Top 8 metrics to track for Product Managers

5 min read4 days ago

Metrics are crucial as they provide a quantifiable way to measure the success of a product, understand user behavior, and guide strategic decisions. In this post, we will talk about the top 8 metrics that every onboarding PM should focus on to ensure they can effectively manage and improve their products.

1. Customer Acquisition Cost (CAC)

What is it?

Customer Acquisition Cost (CAC) measures the total cost associated with acquiring a new customer. This includes all marketing and sales expenses divided by the number of new customers acquired during a specific period.

Why is it important?

Budget Allocation: Helps in understanding the effectiveness of marketing and sales strategies.
Profitability Analysis: Ensures that the cost of acquiring a customer is justified by the revenue generated.

Example:

If a company spends $10,000 on marketing and sales in a month and acquires 100 new customers, the CAC would be $100.

2. Customer Lifetime Value (CLTV)

What is it?

Customer Lifetime Value (CLTV) is the total revenue expected from a customer over the entire period of their relationship with a company.

Why is it important?

Revenue Forecasting: Predicts long-term profitability.
Investment Decisions: Determines how much can be spent on acquiring new customers while maintaining profitability.

Example:

If a customer spends $100 per month and stays with the company for an average of 2 years, the CLTV would be $2,400.

3. Churn Rate

What is it?

Churn rate is the percentage of customers who stop using a product or service during a given period.

Why is it important?

Customer Retention: Indicates the effectiveness of retention strategies.
Growth Measurement: High churn rates can hinder growth, even if new customer acquisition is high.

Example:

If a company has 1,000 customers at the beginning of the month and loses 50 by the end of the month, the churn rate is 5%.

4. Net Promoter Score (NPS)

What is it?

Net Promoter Score (NPS) measures customer satisfaction and loyalty by asking customers how likely they are to recommend a product to others on a scale of 0–10.

Why is it important?

Customer Satisfaction: Provides insights into customer happiness and areas for improvement.
Word of Mouth: High NPS can lead to organic growth through referrals.

Example:

If 70% of respondents are promoters (score 9–10), 20% are passives (score 7–8), and 10% are detractors (score 0–6), the NPS would be 60 (Promoters% — Detractors%).

5. Daily Active Users (DAU) / Monthly Active Users (MAU)

What is it?

DAU and MAU are metrics that measure the number of unique users who interact with a product daily or monthly, respectively.

Why is it important?

User Engagement: Indicates the level of engagement and product stickiness.
Growth Tracking: Helps in monitoring the growth and user base expansion.

Example:

If a product has 1,000 unique users engaging daily, its DAU is 1,000. If it has 10,000 unique users engaging monthly, its MAU is 10,000.

6. Average Revenue Per User (ARPU)

What is it?

Average Revenue Per User (ARPU) measures the average revenue generated per user during a specific period.

Why is it important?

Revenue Analysis: Provides insights into the revenue contribution of each user.
Pricing Strategies: Helps in evaluating the effectiveness of pricing strategies.

Example:

If a company generates $50,000 in revenue in a month with 1,000 active users, the ARPU would be $50.

7. Conversion Rate

What is it?

Conversion rate measures the percentage of users who complete a desired action, such as signing up, purchasing, or subscribing.

Why is it important?

Effectiveness of Funnels: Indicates the efficiency of the conversion funnel.
Optimization Opportunities: Identifies areas for improvement in user experience and marketing strategies.

Example:

If 10,000 users visit a landing page and 500 sign up, the conversion rate is 5%.

8. Customer Satisfaction Score (CSAT)

What is it?

Customer Satisfaction Score (CSAT) is a measure of customer satisfaction based on direct feedback from customers, usually collected via surveys.

Why is it important?

Service Quality: Provides direct feedback on customer service and product satisfaction.
Improvement Identification: Highlights specific areas where improvements are needed.

Example:

If 800 out of 1,000 surveyed customers rate their experience as satisfactory (4 or 5 out of 5), the CSAT score is 80%.

Final Thoughts!

Are you ready track metrics like CAC, CLTV, churn rate, NPS, DAU/MAU, ARPU, conversion rate, and CSAT. These metrics not only help in monitoring the current state but also in strategizing for future growth and improvements.

Let me know if you are facing any challenges in calculating these metrics.

Thanks for reading! If you’ve got ideas to contribute to this conversation please comment. If you like what you read and want to see more, clap me some love! Follow me here, or connect with me on LinkedIn or Twitter.

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