KPIs but to measure your products
KPIs are a tool usually associated with marketing. But they are so much more than that. You can use them to measure the performance of your product or products. We’ll share some important KPIs for you to focus on, and a few examples on how we use them to build Palabra.
Definition of KPIs
KPIs are one of the basic elements that a start-up or any business needs to set up at their early stages. The word is an acronym that refers to the Key Performance Indicator.
So, KPIs will let you measure your business performance, and can be applied to measure the progress of your product as well.
You can count activities, costs, usage, revenue, and other measures. Through these Key Indicators, the product team can identify changes that might occur while users interact with your product, and based on that you can modify your business management.
In a business, there are a lot of different perspectives. Each department has its own view of what is crucial.
For example, a product team may take better advantage of KPIs focused on usage. Meanwhile, a sales team probably is going to use revenue KPIs. Stakeholders usually care more about the customer acquisition cost and the customer lifetime value, as indicators of the future development of the company.
This is where the role of the Product Manager becomes super relevant. This person will be in charge of merging all these points of view.
Also, the Product Manager must be able to use her judgment to determine and analyze what the best decisions are according to the goal or goals that each team must achieve. They play the crucial role of putting the focus back on the metrics that matter in case other teams lose sight of them.
PMs are the hinge that allows the doors to new opportunities and improvements to continue opening.
When planning your reports, you need to take in mind what is important to nurture your reports and focus not only on quantitative KPIs or metrics but also on qualitative ones. The KPIs are the strategic structure that your metrics need to follow. Metrics are the raw material you need to fill your KPI strategy.
There’s another common confusion while talking about KPIs.
KPIs are not the same as OKRs
Before continuing with the next topic, it is relevant to mention that KPIs are not the same as OKRs. There seems to be some confusion at first with these concepts and it is common for those who are just starting out, to take one for the other.
OKRs refers to Objective Key Results. OKRs are indicative of where some business, team, or individual wants to arrive.
KPIs, on the other hand, are focused on measuring how you will accomplish your objectives in the short or long term.
OKRs are useful to not lose focus on where you need to get your product or your team. And you can measure the progress through your KPIs.
Imagine that you’re driving a car. Your OKRs will be your roadmap. But as you’re driving your car toward your destination, you also need to keep an eye on your car’s dashboard to make sure that everything works ok. So your KPIs are like your car dashboard, where you have simple indicators that immediately tell you if something is performing well or not.
If you’re asking what you need to have first, remember that you can’t make a trip without a car dashboard. So, you need to define your KPIs before your OKRs. And we’re going to help you to achieve that in the next section.
The different metrics that teams manage and what a product manager should look at
In order not to extend ourselves too much, we would like to focus on four types of KPIs that can be found in a tech company: Business KPIs, Product development, Product Quality, and product usage.
You (or your PM) can create KPIs that’ll help visualize trends for the successful growth of your business. Usually, these KPIs are related to customer metrics (such as customer lifetime value or customer acquisition cost), revenues, profitability, costs, and everything aligned with the financial aspect of the company.
They’re the most common KPIs that people use when measuring their business.
You can monitor this kind of KPIs to measure how well your product is selling or engaging people in a certain period of time.
In Palabra we use 3 main KPIs to understand how well our business is doing:
- Weekly sign ups: Since we have a subscription model with a free trial, it’s important for us to understand how we’re doing week over week with our acquisition strategies. Signups are not free trials, rather users that started a subscription. We consider trials as part of the “Consideration” stage of our sales funnel.
- Trial to user rate: How many trials converted into new subscribers? This is where we get information on how well we’re doing in targeting teams that will actually get value from our tool. We also look at this metric to understand how well our onboarding flow is doing to show the value prop of our tool.
- Weekly active users: Since our growth is product-driven, it’s very important for us to have a product that people keep using. We don’t just measure how many people logged into the app, but also if they engage with our reports and notifications.
There are a few other important business KPIs for product teams we chose not to focus on at this stage, such as CAC (Customer Acquisition Cost), Weekly Leads or Lead to User rate, or new Team invites from a user.
