Originally published on August 9, 2022
Note: This blog post contains excerpts from The Amplitude Guide to Product Metrics. Download the complete guide to learn what each metric means, how to measure them, and why they’re important to track.
Product metrics measure how customers interact with your product, but not all product metrics are created equal. Let’s hone in on the best metrics for tracking user acquisition, activation, engagement, retention, and monetization.
- There are five standard categories of product metrics: acquisition, activation, engagement, retention, and monetization.
- The right product metrics enable you to form a hypothesis, adjust variables to test that idea, and then measure the results.
- Common challenges with selecting product metrics include determining the correct data to track, what actions to take based on that data, and how you perform against benchmarks.
- Track a mix of leading and lagging indicators to better predict future performance.
- Avoid vanity metrics that don’t effectively reflect business outcomes or indicate opportunities for action.
- See the top 15 metrics to track and how to measure them in The Amplitude Guide to Product Metrics
What are product metrics?
Product metrics show how users interact with your product. They’re derived from measurements and often have a numeric component of time, ratio, rate, etc. For example, your activation rate measures how well you’re increasing the number of new active users in your product. Feature usage tracks how a user engages with a given feature, which can provide insight into what aspects of your product deliver the most value or critical actions in the customer journey. Tracking whether users repeatedly return to your product helps you understand whether your business is growing sustainably.
Metrics vs. KPIs vs. OKRs
You might often hear the terms “metrics,” “KPIs,” and “OKRs” used interchangeably. While they are related, each serves a distinct purpose in helping organizations measure success.
Metrics are quantifiable measures that track specific processes or activities, such as retention rate or daily active users.
Key performance indicators (KPIs) are metrics tied to strategic business objectives that help track performance. Imagine your goal is to improve user engagement; your KPIs might be the number of daily active users and the average session duration per user.
Objectives and key results (OKRs) comprise a goal-setting framework that combines qualitative objectives with quantitative results. Companies often use them for short-term, high-impact goals. If we have the same objective (increase user engagement), our key result could be “increase daily active users by 20% in the next six months.”
Why do product metrics matter?
Product metrics give you information on how to improve your product. You progressively measure, experiment, and assess to iterate and improve your product. Tracking product metrics before and after you make changes tells the impact of those changes.
Simply tracking metrics will not explain the “why” behind results. Dig deeper to understand the customer behaviors and product experiences impacting your key metrics.
Product metrics can inform product decisions about:
- Pricing
- Pay model
- Feature mix
- Onboarding flows
- User interface
- Ideal customers
- Messaging
For example, you could A/B test different pricing and pay models and use the activation rate metric to measure each experiment’s success. Similarly, you can track feature usage to see what features your average user finds useful compared to your power users and decide which features to prioritize in your next update. You could also measure your activation rate to understand if your onboarding flows are performing as well as you’d like.
Why is choosing the right product metrics so challenging?
You need data to make informed decisions about changing, improving, and growing your product. However, the sheer volume of data available to product teams today is so vast that it can be unhelpful. Some of the challenges product teams face include:
- Choosing a tool that gathers high-quality data and presents it in an intuitive format
- Matching the right data to your overall product goals
- Determining the right questions to ask and identifying the appropriate data to track to find meaningful answers
- Interpreting your data to reveal insights and next steps
- Determining reasonable benchmarks for products in your industry and comparing how your product stacks up against competitors
What product metrics should you avoid?
Don’t fall into the trap of measuring too much. It will overstretch your team; sometimes, too much data can obscure the trends that matter most to your product’s success.
For example, don’t waste your time with vanity metrics. Vanity metrics are measurements that don’t predict or measure meaningful results for your product. Some examples of vanity metrics are page views, “likes” on social media, and the number of email subscribers. These metrics can be helpful, but you should avoid overfocusing on them without knowing whether they really drive business outcomes.
“If you’re discerning whether a metric falls into the vanity or actionable category, ask yourself, “Can I use this metric to improve my business?” You may find that many of your KPIs are vanity metrics that do not strengthen your business.”—Nate Franklin, Former Director, Product Marketing, Amplitude
Take the Vanity Metrics Test to determine whether or not you’re focusing on the right ones.
