Table of Contents
What is KPI?
The key Performance Indicator is known as KPI. It is a measurable metric that aids organisations in tracking their progress to their goals. KPIs are frequently employed to evaluate the operation of a particular division of the company.
Some examples of KPI
- KPIs for Startups: These are KPIs specifically designed for startups and early-stage companies. Examples might include monthly recurring revenue (MRR), customer acquisition cost (CAC), and burn rate (how quickly a company is spending its cash reserves).
- Employee Satisfaction KPIs: These are KPIs used to measure employee satisfaction and engagement. Examples include employee turnover rate, absenteeism rate, and employee satisfaction survey scores.
- HR KPIs: These are KPIs used to measure the effectiveness of human resources departments. Examples include time-to-hire, cost-per-hire, and training and development expenses.
Other examples of KPIs include financial KPIs, such as return on investment (ROI) and profit margins; marketing KPIs, such as website traffic and conversion rates; and customer service KPIs, such as first contact resolution (FCR) and customer retention rates.
Why Is It Important To Track KPI For Product Management
Tracking KPIs is vital for product management as it allows you to assess your product’s performance. You may use KPIs to monitor your progress towards your objectives and to help you make data-driven choices regarding your product.
Daily Active Users (DAU) and Monthly Active Users (MAU)
Users’ participation with a product or service can be assessed using two key metrics: DAU (Daily Active Users) and MAU (Monthly Active Users). DAU counts the distinct users who use the product or service on a particular day, whereas MAU counts the distinct users who use the product or service at least once per month.
DAU and MAU are anticipated to keep increasing in 2023 as more people use digital goods and services. 2023 Statista predicts that the average global DAU for social media platforms will be 3.1 billion, while the average global MAU will be 4.2 billion.
Formula:
Dau = Number Of Unique Users Who Engage With Your Product On A Daily Basis
Mau = Number Of Unique Users Who Engage With Your Product On A Monthly Basis
Some of the elements influencing the rise in DAU and MAU are listed below:
- Mobile device adoption: People are using their mobile devices more frequently to access the internet, which makes it simpler for them to use digital goods and services.
- The development of social media: A popular way for consumers to stay in touch with friends and family, social media platforms are also a terrific tool for businesses to reach their target market.
- The expansion of high-speed internet accessibility: People may use digital goods and services without any lag or buffering since high-speed internet is becoming more and more widely available.
Average Revenue per User (ARPU)
ARPU measures the average amount of revenue generated by each user. It’s calculated by dividing total revenue by the number of active users. By tracking ARPU, you can understand how much revenue your product generates per user.
For example, if your product generates $100,000 in revenue and has 10,000 active users, your ARPU would be $10 per user. This information can help you understand the value of each user and identify opportunities to increase revenue.
Formula:
ARPU = Total Revenue / Number Of Active Users
Business Performance KPIs
Business performance KPIs measure your product’s performance against your business goals. These KPIs can include revenue, profit margin, and customer retention rates.
Businesses might also wish to ponder about tracking the KPIs listed below in 2023:
Website traffic is a metric used to determine how many people visit a given website.
- Conversion rate: This indicator calculates the proportion of website visitors who complete an action, such as buying something or subscribing to a newsletter.
- Social media engagement is a metric that assesses how much a company’s social media sites are interacted with.
- Brand awareness is a metric that assesses how well-known a business is among its intended market.
- Customers’ levels of satisfaction with a company’s goods or services are gauged by this statistic.
- Employee engagement is a metric used to gauge how motivated employees are at work.
Bounce Rates
Bounce rates measure the percentage of users who leave your website or app after visiting only one page. A high bounce rate can indicate that your product is not meeting user expectations or that the user experience is poor.
For example, if you have a website with a 50% bounce rate, it means that half of the people who visit your website leave after viewing only one page. This information can help you identify areas of your website that need improvement and optimise the user experience.
Formula:
Bounce Rate = Total Number Of One-Page Visits / Total Number Of Website Visits
Product Usage
Product usage measures how often users engage with your product’s specific features. By tracking product usage, you can identify which features are most popular and which ones may need improvement.
For example, if you have a product with multiple features and one feature is being used more frequently than others, it may indicate that this feature is particularly valuable to users. This information can help you prioritise feature development and improve user experience.
Customer Satisfaction Score (CSAT)
CSAT measures how satisfied customers are with your product or service. It’s typically measured through surveys or feedback forms.
For example, if you conduct a customer survey and 80% of respondents say they are satisfied with your product, your CSAT score would be 80%. This information can help you understand how well your product meets customer needs and identify areas for improvement.
Formula:
CSAT = Sum Of All Customer Satisfaction Ratings / Total Number Of Survey Responses
Number of Support Tickets
The number of support tickets measures how many support requests are being submitted by users. A high number of support tickets may indicate that users are experiencing issues or difficulties with your product.
For example, if you receive 100 support tickets in a month, it may indicate that there are issues with your product that need to be addressed. This information can help you identify areas for improvement and prioritise support resources.
Formula:
Number Of Support Tickets = Total Number Of Support Requests Submitted
Customer Churn Rate
Customer churn rate measures the percentage of customers who stop using your product over a given period of time. A high churn rate can indicate that users need help finding value in your product or that the user experience could be better.
For example, if you have 1,000 customers at the beginning of the month and 100 of them stop using your product by the end of the month, your churn rate would be 10%. This information can help you identify areas for improvement and prioritise user retention efforts.
Formula:
Churn Rate = Number Of Customers Lost / Total Number Of Customers
Monthly Recurring Revenue (MRR) and Customer Acquisition Cost (CAC)
MRR measures the recurring revenue generated by your product each month, while CAC measures the cost of acquiring new customers. By tracking MRR and CAC, you can understand the financial health of your product and identify opportunities to increase revenue and decrease costs.
For example, suppose your product generates $100,000 in recurring revenue each month, and your customer acquisition cost is $10,000. In that case, it means that it takes 10 months to recoup the cost of acquiring a new customer. This information can help you identify opportunities to reduce acquisition costs and increase revenue.
Formulas:
MRR = Recurring Revenue Generated Each Month
CAC = Total Cost Of Acquiring New Customers / Number Of New Customers Acquired
In conclusion, product managers can use various KPIs and metrics to understand their product’s performance and identify improvement areas. Product managers can make informed decisions about product development, marketing, and customer support by tracking these KPIs and using data-driven insights.
To Sum Up!
KPIs for product management play a vital role in measuring the success of a product and the effectiveness of the product management team. Product managers can make data-driven decisions and improve product performance over time by defining and tracking KPIs such as product adoption rate, customer satisfaction, revenue growth, and time to market.
However, it is important to note that KPIs should be tailored to each product and organisation’s specific needs and goals and regularly reviewed and adjusted as needed. With the right KPIs, product managers can effectively measure and optimise their efforts to achieve success and drive business growth.
FAQs
Do I evaluate a process?
Building a performance indicator needs a fundamental component called outcome measurement. To enable corrective action if the process does not produce the intended outcomes.
Do we share a shared language?
A variety of people utilise KPIs. As a result, it’s crucial to explain all the important terms in your KPIs so that everyone will comprehend them. Success depends on everyone who uses or is impacted by your KPIs talking the same language.
Do I use too many KPIs?
The maximum amount of data the human brain can handle at once is seven, on average. Any worker in your company striving to fulfil more than seven KPIs over time needs clarification, and performance will suffer.