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In Business Operations Last updated: February 9, 2023
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What metrics do you use to measure your business’s performance?

Tracking business metrics displays the progress of your business’s goals. In this article, we will discuss everything about product metrics and how the right ones can impact your business.

Importance of different metrics for a business

Metrics are essential for a business to track performance, drive the strategy and direction, and take action based on results. Different metrics help to provide a focus for the company and teams. You can analyze how good or bad your business and marketing strategy is doing, which helps improve operations. 

There are various metrics available, and some examples of important business metrics are Sales Revenue, Monthly Recurring Revenue (MRR), Net Promoter Score, Gross Margin, etc. There is no use in tracking irrelevant metrics that don’t matter. It should align with your business goal and positively impact your business’s development.

What are Product Metrics?


Product metrics are data measurements that capture how a customer interacts with your digital product. It displays how customer behavior or interaction can affect the business.

Businesses use product metrics for various purposes based on their goals, such as forecasting revenue, understanding user behavior, market segmentation, setting product roadmaps, and more.

The product metrics, like conversion rate, churn rate, etc., will help a business create an effective product strategy and determine the ROI of the product. Product metrics help companies to build a product that customers need and want by tracking their behavior and interaction. 

Importance of product metrics

The right set of product metrics will help you evaluate the success of your product launch and implemented product strategy. Product metrics give you an overall picture of how customers behave and interact with your product.

Various product metrics depend on the goal; some focus on measuring the product’s performance, while others focus on individual features. 

Defining and implementing the right product metrics for your business will help you make the most-intelligent periodic decisions.

It also gives you an idea of ways to improve your product. Tracking and managing products will help you understand whether your product strategies have worked or not and if there is any scope for improvident. 

Product metrics will help you create product decisions regarding its pricing, features, pay model, user interface, ideal customers, and many more. It allows you to A/B test different pricing, features, etc., and determines what works best for your business.

Product Engagement Metrics


Product engagement metrics evaluate how customers interact with your product and how satisfied they are. These metrics help a business understand what part or feature of a product is successful and liked by the customers.  

Here are some of the important product engagement metrics:

#1. Net Promoter Score (NPS) 

These engagement metrics measure how likely your customers will recommend your product. It helps determine the overall satisfaction or perception of a product, brand, or feature.


Customers must first score their satisfaction with the product, feature, or brand on a scale of 0-10. According to the ranking, they are then classified into:

  • Promoters (9-10)
  • Passives (7-8)
  • Detractors (0-6)

The formula for calculating NPS is as follows: 

NPS = Percentage of promoters – Percentage of Detractors

#2. Adoption Rate

The adoption rate is the percentage of users who have started using the product after exploring or experimenting. It is calculated by first determining what event you want to define as “adoption” for your product.

Often it is characterized by determining how a customer is getting value from the product.

The formula for calculating Adoption Rate is as follows:

Adoption Rate = (Number of users performed the adoption event(s) / Total number of users) x100

#3. Daily Active Users (DAU) or Monthly Active Users (MAU)

This metric provides the number of people that hop on your website or app daily (DAU) or monthly (MAU). It’s up to the business to decide what counts as an active user, and it can be people just opening the website or app, people registering/logging in, or any other actions.

The formula for calculating DAU or MAU is as follows:

DAU or MAU = (Unique New Users) + (Unique Returning Users)

#4. User Stickiness

User Stickiness depicts the number of people hopping back to your website or app. Simply, it shows how frequently your users are returning to your product.

The formula for calculating User stickiness is as follows:

User Stickiness = DAU/MAU

#5. User Churn

The user churn metric shows the number of people who never return to your website or application. It provides a good understanding of your customer retention.

The formula for calculating User Churn is as follows:

User Churn = (Lost Customers % No. of customers at the start of the time period) X 100

Listing below more product metrics other than the product engagement metrics to track the success of your product:

#6. Conversion Rate


Conversion rate is the percentage of customers who took the next action or stepped towards a specific goal. For example, the conversion rate can determine how many website visitors have signed up on the platform.

The formula for calculating the conversion rate is as follows:

Conversion Rate = number of conversions / total number of visitors

#7. New Customer Growth Rate

This product metric determines the percentage of new customers acquired. It distinguishes between new and repeat customers.

The formula for calculating the new customer growth rate is as follows:

New Customer Growth rate = New customers / total number of previous customers 

#8. Monthly Recurring Revenue

This metric determines the company’s revenue in one month from the product. MRR helps in predicting cash flow and a business’s financial growth.

The formula for calculating the monthly recurring revenue is as follows:

MRR = Number of customers X Amount each customer pays per month

#9. Customer Lifetime Value (CLTV)

CLTV indicates the average amount your customer spends on your product during their interaction with the business. It helps determine how profitable the product is and how much revenue it can bring.

The formula for calculating the CLTV is as follows:

CLTV = Average Order Value X Purchase Frequency X Customer Lifespan

#10. Customer Acquisition Cost (CAC)


CAC shows how much money a business spends to bring new customers to its product. It is an important indicator to measure the success of marketing and if getting new customers is worth the revenue.

The formula for calculating the CAC is as follows:

CAC = Total cost(marketing + sales) / Number of new customers

Product metrics you should avoid focussing


Along with determining the correct product metrics for your business, it is equally important to identify which metrics you should avoid. More data can lead to clarity and ensure your team can achieve its goal.

