Measuring Product Performance

How do you know if your product is performing well enough?

Without measuring the performance of your product with the right metrics, you will not know. But what are good product performance metrics? And how do you know you are covering enough perspectives to make informed decisions?

We often meet product managers who fall into one of the following trap:

1. Measure too little. Product managers often measure revenues and sales volumes because their manager asks for that data and because it is easily accessible. But this is not enough to understand what is actually happening and to take the right actions to improve these numbers.

2. Measure what is not relevant. PM can spend time on building complex dashboards that contain a lot of data, but they are not necessary learning anything useful from this data. This phenomenon is sometimes called “vanity metrics”

We believe the following approach helps product managers carefully select the few metrics that will help them improve the performance of their product and take the right decisions and actions:

1. Understand why you measure. Know what you want to achieve, and how you are going to use the data
2. Cover enough perspectives: Ensure you measure enough aspects to get a good picture of reality, allowing you to take the right decisions and put what you have learned into actions

Let’s look first at why you should measure product performance. You need to know what you want to achieve. This is usually documented in the product strategy, which contains a vision and business objectives such as revenue targets. What you measure then is how far you are from the desired objective. You then need to define actions that will take you closer to your objective. For a product manager, this often takes the form of a product development roadmap. However, it is not limited to that. For example, marketing campaigns or mergers and acquisitions might be part of your strategy without being included in the product development roadmap. The next step is to define the few metrics that will help you understand how you are progressing both in terms of getting closer to your objectives (e.g. revenue progress per month) and if you are executing the at the intended speed (e.g. milestones achievement rate). With the plan, and the metrics in place, it is easier to create a dashboard that will tell you if everything is fine or if there are deviations you need to act on. This approach is not linear and can be represented as a continuous cycle.

But how many metrics should you have? In other words, are you covering enough perspectives with your metrics? It is difficult to say, but as a guiding rule, you need to cover the following dimensions:

1. Business performance. How much value are you creating for your won business? This can include metrics such as revenues, orders received, and gross profit.
2. Customer needs. How well is your product fulfilling customer needs and creating customer value? This is often difficult to measure and is typically measured indirectly through customer satisfaction metrics, for instance NPS
3. Strategy execution. How well are you executing your strategy?? These can be both progress metrics on projects or strategic initiatives (e.g. milestones achievement rate) but they also depend on your strategic objectives. For instance, if you have set “circularity” as a key strategic theme, you might measure the percentage of revenue from circular business model offerings.
4. Value chain improvement: Are you driving improvements along the whole value chain to improve business results and customer satisfaction? For example, if on-time delivery is important for customer satisfaction and a problem for your cash flow, then you should measure it.

A few additional comments: Just because you have the metrics on your dashboard does not mean that you necessary own them. For example, quality and operational metrics are usually owned by other functions. But if it is important for the performance of your product, you should ensure they are measured and that you can access the data. Another important aspect is to be able to break down objectives into actions, all the way to leading indicators, this will be the subject of a later post.

What metrics do you use to measure your product’s performance? Share your thoughts and experiences in the comments!