Product Analytics Metrics
Product analytics metrics are measurements that help businesses drive decisions. These metrics are key performance indicators (KPIs) that product managers use to determine how customers are interacting with the product, identify the value it brings to the company and, importantly, indicate what improvements the company should make.
Types of Product Analytics Metrics
It’s difficult to find a single type of software product, app or platform that isn’t data-driven. The purpose of collecting product analytics metrics is to transform large swathes of raw data into actionable insights. Product managers pore over product analytics metrics like hawks so they can make decisions that result in delivering the most value to customers.
There are a number of ways to measure how well a product or platform is hitting or missing goals. These are some examples of product analytics metrics that can reveal important information about customer behaviors:
- Average time of conversion from first visit to paying user or subscriber
- What percentage of users have engaged with specific product features
- Average session duration per user
- Number of key actions performed per session
Choosing which metrics to look at depends on a business’s objectives. It might be reaching new customer segments, increasing user engagement, or identifying features that make your platform more valuable to subscribers. But no matter what your objectives are, product analytics metrics provide concrete data about your platform, customer journey, and customer experience.
Product Management Metrics
With so much competition out there, companies need a strategy for standing out, reaching more customers, and tracking revenue. Product analytics metrics that provide actionable insights should be a crucial part of that strategy. Establishing key performance indicators are the first step toward gaining actionable insights.
Understanding your customers and their journey is one way to see which metrics to track. AARRR, which is shorthand for acquisition, activation, retention, referral and revenue, was developed by venture capitalist, Dave McClure, as a way for startups to identify KPIs.
Acquisition: How did customers arrive at your platform?
Activation: Do visitors want to continue using your product?
Retention: How many customers you’re retaining?
Referral: Are customers coming to your platform at the recommendation of friends or colleagues?
Revenue: What is your revenue? What you really want to measure is whether your revenue is higher than your costs.
Key Performance Indicators
To be sure your platform is inline with your business goals, here are important KPIs to define:
Businesses calculate paid and organic traffic to see how many users visited a website. Organic traffic is defined by visitors who found the site through a search engine. Paid traffic relates to visitors who found the site via paid search, such as social media ads, sponsored display ads, or any paid-for source. This metric demonstrates whether your efforts at attracting new users are working and how well they’re working.
Customer Acquisition Cost
This is the cost spent to attract and acquire new customers. The formula includes how much a company spends on marketing and sales outreach to potential new users. One easy formula to start with is:
Sales & marketing spend for a month/year
/ total # of customers generated during that period
Find out what other costs you should include in your CAC formula.
Monthly Active Users
Daily active users (DAU) are the actual number of users on your website, app, or platform per day. You can also calculate monthly active users (MAU). A more established business may opt to only count “active” users, or those who complete a key activity per day, week, or month.
Get informed about monthly active users.
This user-behavior metric measures the percentage of customers who visit a site one time and then leave. A high bounce rate could reveal that you need to make changes. If more visitors decide to stay on your site, you’ll have a lower bounce rate.
Do you know what your bounce rate says about your business?
The percentage of users who stay on your platform or sign up (or download or login) is your customer retention rate (CRR).
Total # customers at the end of one month
/ total # of customers at the start of the month
= monthly CRR
If your app has 500 subscribers on April 1 and 550 subscribers on April 30, your monthly CRR is 110%.
Find out why knowing your user retention rate matters.
This KPI measures the amount of users who left the platform after having been engaged users or customers. If your CAC is higher than your churn rate, that’s an actionable insight indiating your CAC is too high.
Customers lost / Total customers = Customer churn rate
Find out more about customer churn.
Number of Sessions Per User
This is a key user-behavior metric. How can you know if your product is valuable to users? Find out how often users are on your platform. You can also break it down by customer segments. You may discover significant differences in how different populations behave, which will provide you with important actionable insights regarding areas that need improvements.
Key Actions Per Session
This metric digs deeper into your user behavior metrics. You can also calculate the total number of key actions or average number of key actions per session. Knowing which features users engage with provides crucial information about your customer experience, including what features might need improvements, popular features vs. unpopular features, and which features you can afford to eliminate.
Customer Lifetime Value (CLTV)
This calculation lets you see how much revenue a user will generate over their lifetime as a customer. “The point of this KPI,” says custom software builder AltexSoft, “is to show you how much you can spend to attract a new customer at an early stage.”
Read more about CLTV.
Product analytics metrics will provide you with important knowledge, but the real value lies in how businesses learn from these metrics. Specifically, says AltexSoft, “how you interpret, hypothesize, and spark change” in your organization.