Product Metrics: Choosing Metrics That Help Move the Needle

Without a well-defined set of metrics, your team can’t be sure their work will meaningfully impact big business goals like revenue and profit.

We built this guide to help you choose the right product metrics—goalposts that can drive your product team’s day-to-day work and ensure the work you do actually moves the needle on broader business goals and objectives.

Here, we cover:

• What product metrics are and why they matter
• How product metrics differ from business metrics
• How to determine which metrics you need
• The top 5 product metrics to track, plus a framework for your goals
• How to build a product metrics dashboard to track your KPIs

Product metrics are numbers and data that help companies measure and judge the success of their product. They help you understand how frequently customers use your product, what they do inside your app, and how those metrics contribute to business growth.

More importantly, these metrics help product managers understand users, their behavior, and, crucially, how changes to the product can impact that behavior.

Product teams use that knowledge to prioritize and measure everything they do, including:

• Developing a holistic understanding of users and their behavior
• Defining overall product strategy
• Setting product roadmaps
• Making changes to products and testing how those changes impact user behavior, retention, churn, etc.
• Measure how each product feature contributes to things like revenue and retention
• Monitoring new product and feature launches
• Segment users based on characteristics and behavior

Why Do Product Metrics Even Matter?

As part of a data stack that enables product teams to access product data quickly and autonomously, product metrics make it possible to bring real, meaningful data into everyday product decisions.

With access to real-time product metrics, product managers (PMs) can:

• Quickly build exactly the kind of product users want—leading to more revenue in less time
• Boost conversions to grow faster and bring in more revenue, without added costs
• Reduce churn and grow retention and lifetime value—meaning more revenue and MRR protection over time

That’s why the ability to turn data into insights—and insights into decisions—marks the real differentiator for companies today.

Everyone has data. That’s why product metrics and analytics have become even more important as the modern data ecosystem has evolved.

More companies have access to growing amounts of data on their customers and products, often housed in cloud data warehouses.

So the data advantage isn’t about having data anymore—it’s about turning that data into digestible numbers (like product metrics) and insights, and using those insights to make better, faster, and more effective product decisions.

That’s how companies develop a truly product-led growth strategy—by deeply understanding users, how they navigate the product, and which characteristics, interactions, or behaviors correlate with churn and retention. Product metrics enable businesses to identify their levers of growth and develop a product strategy and roadmap that maximizes them.

Here’s a question we hear a lot: how are product metrics different from business metrics?

Here’s the answer: business metrics tend to focus on financial performance and include common measurements like Monthly or Annual Recurring Revenue (MRR and ARR), Customer Lifetime Value (LTV), and Customer Acquisition Cost (CAC). For a lot of companies, these are the bottom line—what did you spend and how much revenue did you generate from that spend?

But financial metrics like those are lagging indicators of performance. And setting an MRR goal doesn’t necessarily help your team figure out what to do on a day-to-day basis. Your product team knows your goal is to hit $1 million in MRR—but how can they make that happen?

Product metrics help teams bridge the gap between where the business and product are now and where they need to be in order to hit financial KPIs and business metrics.

By keeping track of product metrics like active usage, feature adoption, retention, and more, product managers can make data-driven decisions on a day-to-day basis that enable you to build a roadmap, prioritize tasks, and track real-time metrics that can tell you whether you’re on track to hit those financial business metrics.

How Do You Determine What Product Metrics You Need?

Just like any team within the org, there are tons of metrics product teams can track. As data and user tracking capabilities have grown and become more accessible to companies of all sizes, the sheer number of product metrics readily available has grown.

But which ones should you track? The short answer is: track the product metrics that make sense for your product and team.

The longer (more helpful) answer involves understanding some of the most common product metrics, what they represent, and when they’re useful. Then you can pick and choose to build your product metric framework (more on that later!).

Some of the most commonly tracked product metrics include:

• Active users
• Usage frequency
• Adoption rate
• Feature adoption
• Activation rate
• Engagement
• Retention
• Churn

Let’s take a closer look at each of these.

Active Users and Usage Frequency

Active users are among the most popular usage metrics for apps, software, and other digital products. The actual metric will vary depending on your product, but it’s often measured as monthly active users (MAU), weekly active users (WAU), or daily active users (DAU).

