Although there’s nothing quite like a product manager’s (PM’s) intuition, today’s product leaders must put data at the center of nearly everything they do.
Effective measurement unlocks data-driven decision making - allowing teams to build products that meet (and exceed) users’ evolving needs and propel the business forward. But just because you’re tracking product metrics doesn’t mean you’re tracking the right product metrics.
In our latest e-book, we walk through the ten KPIs every product leader should have on their radar. Here’s how to measure - and improve - five of them:
Knowing how customers adopt and use your product helps teams understand whether it’s delivering on its intended value. There are two main ways to track adoption: measuring how many users interact with the product (product adoption) or specific features within it (feature adoption).
Product adoption is best expressed over time by the number of monthly active users (MAU), weekly active users (WAU), or daily active users (DAU)—and the right measure will depend on what it means to be an active user of your product. A common way to track feature adoption is by the percentage of features that generate 80 percent of your total click volume. At Pendo, though, we recommend measuring feature adoption based on your product’s most important features, which we call Core Events.
Tips for improving adoption:
- Create an in-app onboarding experience that welcomes and educates users about key features as they navigate your product
- Bring support in-app by providing contextual tips and creating a central location for resources users can access when they need help
- Collect customer feedback to understand your product experience and add context to quantitative usage data
While it’s useful to track how many users and customers are adopting your product, it’s equally (if not more) important to see if those users and customers keep coming back. Stickiness measures how many users return to the product on a regular basis, and is represented by a ratio that can be calculated in three ways:
- Monthly users who return daily (DAU/MAU)
- Weekly users who return daily (DAU/WAU)
- Monthly users who return weekly (WAU/MAU)
Again, the right ratio will depend on what ideal engagement with your product looks like. For example, if your product is one that should be used daily (like a project management tool), DAU/WAU is probably the right fit.
Tips for improving stickiness:
- Look into which features are used by those who access your product most frequently
- Use product data to identify the in-product habits users should be developing, and then create in-app guides to steer users toward those behaviors
- Leverage external channels or programs to nudge users back into your product.
3. Product Engagement Score (PES)
The Product Engagement Score (PES) is a composite metric that takes the average of a product’s adoption, stickiness, and growth rates to provide a single view into product engagement. PES is also particularly useful in helping you understand where you can improve, since you can quickly identify which metric is bringing down the average and identify areas for optimization.
Tips for improving PES:
- To increase adoption, identify which features or workflows are most important for user success, and then create in-app messages to guide users through those areas of the product
- Identify the in-product habits of the users who access your software most often, and then educate the rest of your user base on those actions
- Look into where users are dropping out of workflows to pinpoint problem areas in the product that are causing churn
4. Net revenue retention (NRR)
Net revenue retention (NRR) measures the percentage of revenue retained from your existing customers over a given time period. You can also think of it as the difference between expansion and churn. NRR is especially valuable for product leaders because it takes revenue, expansion, and churn all into account—three measures that your executives, investors, and teams across the organization care about.
In order to measure NRR, you need to know four values: monthly recurring revenue of the last month, revenue generated through upsells and cross-sells, revenue lost due to down-sells, and revenue lost due to churn. From there, simply subtract the last two values from the first two values.
Tips for improving NRR:
- Leverage product usage and sentiment data to understand which in-app behaviors correlate with expansion
- Identify users who are dropping in engagement and use in-app guides to re-engage them
- Use in-app guides to upsell users on additional functionality at key moments in their workflows
5. Time to value
One of the most important moments in the user journey is what many call the “aha” moment: when a user has a clear grasp of why they need a specific software product. Time to value quantifies this experience, and measures the amount of time from when a customer starts using your product to when they start deriving value from it. Just as with feature adoption, we suggest anchoring your time to value measurement around Core Events and measuring how long it takes for new users to engage with these key areas of your product.
Tips for improving time to value:
- Build in-app onboarding with time to value in mind—which features should new users know about right away?
- Create ongoing in-app education to ensure users adopt your product’s most important features
- Use segmentation to understand if certain types of users have shorter time to value, and how you can replicate this for other users
To learn the rest of the KPIs today’s product pros should be focusing on, check out our e-book, “The 10 KPIs every product leader needs to know.”
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This article was originally published on Pendo's Product Teams Blog.