Note: This blog post is an excerpt from The Amplitude Guide to Product Metrics. Download the full guide to learn what each metric means, how to measure it, and why it’s important to track.
Product metrics measure how customers interact with your product, but not all product metrics are created equal. We’ll help you hone in on the best metrics for tracking user acquisition, activation, engagement, retention, and monetization.
- Product metrics can be organized into five standard categories: acquisition, activation, engagement, retention, and monetization.
- The right product metrics let you form a hypothesis, adjust variables to test that idea, then measure the results.
- Common challenges with selecting product metrics include determining the right data to track, what actions to take based on that data, and how you’re performing against benchmarks.
- You should track a mix of leading and lagging indicators to better predict future performance.
- Avoid vanity metrics that don’t provide insight or indicate opportunities for action.
- See the top 15 metrics you should track and how to measure them in The Amplitude Guide to Product Metrics
What are product metrics?
Product metrics are indicators that show how users interact with a product. They are derived from measurements and often have a numeric component of time, ratio, rate, etc. For example, your activation rate measures how well your efforts are increasing the number of new active users. Feature usage helps you track how a customer uses a given feature, which can provide insight into what part of your product provides the most value or is a critical action in the customer journey. And tracking whether users are repeatedly coming back to your product helps you understand whether your business is growing sustainably.
Product metrics give you information on how to improve your product. Tracking product metrics as part of a controlled experiment before and after you make changes tells you whether or not those changes worked. This process of measuring, experimenting, and assessing is how you progressively iterate your product.
It’s important to note that simply tracking metrics will not explain the “why” behind any changes. For this reason, be sure to dig deeper into understanding the customer behaviors and product experiences that impact your key metrics.
Product metrics are used to drive product decisions about:
- Pay model
- Feature mix
- Onboarding flows
- User interface
- Ideal customers
For example, you could A/B test different pricing and pay models and measure the success of each experiment with activation rates. Track feature usage to see what features your average user finds most useful compared to your power users and decide what features to prioritize or remove in your next update. Find out if your onboarding flows are performing as well as you’d like by measuring the time it takes to activate your users.
The challenge of choosing the right product metrics
You need data to make informed decisions about how to change, improve, and grow your product. However, the sheer volume of data available to product teams today is so vast that it can actually be unhelpful. Some of the challenges product teams face include:
- Choosing a tool that gathers quality data and presents it in an intuitive format
- Matching the right data to your overall product goals
- Deciding the right questions to ask and identifying the right data to track to find a meaningful answer
- Interpreting the data to reveal insights and next steps to take
- Determining reasonable benchmarks for products in your industry and comparing how your product stacks up against competitors
Which product metrics should you not focus on?
Don’t fall into the trap of trying to measure too much. That’s a recipe for overstretching 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 things like page views, “likes” on social media, and the number of email subscribers. Take the Vanity Metrics Test to determine whether you’re focusing on the right ones.
Make sure not to whittle away the metrics that still give you important context and insight into user behavior. You can measure activation rate alone, for instance. However, if you don’t also measure how quickly you convert acquired users to activated customers, it can be easy to miss an opportunity to make 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 you should track]
Leading vs. lagging indicators
Every product metric tells a story about where your business is headed or where it’s already been. These are called leading indicators and lagging indicators, and a business needs both to understand how it is performing.
The metrics you use as your leading and lagging indicators depend on your product goals. For example, if your goal is to increase the number of new subscribers to your product, you might use the number of new signups as your leading indicator. If you increase the number of signups, you are hypothesizing that the number of new subscribers will increase in the future.
Leading indicators should drive your daily tactics. They should be something you can measure frequently and easily because you’ll need to hypothesize, test, measure, and frequently readjust as you work to improve them.
Lagging indicators, then, are about measuring whether your actions were successful. You might use annual recurring revenue as a lagging indicator for your goal of gaining new subscribers.
Lagging indicators are based on a long-term strategy. It’s important to know that changes you make today may not show up as improvements in your lagging indicator until much later.
Product metrics categories
Product metrics show you how users are interacting with your product. Your team can use these metrics to better understand what users find helpful, what keeps users coming back, and the best way to take users on a successful journey to becoming loyal customers. Tracking these metrics helps you monitor your business so you can make informed adjustments and continue to grow your business.
These metrics can be split into five categories: acquisition, activation, engagement, retention, and monetization. The acquisition through retention categories represent the general user lifecycle through the 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, show you how well you are moving users from acquisition through 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. Those interactions might 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 important for company growth—but only if you measure them right.
- 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 of time. These are critical metrics for your company’s growth. It doesn’t matter how fast you fill the top of your funnel if users are leaking 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 is turning engagement into revenue.
Each category of product metrics tells a different story, but they all tell an important one. Here’s a cheat sheet of metrics you should be tracking to monitor the health of your products.
Product metrics cheat sheet
||Number of new signups and/or qualified leads
|Customer acquisition cost (CAC)
|Time to activate
||Monthly, weekly, and/or daily active users (MAU, WAU, DAU)
|Customer lifetime value (CLV)
||Net revenue retention (NRR)
|Monthly recurring revenue (MRR)
|Average revenue per user (ARPU)
||North Star Metric
Dive deeper into each of 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 the metrics—using calculations or a product analytics tool
- Why you should track the metrics to make the right product investments
- How companies across industries are using the metrics to drive business growth
Get the guide today.