Metrics for a Successful Product
In order for your product to be successful, it needs constant monitoring and maintenance. You can set up key metrics for your product to ensure that relevant data is being tracked, which allows you to identify potential issues and develop effective solutions to mitigate them. In today’s lecture, we will look into the importance of including performance metrics in managing your product and list some of the key metrics that you should use to track the growth of your product.
Why are Metrics Important?
Metrics, also known as key performance indicators or KPIs, allow you to track the growth and performance of your product. This information is important because it allows you to monitor the progress of your product towards its goals as well as spot and address any potential issues before they arise. The metrics you choose to utilize really depend on the unique goals of your business. However, here are some of the key metrics used today.
- REVENUE: Perhaps, this is one of the most informative metrics for your product. By evaluating your sales, you can gauge how your product is performing in the marketplace, and whether your marketing efforts have been successful.
- NET PROFIT MARGIN: The net profit margin evaluates your product’s ability to generate a profit in contrast to its overall revenue. Using this metric, you subtract all your expenses from the monthly revenue to determine just how much profit was earned. Put simply, the net profit margin allows you to compare the income with the costs associated with your product so that you can effectively predict long-term growth. You can also improve your net profit margin by either increasing your revenue or lowering your cost of production or sales.
- GROSS MARGIN: Your gross margin measures how much of each sales dollar goes toward profit and other costs. This number is expressed as a percentage and is calculated by subtracting the cost of production from the total revenue and then dividing that number by the total revenue. When your business has a high gross margin, it means that a majority of each sales dollar is retained. This metric is especially important for newer businesses because it often reflects the efficiency of your business’s overall productivity and processes.
- LEAD CONVERSION RATES: This metric helps you to determine how many of your leads or potential customers decided to purchase your product. Leads can be converted by a combination of variables, such as quality product, excellent sales team, well-designed website, appealing social media presence, and great customer reviews. Using this information, you can identify which variables are preventing leads from becoming customers.
- WEBSITE TRAFFIC: Measuring the number of visitors to your business website each month is a great way to gauge the success of your marketing efforts and the overall reputation of your business. There are a number of marketing tools available that can allow you to track the monthly traffic of your website in addition to the sources of this traffic. This data allows you to understand how people are finding your business, and help you to improve your website traffic. You can increase your website traffic by improving the SEO of your website, increasing your marketing budget, securing more press coverage, and enhancing the social media presence of your business.
- RETENTION RATE: Fostering brand loyalty is imperative in any industry. Aside from leading to repeat customers, great customer retention often results in customers that tell others about your product, resulting in even more sales. If you’re hoping to increase brand loyalty, you must deliver a quality product first, but providing excellent customer service is another important component.
- CUSTOMER ACQUISITION COST: Businesses usually acquire new customers through marketing, which costs money. This is often known as the cost of customer acquisition, customer acquisition cost, or simply known as CAC. You can calculate your customer acquisition cost by dividing your marketing expenses for a specific period of time by how many customers you were able to acquire during that timeframe.
- CUSTOMER LIFETIME VALUE: Though finding the customer acquisition cost of your business can be helpful on its own, it’s even more enlightening when you compare your CAC to your customer lifetime value, also simply known as CLV, LTV, customer lifetime revenue, or CLR. This metric shows you how much revenue you can expect to earn from a typical customer. Calculating your CLV takes a fair amount of data. The method for calculating your CLV varies and depends on your sales model. However, CLV can be generally calculated by multiplying the value for an average sale by the retention time for a typical customer (in months) and the number of transactions they usually generate in that timeframe. Your CLV is so vital because it allows you to evaluate issues that are diminishing your customer retention, understand how much your business can afford for customer acquisition, and identify customer segments that bring in a higher profit or those that are too difficult to covert.
- TEAM SATISFACTION: Team members are the most valuable asset of your business because they determine the overall success of your business. That’s because when your teammates or team members are happy, they tend to be more productive, which eventually contributes to the profitability of your business. By regularly measuring your team’s happiness or satisfaction through feedback and surveys, you can make sure that your team members are satisfied with your business and their roles.
- PROGRESS TOWARDS GOALS AND DEADLINES: Regardless of your industry, every business has its goals and deadlines that can then be broken down into milestones. You can track the number of milestones that are met and overdue to gain a better understanding of your business capacity. This information could give you insights into potential issues like lack of resources, low productivity, insufficient staffing, and unreasonable expectations, By recognizing the problem, you can further develop effective solutions that will eventually improve the overall efficiency and success of your business.