From Pixels to Profits: 9 Essential Metrics to Link UX Design and Business Goals
I get this query very often from young designers (my mentees) often working for young startups without any design leadership —
“Viraj, My PM counterpart has asked me to define my KPI’s myself. How do I define my KPIs when I am building what he has been asking? Aren’t we building the same product together — so we share the same KPIs?” — Sr. UX.UI Designer
I have many things to say to them where I suggest them to zoom-in and zoom out, talk to the PMs, understand the nature of the business and immediate goal, and throw in a few metrics. But I felt that my thoughts are everywhere and I think the takeaway is also less over a call. So this is my attempt to compile my learnings and create a framework one can follow to simply become an outcome-driven designer with clear goals to chase.
In this post, we will :
1. What are different business & product Metrics?
Let’s say you are hired as a designer at a specific level. Why were you hired in the first place? Let’s look at two cases.
ROI — Return on Investment: Every decision in business is measured by its ROI.
Well, let’s dive into what the business wants.
The job of any company is to grow its profit, quarter by quarter. Period.
So businesses are always looking to expand aggressively. Designers sometimes feel shy and intimidated while interacting with sales and ops teams. But thanks to those teams, the growth cycle is sustained and you get your salary on time. Everything falls apart when that fails (eg: layoffs). So understanding that your job as a designer is not just to solve user problems but to support a growing business shifts the mindset drastically. Whether it is prioritization, timelines, or fidelity — everything can tweaked based on these goals. Now let us understand the WHY, WHAT & HOW of product metrics.
??Tip: See who is getting the recognition & rewards in Sales and Ops teams. Talk to them.
WHAT: What is the Business Goal?
The simplest Immediate Business Goals would look something like this:
?? Note: Sometime the immediate goal is to raise funding from VC and you might feel confused. Be aware of your org goals. Founders expect value in helping them raise money. Even if it is with visually stunning pitch decks or landing pages.
WHY: Why is the goal not moving? What is the marker of slowness?
Now what you can understand is which of these business metrics is going to move the goal. Let us drill down some important ones. Think of these as simple markers of the goals.
There are many others but largely these are key metrics that cover 80% of business health. So let's go one by one.
Total amount of goods and services sold. It is a substitute for measuring revenue for marketplace businesses. If you are a food cart, your GMV is
Eg: for FY 2023–24, Flipkart GMV is $20 billion & Amazon India is at $18 Billion.
2. MRR/ARR — Monthly Recurring Revenue & Annual Recurring Revenue
For a subscription-led business, MRR and ARR play an important role. It's simply the value of new subscriptions done per month (MRR) or Year (ARR).
Eg: Intercom’s ARR is $250 mn
3. CAC — Customer Acquisition Cost
Super important metric. It tells you how much your business is ready to spend to get one paid customer. Getting your product to the customer isn’t free even for an online business. Do you know the fixed cost of landing a customer on your product? It includes the sum of all costs like Ads, Incentives, Discounts, etc divided by the total number of users converted. Users are only free via organic channels like SEO, Social Media, and Content Marketing — but remember that is also a cost. Cost of blog writers, digital marketing & graphic designers.
Eg: in e-commerce, the average CAC is around $45 to $50. Amazon spends about $150 to $180 per customer.
4. LTV — Lifetime value.
It talks about how much will user spend on the platform before they leave the platform or switch to a competition. It is generally calculated for 1 year and projected over 5 years.
An average Netflix subscriber stays on board for 25 months. According to Netflix, the lifetime value of a Netflix customer is $291.25
5. LTV/CAC — A ratio, a marker of business value creation
Basically how much your efforts pay at the end of the transaction with a customer. What you can ask your business counterparts is — It is worth it? It is okay even if CAC ( customer acquisition cost) is high but is your business worthy enough that the customer pays 5–6 times that value? A good benchmark for LTV to CAC ratio is 3:1 or better. That is the least.
For eg: Microsoft gives $25000 of FREE cloud credits initially, but a tech company like Uber might be paying $ millions in yearly bills.