Elena Verna, former head of growth at Amplitude, explains that a data hierarchy map that displays how different metrics connect forces you to prioritize metrics that impact your organization’s goals. That way, you track what matters and cut out vanity metrics.
Some metrics might not provide deep insight independently but can be valuable combined with other metrics. For instance, you can measure activation rate, but if you don’t also measure how quickly you convert acquired users to activated customers, you might miss an opportunity to make your onboarding more efficient. That oversight would mean it’s taking longer to show users value, making it more likely they will churn.
Read the full Amplitude Guide to Product Metrics to see which metrics to track
Types of product metrics
Product metrics show how users interact with your product. Your team can use these metrics to better understand what users find helpful, what keeps them coming back, and the best way to take them on a successful journey to becoming loyal customers. Tracking product metrics helps you monitor your business to make informed adjustments and continue to grow it.
Product metrics can be divided into five main types: acquisition, activation, engagement, retention, and monetization. The first four represent the general user lifecycle through your product, whereas monetization can overlap with several stages in the customer lifecycle.
- Acquisition metrics, like the number of new signups and qualified leads, measure when someone first starts using your product or service. They’re great for understanding what marketing channels are working best for your company.
- Activation metrics, like activation rate and time to activate, reflect how well you’re moving users from acquisition to that critical aha moment where they discover why your product is valuable to them and, in turn, provide value to your business.
- Engagement metrics, like monthly active users and feature usage, measure how (and how often) users interact with your product. Example interactions include sharing a song or editing their profile. Users who engage with your product are considered active users. Increasing the number of daily, weekly, and monthly active users is essential for company growth—but only if you measure them accurately.
- Retention metrics, like retention rate, free-to-paid conversions, and churn rate, gauge how many of your users return to your product over a certain period. These are critical metrics for your company’s growth. It doesn’t matter how fast you fill the top of your funnel if users leak out the bottom just as fast.
- Monetization metrics, like net revenue retention, monthly recurring revenue, and average revenue per user, capture how well your business turns engagement into revenue.
Every product metric tells a story about where your business is going or where it’s been. These are called leading and lagging indicators—and you need both to understand your business performance.
The metrics you use as leading and lagging indicators depend on your product goals. For example, if your goal is to increase your number of new subscribers, your number of new sign-ups might be a good leading indicator. If you increase the number of sign-ups, your new subscribers should increase.
Leading indicators drive your daily tactics. You’ll hypothesize, test, measure, and frequently readjust, so it’s best to measure them often.
Lagging indicators, then, measure whether your actions were successful. For example, you might use annual recurring revenue as a lagging indicator for gaining new subscribers.
Lagging indicators are rooted in your long-term strategy. Your changes today may not show up as improvements in your lagging indicators until much later.
Carmen DeCouto, manager of monetization growth marketing at Amplitude, explains that a common mistake teams make is only focusing on revenue-oriented metrics—but revenue is a lagging indicator. In contrast, a leading indicator like a North Star Metric will help you understand “what’s happening right now,” says Carmen.
The North Star Metric is a key indicator of your product’s success, emphasizing the value it delivers to customers. Ideally, your North Star Metric predicts medium- to long-term sustainable growth.
For example, if you’re running a subscription-based product, you might consider annual revenue from subscribers your key metric, but it’s a lagging indicator. Instead, a subscription-based business could identify characteristics that correlate with a user likely to renew their subscription and then build a North Star Metric around that. If a user frequently runs a particular report showing the status of their customers, does that correlate to renewing a subscription? Perhaps that’s a hint that your North Star may be related to the information in that report.
Product performance metrics cheat sheet
Below is a comprehensive list of metrics that contribute to overall product performance. By examining a few key metrics from each category, you can gain a clear understanding of how your product is performing. Here’s a list of 15 metrics, organized by type, that the Amplitude team recommends tracking.
Dive deeper into these 15 product metrics in The Amplitude Guide to Product Metrics. The guide will walk you through:
- How to define the metrics and interpret what they mean for product performance
- How to measure them—using calculations or a product analytics tool
- Why you should track them to make the best product investments
- How companies across industries use these metrics to drive business growth
