KPIs for New Product Managers: What to Track and Why

As a new or junior product manager, you’ve probably been swamped with acronyms: MVP, CTR, ARPU, and many more. Among these, KPIs — or Key Performance Indicators — stand out as one of the most crucial concepts you’ll need to grasp.

In this extensive guide, we’ll dive into the KPIs that are essential for product managers, especially those who are just starting to get their feet wet in the tech, healthcare, finance, or retail sectors. Understanding KPIs will not only help you navigate your new role effectively but also position you as a metrics-driven leader who knows how to make data-informed decisions.

The Significance of KPIs for Product Managers

KPIs are measurable values that demonstrate how effectively a company is achieving key business objectives. For product managers, KPIs are indispensable for several reasons:

1. Strategic Alignment: They ensure that your product development is in sync with your company’s goals.
2. Data-Driven Decisions: They offer quantitative metrics to guide choices and validate assumptions.
3. Team Communication: They provide a common language to discuss product performance.
4. Accountability: They allow you to set expectations and hold your team accountable.

What KPIs Should You Be Tracking?

User Engagement Metrics

1. Daily Active Users (DAU) / Monthly Active Users (MAU): These metrics provide insights into user engagement over time.
2. Session Duration: Indicates the average time users spend in your application or website.
3. Feature Usage: Helps you understand which features are most and least engaging to users.

Why It Matters

User engagement metrics provide insights into how users are interacting with your product. If engagement is low, your product might not be meeting user needs effectively.

Financial Metrics

1. Average Revenue Per User (ARPU): Gives you an idea of the revenue generated per user.
2. Lifetime Value (LTV): Indicates the total revenue a company expects to earn from a customer throughout their entire lifetime.
3. Customer Acquisition Cost (CAC): Represents the cost to acquire a new customer.

Why It Matters

Financial metrics are crucial to understanding if the product is profitable and sustainable in the long run.

Customer Satisfaction Metrics

1. Net Promoter Score (NPS): Measures customer satisfaction and loyalty.
2. Customer Retention Rate: Indicates the percentage of customers you retain over a specific period.
3. Customer Churn Rate: Represents the percentage of customers who have stopped using your service during a specific timeframe.

Why It Matters

Customer satisfaction metrics help you understand what users think about your product, what can be improved, and how changes impact customer loyalty.

Performance Metrics

1. Page Load Time: Measures how long it takes for a page to load.
2. Error Rate: Quantifies the number of errors that users encounter while using your product.
3. System Downtime: Indicates the amount of time your product was unavailable to users.

Why It Matters

Performance metrics ensure that the user experience is smooth, leading to better engagement and satisfaction.

Setting Up Your KPI Dashboard

1. Identify Objectives: Your KPIs should be aligned with your business objectives. Are you looking to improve user engagement, decrease churn rate, or increase revenue?
2. Select Relevant KPIs: Choose KPIs that directly impact your objectives. Not all KPIs will be relevant.
3. Gather Data: Use tools like Google Analytics, Mixpanel, or in-house analytics to collect data.
4. Visualize: Use dashboards to display real-time KPI data. This will make it easier for you and your team to make informed decisions.
5. Review and Adapt: KPIs are not set in stone. As your product evolves, your KPIs might need to change as well.

Common Pitfalls to Avoid

1. Vanity Metrics: These are metrics that look good on paper but don’t contribute to business objectives. For example, the number of app downloads is a vanity metric if those users are not active or engaged.
2. Too Many KPIs: Tracking too many KPIs can be counterproductive. Focus on what really matters for your product and business goals.
3. Ignoring Negative Metrics: Metrics like churn rate or error rate are easy to ignore but can provide invaluable insights into areas for improvement.

Conclusion

As a product manager, you may find the plethora of available KPIs daunting, but remember, the objective is not just to track everything but to track what matters. Understanding and focusing on the KPIs that align with your product and business goals is key to your role.

Take the time to understand each KPI’s significance, how it aligns with your product strategy, and what actionable insights you can derive from it. This is a continuous process of learning, adapting, and iterating, but it’s also what makes the role of a product manager so incredibly rewarding.

So the next time you’re caught in the whirlwind of development cycles, user feedback, and stakeholder meetings, take a moment to look at your KPIs. They will not only ground you but also show you exactly where you need to go.