A Guide to Product Metrics: How to build your own framework for measuring success

If you build or market products, you’re used to thinking about how to measure their success. You probably already have a dashboard that shows some top product metrics, KPIs, and lots of graphs and charts with lines that go up and down. 

But product metrics are more than just numbers on a dashboard. When you use metrics as tools to make better decisions, you unlock the full potential of product analysis. And when you focus on the right metrics and have the right platform to understand them, you can use product metrics to improve collaboration across teams, grow your business, and drive revenue. 

Read on to learn a bit more about the metrics that matter most for different businesses and how to build your own product metrics measurement framework. Or you can cut the chase and download our full ebook, A Guide to Product Metrics, now. 

Metrics drive strategy. When you’re looking at the right metrics for your product and taking steps to improve them, you can quickly see how day-to-day work on features (and campaigns) affects the overall performance of your product. 

Metrics aren’t valuable in isolation. They relate to and affect each other, so you need a framework to understand and prioritize them. Founder of deepskydata Timo Dechau calls this a metrics tree, where the most important metric informs the other metrics you’ll track. We at Mixpanel will often refer to it more generally as a metrics framework, but the core principles are the same. 

Every company we’ve worked with has a handful of metrics that sum up their product’s overall performance. But among those, there is typically a metric that is slightly more important than the rest, which we call a focus metric. 

 

Then there are more granular metrics that teams and individuals spend their time on to drive movement in the focus metric. We call these level 1 and level 2 metrics.  

If a company’s metrics are set up well, there is a natural hierarchy and upward flow of impact. An individual achieving their goal should advance the team toward its goal, which should in turn get the department or company closer to its goals. 

It’s important to understand that different product metrics will have different importance depending on the type of organization. There is simply no single set of metrics that works for everyone. Businesses and products are all unique and have different goals based on stage and ambitions. An ecommerce startup will want to leverage venture capital to acquire new customers quickly, while a 100-year-old bank will be more focused on retention and upselling within an already large customer base.

That’s why it’s important to compare your performance to other companies in your industry, rather than look for a universal metrics truth (since there isn’t one). 

Explore product benchmarks by industry and put your performance in perspective with our multi-industry Benchmarks Report, or take a deep dive into Media & Entertainment benchmarks and Fintech benchmarks. 

Let’s look at an example of a metrics framework. 

A subscription-based video streaming company’s long-term health depends on its ability to attract the right audience, convert them into paid subscribers, provide them with a great experience, and retain them as loyal users.

Their focus metric might be Weekly Active Subscribers (WAS), defined as subscribers who watch at least one video each week. 

Below that, we see the L1 metrics that will influence and define that WAS number, like total number of subscribers, total minutes viewed, and new subscribers in the last seven days. 

Finally, below that, we have the L2 metrics that are more specific and help define those L1 metrics: for example, subscribers will be influenced by the number of retained, reactivated, and new subscribers. 

Looking at metrics as a whole, instead of in isolation, helps product managers understand what will move the needle and track product performance as a whole. 

As we mentioned above, the focus metric you’ll choose and the metrics you’ll prioritize depend on the type of product you’re building. That said, there are some metrics that every product manager should be aware of and tracking. 

Metrics like retention, engagement, churn, and lifetime value (LTV) tell you how much your users value your product. 

Retention is the metric that shows whether your product has staying power. Think about what drives retention in two ways: Are you bringing in the kinds of people who will stick around, and are you giving those who have already come through the door enough reason to come back? 

Engagement measures a deeper level of commitment to the product. It accounts for both the frequency and cadence of completing key actions, and different companies measure engagement in different ways: Engagement could be defined as the number of key actions taken, minutes of video watched, or number of transactions completed. It’s important to divide this by your active user count to measure the depth of engagement per user with your product. Otherwise, user growth might mislead you into thinking your product is stickier than it actually is.

Tracking feature adoption with metrics like feature adoption rate, time to adoption, frequency of use, and drop-off rate will help you identify what’s working (and what’s not). It’s important to know which features users are flocking to and which ones need to be optimized (or removed completely), so your team is focusing their efforts accordingly. 

Conversions are an important indicator that users are taking the actions you want them to, and progressing through the user journey. Tracking user progression through funnels gives you important insights into conversion problems, but it can also help you understand how conversion rates vary by user attribute or behavior. 

Uptime, performance, and reliability metrics will help you understand how well your product is working and spot any problems before they snowball into something bigger (like missed sales or churned customers).

To shift your organization towards using product metrics for better business decision-making, you need to build a metrics-driven culture. 

Create strong foundations by involving cross-functional teams in metric selection and tracking. Use dashboards that anyone can access and understand to keep different teams aligned on common goals. 

Use product metrics to understand which features to prioritize and track the performance of different iterations. Self-serve, accessible analytics tools will help foster a data-driven mindset without overwhelming teams. 

Metrics don’t exist in a vacuum. In addition to the type of business you’re working on (SaaS vs. ecommerce, B2B vs. B2C, etc.), the growth stage your company is currently at is going to influence which metrics matter most and what you’re tracking. As we mentioned earlier, a 100-year-old legacy bank won’t have the same goals as a scrappy boot-strapped startup. They also won’t have the same budgets or analysis capabilities. 

Early-stage teams have fewer resources and less margin for error. They need to focus on moving the needle as far as possible with the smallest amount of investment because they’re already stretched thin. To do that, early-stage teams should focus most on core usage and engagement metrics. They need to understand who their users are and how they’re getting value from their product, so they can use that information to scale. 

At the growth stage, companies are venture-funded and have more resources at their disposal: higher headcount, higher budget, and a more established user base. The growth stage is the perfect time to add more advanced metrics and analytics like cohort analysis to get more granular data and deeper funnel insights. 

Once companies reach the enterprise level, they have the resources and opportunities to incorporate more advanced analytics and advanced segmentation into their product analysis. 

Enterprises can make full use of predictive analytics and put DevOps into place to break down silos and understand users at scale. 

Product teams are responsible for tracking and improving product performance. Understanding which metrics to track (and how) is the key to doing so successfully and sustainably. If you want to learn more about the fundamentals for defining key performance indicators that enable growth, download our ebook today.