What are KPIs (Key Performance Indicators)? Find out how to measure the success of your product

 

What are KPIs? These are reference data that no Product Manager can afford to lose sight of. Indeed, without monitoring the metrics associated with the process, product lifecycle, and customer, no effort would make sense and no action would impact.

These are therefore key performance indicators that quantify the progress, or the setbacks from which to restart, of the activity as a whole, of the work team, and of the product.

In this guide we want to understand not only what KPIs are, but also how to choose the right ones, that is, the ones that really matter to your product and that can help you make the best strategic goals and decisions.

 

What are KPIs? Definition

 

The first topic we are going to find out is what KPI means. The term, acronym for Key Performance Indicator, refers to metrics useful for measuring any type of performance in relation to previously set strategic goals.

No objectives, no good KPIs: without a clear set of objectives you will lose both, focus and motivation and no type of performance indicator can be of support.

 

 

Imagine driving a car without tools and with reduced visibility: how do you know that you are heading in the right direction? You could use your experience as a driver and rely on instinct, but this may not be enough to avoid sudden dangers. Using the right KPIs and reading the relevant data allows you to balance intuition, empirical experience, and numerical data.

Without KPIs, you entrust the fate of the product to chance, most of the time guessing about the results.

 

 

KPI for Product Manager: the most powerful decision-making tool

 

What does a Product Manager do? Create value for the customer and for the business based on a process by objectives. How does he do it? Making the most effective decisions in achieving product success. What are KPIs for? To monitor the essential factors of the process itself:

• Teamwork
• Status of the product life cycle
• Overall business activity

 

 

We can therefore say that the key performance indicators are the most powerful tool that the PM has at its disposal to defend and promote its decision-making process.

 

KPIs what they are, how to choose them, and why to use them

 

Before moving on to the practical methodology, let’s deepen what KPIs are and how the Product Manager uses them to support company objectives during their decision-making process:

• Brainstorming: the PM works with the executive team to identify the most relevant product management metrics to monitor.
• Selective KPI Report: The Product Manager uses selectively detected KPIs to strengthen the business case and request new investments, or to validate the approved investment strategy.
• Celebration and prevention: KPIs are used in the communication strategy to celebrate success and to motivate the team, but also to preventively identify risk.

 

Practical methodology: what are the KPIs in Product Management

 

The time has finally come to discuss how to choose the best KPIs in product management. The methodology that I recommend supports a goal-oriented approach, divided as follows:

• Business Goals: the first relevant performance indicators are those relating to the objectives of the customer and of the business in the product strategy.
• Product Goals: The KPIs to add are those selected in the product roadmap.
• Team Goals: KPIs that monitor the health of the product in relation to the stakeholders and the life cycle of the product.

 

1/ Which are the KPIs relevant to the business objectives?

 

I suggest you always start with the business goals in the product strategy, to find the best KPIs. Let’s take an example: I am following a product that helps reduce the level of sugar in the blood, with particular reference to people with diabetes. Phase 1 involves the launch of the app for which € 60,000 in revenue is expected in the first 12 months.

Where do I select the relevant KPIs? Without a doubt, in the macro areas of “Target user satisfaction” and “Growth of company value”. As regards the KPIs of satisfaction of end customers, they are the result of actions such as market research (through interviews and surveys) and competitor analysis.

Growth in business value includes data such as the referral rate to your site (quantity and quality of links) and recurring monthly revenue.

 

 

2/ What are the additional product KPIs?

 

We use the roadmap to identify other useful performance indicators, to be aligned with the KPIs of the Business and customers’ objectives, previously selected as relevant.

We focus on the product objective: a targeted and measurable result that your product should achieve over, for example, a quarter.

We continue the example of the product that lowers blood sugar levels, for which the primary objective is to improve the user’s health and help them understand correct and healthy eating habits. I have previously set metrics based on user feedback, customer satisfaction, and referral rate.

In the second phase, where the roadmap strategy provides for acquiring a consolidated customer base, I could introduce a KPI that gives me an account of the attainable goal. To do this, I measure the market share and monitor the position and behavior of my product in the app store where it is marketed.

