently.

The following is an example of product roadmap scoring:

  • Reach: Calculate the reach of a work item in the product roadmap, i.e., how many users it impacts.
  • Impact: Find out the impact of the proposed work. Use a yardstick consistently.
  • Confidence: Determine your level of confidence in your impact assessment.
  • Effort: Calculate the total effort required to complete a work item in the product roadmap.
  • The product roadmap score for the given work is {(Reach x Impact x Confidence)/effort}.

17. Churn Rate

Category: Customer/User Acquisition

Customer churn rate is opposite to retention date. You might lose customers. E.g., some customers cancel subscriptions since they don’t like some new features. You need to measure this to take corrective actions.

Use the following formula to calculate this KPI:

Customer churn rate = customers lost / total customers.  

Final thoughts

While this product management KPIs guide helps, you might need assistance with software product development. Take a few minutes, and fill out this DevTeam.Space questionnaire. A dedicated account manager will soon help you.

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