We learned it’s better to focus on a few metrics instead of covering every part of the business. What those important KPIs mean for your business will depend on your revenue model, your acquisition strategies, and your tracking possibilities.
Product development KPIs
Use this kind of KPIs to measure possible improvements in development speed or errors to fix. They work to measure internal progress.
One example of a product development KPI is Time velocity. You can measure how many sprint points a team can solve in a period of time. This can be used to plan future projects and improve development times for your teams.
In Palabra we measure time velocity using Epics. Our Design & Growth teams prioritize features for the Engineering team to focus on. The Engineering team then translates them into Epics, figuring out exactly what it takes to accomplish them.
We not only measure how much time it takes us to complete each Epic but also how good we are at estimating. If an Epic takes more than planned, we try to find if there’s anything we can do to estimate better next time.
Product development metrics are often passed by, but they’re crucial to be predictable. With predictable development times, you’ll be able to deliver timely new features to your users, communicate them, and build trust within the team and with your customers.
Product quality KPIs
You can find these types of KPIs in tasks related to customer experience.
For example, a common metric to measure this is the number of tickets that customer service accumulates in a certain period of time. You can have tickets for a lot of different reasons or even social media messages with complaints about a particular feature.
Reading or listening to the users, will let you measure the evolution of certain changes you made to a feature, design, or usability in your product.
Watching the problems in the product (or feature), and measuring these KPIs, could put you on a path to a predictive quality strategy, more than a reactive one.
Product usage KPIs
For UX/UI developers and designers, this kind of KPIs will allow them to know how users perceive the product and if it’s easy to understand and use. You can read more about related metrics for product-oriented strategies in our latest article.
Usually, they’re easier to measure inside an app or website with the right tools. Google Analytics is fine to measure a website, but for apps and other types of tech products, you’ll probably need something more specific.
While building Palabra, we like to consider what metrics we need to build our product, combining them with what we learn from our users and target audience, and build them as features for the product.
For example, we’re usually interested in knowing how many people start and move forward in their user journey. In Palabra, an ideal new customer journey looks like this:
- Start their trial
- Connect their data using Segment or direct integration
- Create at least one journey with two steps or more
- Log in to the platform at least once more before the end of their trial
We use our own tool to measure how many people go through each step in this journey, in a dashboard like this:
And we use weekly email notifications to see how we’re doing week over week. Every Friday we get notified in our emails and in a Slack channel how many people entered and finished the funnel, as well as how much better (or worse) we did compare to last week.
The North Star Metric
As you know by now, there are a lot of metrics you can use to measure your business or product. But, that brings another problem: the desire to measure everything because everything is measurable.
Please, don’t measure everything. You will end up dizzy and confused and missing what is really valuable for your business.
With a North Star Metric, you can solve this problem easily. This method consists of choosing one KPI (yes, only one). The one you choose must be the core value of your product. Does that mean that you should not measure anything else evermore? Nope.
You should start with one, and keep adding other relevant metrics that are functional with your main KPI. When you overcomplicate, that generates immediate paralysis.
Using a North Star Metric gives your company a clear direction and your teams can focus on working on optimizing a single thing at a time (which can bring better results than working on five things at a time). For example, all your teams can focus on user growth or use of some specific feature, every team has the same KPI that handles in his own way.
Something else you must keep present: KPIs measure your product or company performance, they are not tools to feed your vanity. In fact, measuring a product or feature based on vanity nullifies objectivity and causes unnecessary strategies or KPIs that don’t add value.
Some final notes
So, for your company to be able to take full advantage of its resources and staff, the goals must be aligned to push everyone in the same direction. That is why defining your KPIs is vital.
They will also push teams to make data-driven decisions. However, as we mentioned in this article, it is important that each team choose the right metrics since a data-driven decision without them is useless.
KPIs = Data-driven decisions but with the right metrics, goals, and information.
Let’s talk about KPIs, book a demo of Palabra, and ask us all you need to know to configure your metrics and KPIs.