 

3/ Product and team health indicators

 

What we are doing works: we have measured the product in relation to the business objectives and specific performances required of it by the strategic roadmap. The product is reaching the goals of revenue, referral rates, and new customer satisfaction standards. And this is all really great! But is that enough? In my opinion, it may not be enough especially when there are signals that represent threats along the way.

Let’s go back to the example above: people on the team have reached high-stress levels for their workloads, or bugs have been found in the code that increases the complexity of the purchase and decreases the download rate. These factors set off more than one alarm bell linked to the team turnover rate and technical distress. To monitor the alert level, we add parameters that measure, as it were, the state of health. Here are the KPIs I choose to include:

• Team motivation and stakeholder engagement
• Program changes, or the ability to hit the target in terms of time and budget
• Product quality

In this way, I will be able to identify any danger signs in advance, in such a way as to react promptly and proactively, without being in a position to make decisions with my back to the wall.

 

Corporate KPIs aimed at business growth

 

The Product Manager has a panoramic view that embraces the Business in a broad sense, which is why corporate KPIs should in no case be neglected. Knowledge of the basic KPI categories is therefore preliminary to any type of decision:

• Financial / Economic KPIs: include net income, gross profit margin, revenue, and cash.
• Customer KPIs: these concern in particular customer satisfaction to generate value and customer loyalty.
• Process KPIs: measure and monitor performance in the operational organization.
  
  

The metrics focused on the customer and on productivity are those that guide every investment decision, which provide the basis for adding heads to the project, or which indicate the disposal of a department / product.

 

 

Business KPI examples

 

After having categorized the main types of KPIs, it may be useful to list, by way of example, those considered transversally.

 

Examples of economic/financial KPIs

• CAC (Customer Acquisition Cost)
• LAC (Lead Acquisition Cost)
• ROI (Return on Investment)

Formula ROI = [(Revenues-Costs)/Costs ] x 100

 

Examples of customer KPIs

• Number of calls handled (day)
• The average length of a conversation (phone/chat)
• Amount of complaints processed
• LTV (Lifetime Value)

 

Examples of process and development KPIs

• Number of projects approved within the budget
• Number of projects entered in pre-production (per semester/year)
• Deviation of planning time and implementation time
• Number of changes made (month/quarter)
• Amount of hours/employee per project

 

How are company KPIs maximized?

 

As a Product Manager, I use KPIs (company) to monitor how sales are doing, how business processes are progressing, and how new customers react.

From the analysis, I draw the first indications. If the indicators on customer counts, for example, are decreasing, I try to identify what the threat is and ask myself questions:

• Is this a new competitor?
• Is it a price issue?
• Is it a problem related to usability or communication?

A deep dive into the roadmap follows to explore the repair activities and countermeasures to be adopted.

I don’t even let my guard down when I see a rapid increase in indicators, such as margins and total revenues. On the one hand, growth means the acquisition of new market shares, greater investments in the product line, and the like. On the other hand, however, unplanned development can have repercussions on the operational areas. So I ask myself:

• Do I have enough capacity?
• Does the team have sufficient operational support?
• Is Customer Service, able to handle higher volumes?

 

 

What are KPIs: examples of product use

 

Product KPIs help identify how the product is first perceived and then used. We are therefore in the UX (User Experience) area and the data we obtain guide us on the roadmap to make decisions on key features.

The behavioral analysis, traced over a period of time, is aimed at continuous improvement. For example, I take the time (in seconds/minutes) on the conversion page as a KPI and verify the related download, abandonment, or transaction completion (conversion) activities. Based on the recorded data, I promote high-performance messaging to customers.

The rate of abandonment of potential customers can be linked to technical performance problems (such as loading time): the performance indicators allow me to intervene in the situation before it even affects the consolidated customer base.

 

KPI examples: product development

 

Product development KPIs are among those that a Product Manager appreciates the most, because they not only help in improving the process but also because they can inject new energy and stimulate productivity.

We collaborate with Product mìManagers, the Product Owner and the Scrum Master to agree on the best KPIs that we will need to analyze the results achieved, size the team and identify areas for improvement.

 

 

What are product quality KPIs?

 

Product quality performance indicators identify trends and risks in customer satisfaction. Quality KPIs are a priority as they are difficult to monitor: customers and users use many platforms, including social networks, to express any disappointment regarding product/service providers.

