Introduction to Product Metrics: The Backbone of Product Management

Product metrics play an essential role in the world of product management. They provide valuable insights into whether a product is on the right path towards achieving its goals. A solid understanding of product metrics is crucial for every product manager to guide their decisions, shape the product roadmap, and enhance user experience. In this article, we’ll dive deep into various product metrics, including North Star metrics, one metric that matters, pirate metrics, and the concept of level one and level two metrics. Let’s embark on this journey to understand how these metrics can transform your product strategy.

Why Metrics Matter in Product Management

Product metrics are fundamental for several reasons. They help identify if the direction is correct, align short-term actions with long-term goals, and support the achievement of business objectives. Metrics offer insights into user behavior, evaluate the success of product features, and assist in hypothesis testing and experimentation. Essentially, product metrics are the bread and butter for any product manager, serving as a compass for navigating the complex landscape of product development and management.

The Case Study: Everything Food

To illustrate the concepts, let’s consider a hypothetical company named Everything Food. The company aims to solve the problem of access to home-cooked food, connecting cooks and food enthusiasts through a digital platform. The vision for Everything Food is ambitious: "Create a world where everybody has access to home-cooked food."

Defining the North Star Metric

The North Star metric is a single, crucial metric that reflects the core value a product delivers to its customers. For Everything Food, the North Star metric could be the number of orders. This metric aligns the efforts of engineering teams, product managers, and operations towards a common goal. By consistently increasing the number of orders, the company can measure its progress towards making home-cooked food more accessible.

Examples from Other Companies

To provide further clarity, let's look at some North Star metrics from other companies:

- Spotify: Time spent listening

- Airbnb: Number of nights booked

- Uber: Number of rides completed

- YouTube: Total watch time

- Facebook: Daily active users

One Metric That Matters (OMTM)

While the North Star metric provides a broad vision, the One Metric That Matters (OMTM) is specific to individual teams or functions within a company. It serves as the North Star of that particular task or team’s progress. The OMTM should align with the overarching North Star metric and contribute towards the company's vision.

Understanding Pirate Metrics (AARRR)

The pirate metrics framework encompasses five stages: Acquisition, Activation, Retention, Revenue, and Referral. These metrics help to break down the customer journey into manageable segments and track progress at each stage.

Acquisition

Acquisition measures how users find your product. For Everything Food, the number of app downloads for cooks and food enthusiasts would be essential acquisition metrics. This stage indicates the initial interest in the product.

Activation

Activation captures the first instance of value a user gets from the product. For cooks on Everything Food, activation could be creating a profile and listing dishes. For customers, it could be placing their first order. Ensuring a positive user experience at this stage is crucial for retaining users.

Retention

Retention indicates whether users continue to find value in your product over time. Metrics like daily active users (DAU), weekly active users (WAU), and monthly active users (MAU) provide insights into how frequently users return to the product. For Everything Food, monitoring the retention of both cooks and customers is vital.

Referral

Referral measures the ability of your product to attract new users through existing users' advocacy. Successful referrals indicate a product that delights users enough to recommend it. Metrics such as the number of referrals per user and Net Promoter Score (NPS) are valuable in this context.

Revenue

Revenue is the ultimate indication of business success. It involves tracking metrics like revenue per user, average order size, and cost per acquisition (CPA). For Everything Food, understanding revenue streams and cost efficiency is essential for sustaining and scaling the business.

Level One and Level Two Metrics

Level one and level two metrics act as supporting metrics to the primary ones like acquisition, activation, retention, etc. They prevent the gamification of primary metrics and offer additional insights. For example, if weekly active users are a primary metric, level one metrics might track the source of user acquisition to ensure sustained growth without high turnover.

Importance of Counter Metrics

Counter metrics help to identify when the primary metrics might be misleading, offering a more nuanced understanding of the product's performance. They act as checks and balances to ensure that overall product health is maintained.

Practical Application: Everything Food’s Metric Framework

1. North Star Metric: Number of orders

2. OMTM for Acquisition Team: Number of app downloads

3. Acquisition Metrics: New user sign-ups, app downloads

4. Activation Metrics: Number of profiles created, first-time orders

5. Retention Metrics: DAU, WAU, MAU, repeat order rates

6. Referral Metrics: Number of referrals per user, NPS

7. Revenue Metrics: Revenue per user, average order size, CPA

By tracking these metrics, Everything Food can ensure alignment with its vision, make data-driven decisions, and continuously refine its product strategy.

Tools for Tracking Metrics

Several tools help in tracking and visualizing product metrics:

- Google Analytics: Provides detailed insights into user behavior, engagement, and conversions.

- Tableau and Excel: Effective for creating detailed reports and visualizations.

- Amplitude: Offers in-depth product analytics and user behavior tracking.

Importance of Data-Driven Decision Making

Being data-centric is crucial for product managers. Quantitative data guides decisions, validates hypotheses, and informs strategy. It’s important to continuously track metrics, gather insights, and make informed changes to the product roadmap.

• Regular Review and Realignment

Regularly reviewing and realigning metrics is essential. For instance, set quarterly objectives and key results (OKRs) that align with your North Star metric. Adjust your metrics and strategy based on the insights gathered during these reviews to ensure sustained progress towards your vision.

• Experimentation and A/B Testing

Experimentation, such as A/B testing, is vital for optimizing product features and user experience. Presenting different versions of a feature to different user segments and measuring the impact on key metrics helps in making informed decisions. Ensure you have defined metrics for each experiment to track its success accurately.

Conclusion

Product metrics provide the foundation for product management. By understanding and effectively utilizing metrics, product managers can ensure their products meet user needs and achieve business objectives. Whether it's through the North Star metric, OMTM, pirate metrics, or level one and level two metrics, the ultimate goal is to create a product that delivers value and drives success.

As product managers, always aim to be data-centric, regularly re-evaluate your metrics, and embrace experimentation. This approach ensures continuous improvement and alignment with your product’s vision. By doing so, you can steer your product towards long-term success, just like Everything Food aims to revolutionize the access to home-cooked food.