From Retention to Revenue: Key Metrics That Measure Growth

Tracking metrics is not just about analyzing numbers. It’s about understanding your business, your customers, and where things can improve. Whether you're managing a product, running a business, or improving user experiences, knowing which metrics to focus on can make all the difference.

In my experience, it’s easy to get overwhelmed by data. Focusing on the right numbers, the ones that actually drive growth and retention, helps cut through the noise.

Retention: Keeping Your Customers Engaged

Retention is one of the strongest indicators of your product's success. If customers are sticking around, it’s a sign that they see value in what you offer. For me, tracking retention rates was always a priority. It gave us a clear understanding of how well our product solved customer problems over time.

The formula is simple:

Retention Rate = 
(Number of users at end of period / Number of users at start of period) * 100.        

This metric helped me spot trends. If retention fell suddenly, there was an issue that needed attention. Sometimes, even minor UX problems or bugs could cause significant drops in retention.

In one of my previous roles, we focused on first-week, two-week, and six-month retention. The first week was critical because our product was complex, and users often dropped off simply because they didn’t understand how to use it. This is where refining our sign-up and onboarding flow paid off. Tracking retention over the 14-day trial period was crucial, as users were unlikely to convert to paying customers if they didn't see the value within two weeks.

Week One Retention Benchmarks

Lifetime Value (LTV): Understanding Customer Worth

Knowing how much a customer is worth over the long term helps you make smarter decisions about marketing, sales, and product development. LTV is all about figuring out how much revenue you can expect from a customer over their lifetime.

For example, if it costs you €100 to acquire a new customer and your product starts at €12 per month, it might seem like the acquisition cost is too high. But LTV tells a different story. If a customer stays with you for years and gradually upgrades to higher-tier plans, the revenue they generate far exceeds their initial acquisition cost. That’s why understanding LTV is crucial for making informed business decisions.

Feature Adoption: Are Users Engaging with What You Build?

You’ve built a great feature, but are people using it? That’s where feature adoption comes in. One of the biggest lessons I’ve learned is that building a feature doesn’t guarantee it’ll be used. The real challenge is ensuring users actually engage with it.

If adoption rates were low, we’d ask ourselves: Did we build something users really need? Did we communicate its value properly? Did we make it easy to use?

But adoption isn’t just about usage. It’s about impact. Even if a feature is widely adopted, you need to ask: Is it being used by the right customers? Does it solve the problem you intended it to? And most importantly, how does it impact your overall business objectives?

Monthly Recurring Revenue (MRR): Predicting Growth

For subscription-based products, MRR is one of the most important metrics to track. It gives you a clear view of your recurring revenue each month and helps you predict future growth.

One of the key metrics I used was the MRR Growth Rate:

MRR Growth Rate = 
(MRR for this month - MRR for last month) / MRR for last month * 100.        

This metric helped us not only predict future revenue but also understand when and why users were upgrading or downgrading. It was a simple way to keep an eye on the health of our product.

ARPU: Average Revenue Per User

Understanding the average revenue per user (ARPU) is essential. While it might seem like a simple number, ARPU helps you identify your top clients and assess how much value they bring. In one of my previous roles, we discovered that several high-paying customers were having a significant impact on our ARPU. These "power users" paused their subscriptions from time to time, causing noticeable revenue fluctuations.

By analyzing ARPU, we were able to dive deeper and find opportunities to increase it. One strategy was to set up interviews with our top customers to understand what made them successful with our product and how we could apply those insights to a broader audience.

Active Users (MAU, DAU): Measuring Scale

Tracking monthly active users (MAU) and daily active users (DAU) is a great way to understand your product’s scale. But it’s not enough to simply watch user numbers grow, you need to look at the segments behind those numbers. Are your premium users growing, or is it mostly free users? Knowing this helps you focus on driving value where it matters most.

Net Promoter Score (NPS): Listening to Your Customers

NPS is one of the most straightforward ways to measure customer loyalty and satisfaction. It’s based on a simple question: How likely are you to recommend our product to a friend?

NPS is more than just a number, it’s a window into customer sentiment. By asking users to explain their ratings, you can uncover deeper insights that went beyond the score. Detractor feedback, in particular, was incredibly valuable for understanding what needed improvement.

Learn more about NPS in my other posts: NPS explained.

Bringing It All Together

The beauty of these metrics is how they complement each other. Retention shows if users stick around. Feature adoption reveals whether they engage with new tools. MRR tracks your revenue growth. And NPS highlights customer loyalty. Together, they provide a full picture of how your product is performing and where to focus next.

Every product is different, and so are the metrics that matter. Tailoring your approach to fit your product's specific needs is very important. But these key metrics: retention, LTV, feature adoption, MRR, and NPS provide a solid foundation for tracking success and driving continuous improvement.

If you have any questions or want to dive deeper into specific metrics for your industry, feel free to comment or reach out. I’m happy to share more insights and experiences.

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