You can completely avoid vanity metrics, a set of metrics that don’t evaluate the meaningful results of your product. Here are a few examples of Vanity Metrics:

  • Page views
  • Social Media likes
  • No. of email subscribers
  • Time on Page
  • Bounce rate
  • Pages per session
  • Pages per user per month
  • Direct traffic lift

How to Find the Right Product Metrics


These product metrics provide a lot of information, and to measure your product’s success, development, quality, and more, you should choose the right one. To select the best metrics for your business, you should first ask the right questions:

#1. Do the product metrics align with your business goals?

Selecting the right product metrics starters with having a clear business goal. Define your current business goal: is it growing your existing business, targeting a new customer demographic, or expanding internationally?

After successfully defining your goal, you should look for metrics to track how your product strategy supports your business goal. Product metrics that tie back to your business goals are cost to require new customers, average revenue per customer, etc.

Setting up your business goal early and aligning it with your product strategy puts everyone on the team at the same level and helps define efficient KPI targets.

#2. Do the metrics reflect user needs?

The customer alone determines the success of any product. So it is essential that the product should meet their needs. You should select product metrics that can determine if your product can meet their requirement or needs.  Examples of user-oriented product metrics are churn rate, user adoption, customer retention, etc.

#3. Do the metrics impact long-term revenue growth?

Product metrics like Conversion Rate, Monthly Recurring Revenue (MRR), Customer Acquisition Cost (CAC), etc., help track how the product impacts business revenue. Include business-oriented metrics to determine overall business growth.

#4. Are you avoiding common Mistakes?

Here are common mistakes that you should avoid to find the right set of product metrics:

  • Tracking irrelevant product metrics – Your business doesn’t need useless and non-actionable data; select relevant metrics that align with your business goals.
  • Selecting metrics before defining product strategy- Take product metrics as a reflection of your business/product strategy. Always define your strategy first.
  • Mixing retention and engagement- Understand the difference between retention and engagement, as both are commonly mistaken to be the same thing.
  • Setting metrics dashboard first- Defining product metrics is more important than setting up your dashboard.

Benefits of Choosing Best Product Metrics


Product metrics are powerful indicators of your product’s success by tracking customers’ behavior and interaction with your product. They bring several benefits to a business; some of them are:

Better Product Decisions

The right product metrics help businesses and teams to make intelligent decisions by providing relevant information. These metrics monitor and analyze leads throughout the product lifecycle. They reveal what aspects of a product align with customer needs and what is not working.

Instead of working on educated guesses, data-driven information from metrics helps a business and its team better understand its customers, make informed decisions, and manage operations. It also helps the team to improve their product continuously.


Metrics help the team to set a pre-target to achieve, which results in a sense of shared responsibility and increases trust among them. It cultivates accountability on the importance of customers and how their behavior is responsible for a product or business’s success.

Shared Team Goal

Product metrics help to make sure every team member is working towards achieving the same goal. It helps to minimize any disputes or misunderstandings and define clear objectives. 

Business Growth

The right set of product metrics helps businesses boost their conversion rate and bring in more revenue. It helps reduce churn rate and grow customer retention, which helps a business’s overall growth. Product metrics allow you to respond quickly to customer feedback and increase customer satisfaction and trust in your business.

Learning Resources

#1. How to quickly create the right KPI system for your business?


This Udemy course will help you identify and create the right set of KPIs for your business. You will learn the algorithm for determining KPIs, how to create a system of daily/weekly monitoring of KPIs, and how to create reports.

It will also help you determine how to calculate bonuses and salaries based on the KPI of an employee or department. This course is for business analysts, business structures department heads, and quality department employees. 

#2. All About KPIs


This is another popular course on Udemy that will help you create a robust measurement system for your business. You will learn how to select the right KPIs, create a dashboard in MS Excel and Power BI, and implementation of the whole system.

This course will give you assignments to practice and tips and tricks for executing the whole process effectively. You will be given a case study to work on along with the video sessions. This course is best for management students, aspiring/new project managers, and new executives implementing strategies.

#3. How to Measure Anything

The book by Douglas will help you learn how to make profitable and less risky business decisions. It will help you measure every aspect of your business, such as customer satisfaction, technology risk, organizational flexibility, etc.

You will learn how to add new measurement methods and apply them to various areas like risk management, customer satisfaction, etc. You will get an online database of downloadable and practical examples to help you understand everything better.

#4. KPI Mega Library

This guide will help you get effective and quick access to the right set of KPIs for your business. It contains around 36,000 KPIs arranged in alphabetical order. You will be able to identify KPIs for your business’s strategic planning and performance management.

The book is divided into three parts: Organization, Government, and International, and provides you with KPIs related to your specific industry or sector.

#5. Essential Innovation and New Product Development KPIs

Bernie Smith created this guide to provide businesses with innovation and product development KPIs.

Most of the KPIs included in this guide comes with full explanation, example, formula, typical data sources, and how to overcome in case of any challenge or issue. 

Final Words

The important part of building and managing products is observing the metrics carefully and bringing improvement based on that. Define your business and product strategy goals, ask the right questions, and set up product metrics to track the progress of achieving your goals.

Ensure you do not include repetitive or irrelevant metrics; select only those with the most strategic insights. Implement the right metric dashboard software to help your team to keep track of everything seamlessly. 

You may also explore the differences between OKR vs. KPIs.

  • Kritika Singh
    I write SEO content, articles, website/funnel copy, email copy, FB Ads copy, and more for businesses who wish to increase their traffic, engagement, impact & conversions.
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