As a product manager, you rely on data and metrics to inform your decisions and guide your team’s efforts. But not many business owners have a data management background, making product data analytics feel like a daunting task.
Feeling overwhelmed is understandable, considering there are loads of metrics to trust in a business. But not all metrics are worth following. So the first step in product management should be identifying critical metrics and KPIs to pay attention to.
This guide highlights these metrics, so you may want to keep reading.
What Are Metrics and KPIs, and Why Are They Important to Product Managers?
Metrics and KPIs are essential for product managers because they allow you to track the progress of your product and make data-driven decisions. However, these two are distinct. Metrics measure the overall business health, while KPIs (key performance indicators) are a subset of metrics that measure the performance of specific initiatives to achieve a particular goal.
Tracking key metrics and KPIs is essential for product managers because they provide insight into the business performance, which helps make better decisions, better risk assessments, and celebrate success.
Effective metric and KPI analytics start with having the right data analytics tools like Mixpanel. But you may still consider other worthy Mixpanel competitors such as Smartlook, Amplitude, Pendo, Google Analytics, and Adobe Analytics.
Critical Metrics and KPIs to Track
1. Customer Retention
This metric looks at your business’s ability to retain its customers. To get customer retention, you subtract the number of new customers from the total number of customers and then get the percentage of this figure relative to the number of customers you had at the beginning of the period in question.
Understanding your customer retention rates can help you assess your growth rates. Also, you could look at it as a measure of how well your product resonates with the customer. The opposite of customer retention is the churn rate which looks at the rate at which your product loses customers.
2. Conversion Rates
Most customers will first go to the internet to seek relevant information about a problem they seek to solve before making a purchase. While on the internet, the user is exposed to countless options in terms of content.
If you get your site’s SEO right, you will have a high chance of getting in front of many eyes. But getting in front of many eyes doesn’t always mean that your leads will convert into paying customers.
The conversion rate measures the percentage of leads that convert into paying customers after their first interaction with your brand on social media. A low conversion rate shows that many people that get to your site drop off before they become paying customers, probably because they did not get value from your content, a problem that you can solve by improving the quality of your content.
3. Customer Acquisition Cost
Customer acquisition cost refers to the cost of acquiring one customer. You arrive at this figure by comparing the total marketing budget to the number of customers you net per a specific period.
Customer acquisition cost is a critical metric because it directly impacts your profits. If your business has a high customer lifetime value which comes with a high retention rate, the high cost of customer acquisition may not affect your business. However, a high customer acquisition cost can run your business down when your retention rate is low.
4. Revenue by Source
Online marketing involves leveraging different platforms for lead generation. These platforms include organic content marketing on your website, paid ads, organic and sponsored social media posts, and PPC advertising.
All these platforms involve some cost. Also, different platforms will yield different results. Tracking revenue generated from the various platforms is vital as it will impact the customer acquisition cost.
If you notice platforms whose revenue generation does not match the input, the best approach would be to set it aside to focus on the platforms that generate the highest revenue.