Formulas & Metrics
A non-exhaustive list of formulas and metrics for Product Management.
Contents
- AARRR: Startup Metrics for Pirates (Dave McClure)
- Conversion Funnel
- Google's Heart Framework
- Others
- References & Reading Material
AARRR: Startup Metrics for Pirates (Dave McClure)
Aquisition
Getting people to your product, simple metrics:
- CTR: Click-thru Rate for email
- SEO: Search Engine Optimization rank
- SEM: Search Engine Marketing
- Views / Impressions: Product site views and impressions
Should include ROI:
- CAC: Customer Aquisition Cost (Cost of sales and marketing / new customers), could be argued this belongs in Activation or Revenue
Activation
The people you converted to users, at the basic level, the Conversion Rate.
Out of all the people who landed on your website:
- The number of people who converted to users (signups/visits)
- The number of people who completed onboarding (onboarded/visits)
Retention
Engagement Metrics, Customer Usage
- MAU: Monthly Active Users, the number of users who used the product at least once in the last month
- WAU: Weekly Active Users, the number of users who used the product at least once in the last week, not used much
- DAU: Daily Active Users, the number of users who used the product at least once in the last day
- Retention Rate: Percentage of users at a given time that are still users a certain amount of time later, often using the time periods of D0, D1, D7, and D30 (where D is Days)
- Churn: Percentage of users at a given time that are not users a certain amount of time later (inverse of retention rate)
Retention is usually applied to cohorts, select a specific set of users then measure what happens with them over time, the User Retention Curve can be graphed.
Other retention metrics:
- Time between visits
- % of users who visit X times a month
- Stickiness: Average number of days monthly active users use the product (DAU/MAU), the higher the better
Referral
- NPS: Net Promoter Score, the percent of promoters minus the percent of detractors in a survey of all or some users on how likely they are to recommend your product on a scale of 1-10. People who rank 0-6 are detractors, 7-8 are passives, 9-10 are promoters.
- K: Viral Coefficient, the number of new users an average user generates. The avg number of invites sent multiplied by invitation acceptance rate, the higher the better.
- VCT: Viral Cycle Time, how fast new users invite friends.
Revenue
- CPM: Cost per mille, earnings per 1000 ad impressions or views
- AOV: Average Order Value or Cart Size, the average price per purchase
- ASP: Average Sale Price
- Net Sales: Gross sales minus returns, allowances, and discounts
- GPM: Gross Profit Margin = (Net sales – COGS) / Net sales x 100%
Handy Table for AARRR
| Goals | Signals | Metrics | |
|---|---|---|---|
| What do you want to happen? | What data do we need to measure? | Signal expressed over time | |
| Acquisition | |||
| Activation | |||
| Retention | |||
| Referral | |||
| Revenue |
Conversion Funnel
Think of a funnel (large at top, small at bottom), as users research a solution they start at the top and as they learn more they move down the funnel until they ultimately take action (like a purchase). The funnel is normally broken down into four levels, something to the effect of:
- Awareness
- Interest
- Desire
- Action
Typically you want to measure how many users you lose at each step, then target those areas for improvement/optimization (this might be through SEM/SEO, UX improvements, etc).
Google's Heart Framework
Intended for large-scale products.
- Happiness: User Satisfaction, measured by surveys
- Engagement: Measurable Engagement, measured by things like: frequency, clicks, time spent
- Adoption: How good you are at attracting new users, measured by new users over time period
- Retention: Inverse of Churn Rate, measured by things like: rate of users returning, rate of users staying
- Task Success: Technical metrics, measure by things like: time to load a page, time to checkout, etc.
Others
- Market Share: How you're doing vs. competitors
- By revenue: The revenue of your product against the revenue of all competing products
- By units sold: The number of units you sell against all the units sold in a given market area
- Market Penetration: Number of Sales / Market Size, where market may be a segment