Mastering data in product management is understanding metrics. They allow you to understand your customers’ needs and behaviors, identify growth opportunities, discern potential issues, and predict trends. Plenty of tools such as Google Analytics, Amplitude or MixPanel will help you understand and leverage data.
But with so many KPIs out there, which ones truly matter? Here are the 10 most important SaaS metrics every PM should master.
1. Daily/monthly active users (DAU/MAU)
These metrics provide valuable insights into how often consumers use your product in a given day or month. They help identify the level of engagement and adoption of your product.
An active user performs some valuable activity on the platform such as watching a video, sharing pictures, or reading a blog.
2. Monthly Recurring Revenue (MRR)
It’s the income that a company can expect to generate every month. It measures an organization’s financial health—especially important for SaaS businesses working on a subscription model. For more in-depth insight, monthly recurring revenue can be broken into specific segments such as new business MRR, expansion MRR, and churned MRR.
3. Customer Lifetime Value (CLTV)
It measures how much total revenue or profit a company can expect to earn from a single customer over the entire duration of their relationship. It aims to identify how much you should spend to attract a new customer at an early stage based on the profit generated by the user. It also helps to identify the right customer acquisition channels, purchasing channels and retention strategies.
4. Customer Acquisition Cost (CAC)
Customer Acquisition is the sum of all activities a business pursues to attract and convert new users into paying customers.
CLTV and CAC are what allow you to see if you spend more money on acquiring customers than what they bring you, and if it is time to reconsider pricing and marketing strategies.
5. Session Duration
Session Duration measures the total time a user spends in a product during a single visit Longer sessions typically indicate higher engagement levels.
A session begins when a user opens an application and ends when they disengage, which can be defined in different ways such as closing the app but also opening a separate window or otherwise going inactive.
6. Bounce Rate
It’s the percentage of users who leave your platform after viewing only one page. A high bounce rate can indicate potential issues with user experience, site design, or content relevance.
7. Customer Retention Rate/Churn rate
Customer retention rate is the percentage of existing customers who remain customers over a given period of time. It refers to an organization’s ability to keep customers buying their products and from switching to other providers. McKinsey states that companies need to acquire three new customers to make up the business value of losing one existing customer
Churn rate, on the other hand, is the percentage of users who stop using your product after a specific period.
8. Feature Adoption Rate
It’s the percentage of users engaging with new or core features. It’s calculated by dividing the number of monthly active users for a specific feature by the total number of user logins within the same month and multiplying by 100.
9. Net Promoter Score
Net Promoter Score, or NPS, is a metric used to gauge customer loyalty and satisfaction.
The NPS is determined by asking customers a single question: « On a scale of 0-10, how likely are you to recommend our company/product/service to a friend or colleague? » Based on the responses to this question, customers are categorized as Promoters (9-10), Passives (7-8), or Detractors (0-6), and the NPS is calculated.
Source: Product School
10. North Star Metric
It’s the most important metric of the product. It defines the success of the product/company and is linked to the vision of the company.
For example, Netflix’s vision is “Becoming the best global entertainment distribution service”. Therefore, the northstar metric here is Session Duration as it denotes that users are spending more time on Netflix because the entertainment quotient of Netflix is really high