The tricky part about measuring active users is that there’s no one definition for “active use.” You need to come up with a standard that makes sense for your product. It can be as basic as opening the app or more complex, like completing a specific task within the product.

Usage frequency is a similar metric, but it’s expressed as a percentage—of your entire user base, what percentage are active users?

You can measure usage frequency overall or break it down by individual features, too. With a Product Analytics tool, you can gauge how usage frequency changes over a set time period and how usage varies within different segments or cohorts of your users.

When you get that level of detail with usage frequency, you can:

• Find and fix friction that stops users from using your app more frequently
• Gauge the impact of product onboarding efforts in helping users to get the most from your product

Adoption Rate and Feature Adoption

Your product adoption rate tells you the percentage of your user base who’ve fully adopted your product (or a particular feature). This is a key metric for product teams because it gives you a sense of how deeply customers use your product. Deeper use tends to correlate with higher retention and more likelihood customers will upgrade.

Plus, when you know what adoption looks like overall, you can dig deeper, analyzing how adoption rates vary between features within the product, change over time, and vary across cohorts and segments of users.

Those analyses can give you a more holistic view of adoption and what drives it, making it easier to plan your roadmap, prioritize features, and understand who your best customers are.

Activation Rate and Time to Value (TTV)

Typically, when new users first sign up for your product, they aren’t totally bought in and ready to be loyal, long-term customers. Loyalty and retention only come after the user has bought in, seen the value of your product firsthand, and thought, “Aha! I need this product forever!”

That “Aha!” moment is your activation point, and it holds the key to building a product that banishes churn and retains users for the long haul. Your product team should have a defined set of user behaviors that serve as this activation point.

Understanding how many new users reach this point—and how long it takes (often called time to value)—is a key product metric. Only when you define and measure activation can you grow it (and retention accordingly) by funneling more users to their “Aha!” moment, faster.

Engagement

Engagement measures, on average, how frequently customers use a product. In many cases, the more often customers use a product, the more valuable they find it—which means higher engagement often leads to increased retention, lifetime value, and revenue.

Monitoring this product metric ensures you give users a product they love, use, and are happy to pay for.

Plus, measuring engagement opens the door to deeper analyses you can use to brainstorm and prioritize new features, improve the product, and more.

For example, you can use a Product Analytics solution to perform Cohort Analysis on your most engaged users. By digging into the features they use and other common behaviors, you can uncover the best ways to cultivate higher engagement across the rest of your user base.

Analyzing the opposite cohort—users with particularly low engagement—you can identify potential causes of drop-off and low engagement. Causes you may be able to mitigate, help other users avoid, or eliminate entirely.

Retention and Churn

Retention and churn go hand-in-hand. Your retention rate represents the percentage of customers who continue to use and pay for the product over a set period of time. Churn is just the opposite: the percentage of customers who drop-off or cancel, usually measured on a monthly basis.

Building a product that encourages retention is one of the biggest ways product teams can impact the company’s bottom line. It’s the key to product-led growth, and it’s absolutely vital for SaaS companies in particular.

If you track retention and churn using a Product Analytics tool like Indicative, you can take this even deeper. You can build customer segments for both high- and low-retention groups of users, for example, and explore how behavior within the product varies across each.

With that information, you can uncover the behaviors and usage that correlate with high retention, prioritizing features that encourage retention and nudging users toward high-retention usage.

Metrics to Avoid

Is there a wrong product metric to track? Yes and no.

While there’s no harm in tracking them, certain metrics don’t add much value and can serve as a bit of a false flag. We call these vanity metrics—numbers that may look good, but don’t actually help you take action to improve the product.

Instead, your time is better spent focusing on actionable product metrics that allow you to uncover the best ways to build a better product and map back to overarching financial business goals.

Some common vanity metrics we recommend avoiding include:

• Pageviews
• Bounce rate
• Session duration and time on page
• Registered users

It’s worth noting that these aren’t necessarily vanity metrics for everyone—page views and bounce rate may be useful for other teams like marketing and web development. But they don’t help product teams build a better product, so they’re effectively vanity metrics for our purposes here.