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Note: It is not always bad if your CACs are industry highest in your domain. Sometimes thats what takes to keep the competetion at bay. Point is that the CAC/LTV ratio should be high to make a sustainable business.
6. DAU: Daily Active Users (also WAU, MAU)
Total number of unique users who came to your platform on any particular day. They can be old(returning) and new users. Extending the definition, WAU is Weekly and MAU is Monthly Active Users.
Eg: Chatgpt’s MAU is about 600 Mn
7. DAU/MAU — Stickiness
This is a super interesting metric. The percentage of monthly active users who engage with a product in a single day. It is like how many people are sticking to your product daily over a 30-day window. Ideally, you would want more and more users to come daily from the monthly pool. If hypothetically this is 1 (or 100%) which means you have the craziest amazing product. You have captured 100% of your users and all of them come daily to the platform for 30 days. That’s nearly impossible to achieve. That’s like stuff from Elon’s dreams with X(Twitter)
Eg: Meta’s stickiness was 68.7% for 2023
8. ARPU — Average Revenue Per User
This is a simple metric to understand how much a customer pays on average. It is the sum of all revenues divided by the sum of all users who contributed to the revenue. It is generally low for B2C products and high for B2B products.
Eg: The ARPU for Reliance JIo is ? 193 whereas Airtel is about ? 233
9. NPS — Net Promoter Score
Remember the rate 1 to 10 surveys that you get with a follow-up question of “Would you recommend it to a friend? Yes, No, maybe?”
Well, that’s what along with other feedback and surveys, business use to find the NPS score. It is a measure of customer satisfaction with your product and the higher the number, the better the business.
Eg: an NPS score of 50–80 is excellent.
HOW: How to deliver design for goal post?
A typical business funnel would look something like this — AAARRR (Also called the Pirate Funnel). This is how 99% of customer journeys are also planned. In other words, track your user journey from the Facebook Ad to the Payment Success Page and map it to any of the following frameworks that product and marketing teams are using to identify the segments (cohorts) of the users.
So users naturally users drop off at each step. Typically in business-product meetings, the key discussion point is —
A) How to minimize this leakage so that more customers can convert. And B) What is the shortest/easiest way to get a maximum conversion (Low Effort — High Impact)?
This forms the basis of feature prioritization.
?? Find the area where your feature is going to make an impact. For eg: You are building a new core feature that might be adding users to charge more which means more revenue generation or maybe building tutorial videos that might be adding users to activation.
2. Getting over feature mindset and nurturing outcome mindset
Example: So let’s say you are tasked to design an in-app demo of your Saas platform as a feature. You have a 1:1 with your skip level manager. How would you tell them about this project?
What —What is the business trying to achieve? ( Eg: Increase Revenue)
Why — Why it is not getting achieved? (Eg: The current activation rate is low (e.g., only 30% of new users complete onboarding), leading to poor conversion into paying users and hindering MRR growth)
How —How does my work move the needle? (Eg: Design an interactive in-app demo to onboard users seamlessly, ensuring they understand the core product value faster and complete onboarding successfully.)
So instead of saying — “Last month, I made designs for an in-app demo,”
You should say — “I contributed to improving our user activation flow by designing an in-app demo that reduced onboarding friction, leading to a 20% increase in activation rates and supporting MRR growth”
You might still feel a conflict. These goals look the same as the PM’s goal. It is like PMs are planning for it, and you are executing it from a design perspective, tech is executing it from a tech perspective. What is the extra effort thereby you as a designer? How do you get recognized for ‘special’ influence? Well, don’t worry, this is the first step to aligning yourself. While PMs and engineers have overlapping goals, designers contribute uniquely by ensuring user needs and business goals align, leading to measurable outcomes like higher engagement or retention. I will talk about what are the opportunities that designers have to influence the course of a project that set them apart from the rest of the team in a different post.
?? Let's try it ! write 3 such sentences like these for your last project
I hope this helps you to start thinking about the business value of design and aligns your goals and achievements with your peers and seniors.
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Linkedin: https://www.dhirubhai.net/in/virverma/
This is a very important discussion! We see a growing demand for designers who can, not only create, but also quantify the impact of their work. Thanks for sharing these insights!