For this reason, the Product Manager knows how to evaluate the appropriateness of any compromises between quality and delivery times, since a single hitch encountered even by a single user can have strong repercussions on the project as a whole.

When used correctly, the product quality KPIs help us to:

• Lay the foundations for continuous improvement
• Optimize the number of tests
• Improve the UX
• Implement automation

 

What are the KPIs of corporate communication?

 

In our role as Product Managers, we have the opportunity to influence the company’s strategic choices, participating in the life cycle of the product in its entirety. As we take that responsibility, we must always have a basic concept clear: high-impact actions will work if communicated regularly and clearly.

If you want to know how to proceed, I personally consider which Product Management KPIs work best in corporate communication and share them in meetings, one-to-one meetings, or monthly/quarterly reviews. Here are the ones that never fail:

• Business performance and salient points relating to product quality
• KPIs obtained by crossing the data of the various categories (e.g. use and development of the product)
• KPIs identified with senior executives, especially COGS, and release timelines/roadmap
• KPIs on historical data and new trends that can mark any anomalies before they turn into problems.

When we learn to communicate successes correctly and deal with negative results without delay, we minimize the nasty surprises that still accompany the work of the Product Manager. On the other hand, the product is an element of the market and the market is a constantly evolving scenario, imagining it without mutations and without unexpected events is an inadmissible error.

If we go back to the initial metaphor, we are moving by car, but now we have chosen our travel companions, turned on the headlights, set the destination, and calculated the stops. And we know exactly what we expect from our journey so that we can measure its success in detail and tell it once we arrive at our destination.

 

Communication KPIs: what are they for?

 

Corporate, product development, quality, and usage KPIs are powerful knowledge and programming tools.

After you have chosen your list of KPIs, monitor them with religious commitment and make their communication an essential part of them. By doing so you will get various benefits and advantages:

• Credibility as a leader: the data speaks for you and gives you credit towards all parties involved.
• Group self-esteem: Celebrate successes and acknowledge merits, you will strengthen the team and make the project goals clearer.
• Control of the beat: the indicators help you to keep under control the health of the process and of the stakeholders, reducing risks and seizing the opportunities to develop growth plans.

 

 

Bottom line: what are KPIs?

 

Product Management KPIs are one of the keys to Product Manager success. A knowledge tool that if known how to handle can have a great impact on the company.

Today, Product Management methodologies and management software provide us with much more data than we are capable of managing, or – better said – much more data than is actually necessary and really useful.

Everything can be measured, but there is no point in measuring everything.

If you decide to use more KPIs than you need, you will have data without added value, and obtained with a waste of time. Basically, you will lose twice! And if things go wrong, you could run the risk of relying on irrelevant KPIs on the basis of which you would end up making bad strategic decisions.

The final advice is to select the right KPIs by analyzing the factors that we have discussed together in our guide. Regular review and sharing of results are an integral part of this process.

Involve the most prominent stakeholders, but avoid being dictated by others what KPIs are. Your responsibility is to clearly explain how you have identified effective product KPIs and what are the next steps to collaboratively determine the best performing metrics.

 

FAQ – What are KPIs

 

What are KPIs for?

 

The KPI is a performance indicator used to count and measure production activities, economic revenues, production costs, and other preliminary metrics for business decisions. The Product Manager uses KPIs to monitor the product and analyze its strengths and weaknesses also in relation to the business objectives.

 

How are KPIs chosen?

 

The Product Manager chooses the Key Performance Indicators on the basis of the specific objectives of the product and the reference market. In general, the PM can select 5-6 key KPIs which include product development and quality, as well as various financial indicators. Then it will identify another 2-3 KPIs to track specific situations.

 

What metrics track the product lifecycle?

 

In the product life cycle, there are metrics such as quality, usability, customer satisfaction, and the health of the team that are important in terms of continuous improvement. For this reason, Product Managers are constantly looking for strategies and methods to increase both revenues and Customer LifeTime Value (CLV).

 

What are the best KPIs for business strategy?

 

The best metrics are those that allow you to identify in advance the necessary and appropriate changes in business management. That’s why the most common business KPIs include revenue and profits, as well as customer data. These indicators measure the speed of growth, an optimal condition for further accelerating success, with new investment opportunities. However, strategic KPIs also serve to highlight negative and unexpected changes that require immediate investigations and further investigations.