There are lots of other vanity metrics you can track, so before you spend time contemplating any product metric make sure:

• You can make a concrete business decision based on what you learn
• Your team can materially impact the numbers
• The resulting data will provide a realistic view of the product and your users

To recap: your product metrics should…

1. Drive actionable day-to-day decisions and work
2. Tie back to broader business metrics and goals

Which product metrics will tick those boxes varies from one product team to another because they’re impacted by both industry and growth stage.

For example, the top product metrics for SaaS companies include a comical, yet helpful, acronym known as Pirate metrics (AARRR):

• Acquisition
• Activation
• Retention
• Referral
• Revenue

SaaS companies should focus on product metrics that fall within those five buckets, identifying more granular goals around things like activation rate, feature adoption, retention over time, and average revenue per user (ARPU).

The difference between industries is largely seen at the lower level. All industries care about acquisition and revenue—but an ecommerce business, for example, is less concerned with activation. Their product metrics may focus more on new purchases, average order value (AOV), and repeat purchases.

The metrics that will help your team move the needle often change depending on the business growth stage, too. Typical Pirate metrics emphasize acquisition, and they’re best suited to startups with small existing user bases.

As your company and product mature, RARRA metrics may work better. The RARRA model uses the same Pirate metrics, but they’re reorganized based on importance.

• Retention
• Activation
• Referral
• Revenue
• Acquisition

For mature, subscription-based, or high-competition businesses, retention is king and queen. With RARRA, retention metrics are at the fore, while acquisition becomes more of a background focus.

A Framework for Your Product Metric Goals

When you’re deciding which product metrics to focus on, it’s easy to choose a handful and go from there. But taking a more deliberate approach can make it easier to prioritize improvements and strategically drive higher level goals. That’s why we recommend following a 3-layer framework.

• Layer 1: Your North Star metric
• Layer 2: Complementary metrics
• Layer 3: More specific drivers of your Layer 2 metrics

Here’s an example of the framework in action: a SaaS company that sells health tracking software wants to grow revenue. They identify that active usage is the key to both long-term retention and upgrades—both of which drive revenue.

• Their North Star metric is weekly active users (WAU)

In layer 2, they want to track the metrics that will help them grow WAU, metrics the product team can materially impact with their day-to-day work. In this case, those include the company’s Pirate metrics. Their Layer 2 metrics include:

• New user acquisition
• Activation rate
• Usage frequency
• Revenue per user

Layer 3 enables the team to get more specific and granular. These help break down and add more context to Layer 2 metrics, so they can reverse engineer improvements in those numbers. For our example SaaS company, Layer 3 metrics may include:

• Churn as a percentage of new signups
• Adoption rate by feature
• Time to value
• 7-day retention
• App opens
• Time to upgrade

With this framework in place, the product team is well-positioned to guide and prioritize everyday work while ensuring their product metrics map back to broader business goals and move the needle on things like revenue.

To benefit from your product metrics, you need to be able to keep track of them in a way that’s streamlined, accessible to the whole team, and customizable with the numbers that matter for you.

That’s where building a product metrics dashboard comes into play. A well-built dashboard makes quick and easy work of monitoring your product KPIs, identifying any anomalies or changes, and sharing results across the team and the rest of the company.

With an Indicative dashboard, for example, you can:

• Save analyses and track your product metrics on a dashboard that’s shareable across the team and the wider org
• Customize which analyses and metrics you include, then tinker with display options, data visualizations, and other settings to tailor your dashboard
• Set widgets to update automatically, so you’re always looking at fresh data

How to Build a Product Metrics Dashboard in Indicative

Creating a new dashboard for your product metrics is easy if you use Indicative. Here’s the step-by-step process.

• Step 1: Create a dashboard by going to the Views dropdown and selecting New Dashboard. Give the dashboard a name and description, then choose which folder to save it in.

• Step 2: Add widgets as needed to build your ideal dashboard. Navigate to the New dropdown and select the type of widget you want to add. Define the analysis, then open the Save As New dropdown, select Widget, and choose your product metrics dashboard.

• Step 3: Add new metrics any time—directly from any analysis—by following the same process.
• Step 4: Customize your dashboard. Choose from screen or print mode, set your widget layout flow, drag-and-drop to reorganize analysis, and resize widgets until your dashboard is exactly how you want it.

That’s it!

Your product metrics dashboard is ready to help keep your team in the loop, help you present results to stakeholders and executives, and evolve with your product and team.