Product Performance: Key Startup KPIs and Metrics to Track Success
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- 11 min
- Dec 14, 2021
In a fast-changing environment, the best way to deal with doubts any new startup might face is to figure out where to focus. To track your company’s growth and success in real-time, you must learn how to take advantage of gathering and analyzing critical startup KPIs and metrics. Our goal is to share our experience to help your business grow using actionable analytics.
Below, we offer essential tips on identifying KPIs and metrics for your specific product features. Plus, you’ll learn what important KPIs and metrics suit many businesses, their key differences, and how to adapt these metrics and indicators to your business model.
Let’s find the path to your startup’s success.
KPIs vs. metrics: how to differentiate
Simply put, metrics are quantifiable variables used to track your product’s performance. In a tactical sense, metrics allow businesses to understand how [good, efficient, strong, etc.] activities are performing. In other words, metrics are variables that measure different startup parameters. Using metrics, you can measure the success or failure of certain aspects of your business activity.
There are crucial metrics such as reach (how many users visit your website or mobile app), activation, active use, engagement, and retention, along with a bunch of different business-specific metrics. Metrics help to ensure that your product is growing in the right direction. We will describe each of them in detail.
Key performance indicators (KPIs) are measurable values of specific metrics to achieve. For example, some KPIs are used to understand whether the product is successful (a certain KPI value is achieved) or not.
A KPI may also be a milestone, such as releasing a mobile application.
There are many different types of KPIs. You should determine and choose those KPIs that are suitable to your specific situation. Some KPIs measure engagement, user experience, and business value. Others measure changes in revenue over time, and so on. Startup KPIs enable companies to understand how well they are meeting strategic goals. Below, we share examples of startup KPIs you can choose to track your success.
Dynamic processes and activities
What they measure
Future (desired, required, or unwanted) events
Static or dynamic
Differences between KPIs and metrics
How to define a startup’s product success using KPIs and metrics?
It’s essential to understand what influences your product’s success. For this reason, product owners, stakeholders, and project managers use KPIs and metrics as quantifiable measures to track problems, detect them in a timely manner, then make essential decisions in line with product goals.
Following this logic, the next question is:
- How can you define a set of metrics that will meet your business’s unique needs?
Some startup founders may choose a set of metrics by intuition, which, as they think, determine their product’s performance. However, they are likely to miss the target in a broad spectrum of options available.
Choosing the proper measurement framework helps to avoid this issue. A measurement framework is necessary because it is an integral part of the product development process. By tracking the right KPIs for your startup, it’s easier to follow your company’s strategy, understand where to invest, and decide how to optimize overall product performance.
Before starting to track your product’s success, you should perform market and competitor research and define your target audience.
Six important startups KPIs
We recommend you consider the following set of crucial key performance indicators for your startup. For better understanding: when we speak about variables, we call them "metrics," but when we define specific values for these metrics, that's KPIs.
Net promoter score (NPS)
The NPS metric evaluates user satisfaction. Users that are likely to recommend your product are called promoters, and those who are vocal in their dislike for your product are detractors. To consider an NPS as KPI, you should ask users to rank your product from 0 to 10, not focusing on specific aspects, i.e. put an overall score. Ratings from 0 to 6 indicate detractors, neutral users give ratings of 7 or 8, and promoters are those who rate your product 9 or 10. The formula for calculating NPS is:
NPS = % of promoters – % of detractors
A net promoter score helps a company find the source of problems, respond promptly, and improve the customer experience.
Active users (DAU, WAU, MAU)
The next metric to measure your product’s success is your number of daily active users (DAU), weekly active users (WAU), or monthly active users (MAU). In addition to capturing the attention of your customers, you need to retain them.
AU = Number of unique active users per day/week/month
The active users as KPI helps online businesses understand user retention and user engagement over a given time frame, and find ways to improve these characteristics.
Customer acquisition cost (CAC)
This metric is used to measure and optimize operational and business processes as well as the budget. To calculate CAC, divide total marketing and sales costs by the number of new customers acquired during a certain period.
CAC = Total marketing and sales expenditures for the period / Total number of customers acquired during the period
The lower your CAC, the more efficient your marketing and sales efforts are. Using the CAC metric, it will be easier for you to forecast startup failure, find ways to reconsider pricing, and change your product marketing strategy.
Customer lifetime value (LTV)
This metric is about how much your business will earn in the long term from one customer. The key is to understand how much you should invest to attract one user given the expected return from that user.
LTV = Average customer lifetime × Average revenue per user (ARPU)
Keep in mind that the average customer lifetime means the period for which you retain a customer. So, when we speak about LTV as the KPI, all things being equal, it should be as high as possible.
Client retention rate (CRR)
The CRR metric measures the number of users who stay loyal to your company for a particular amount of time. You can calculate CRR using the formula below:
CRR = (Customers at the end of the period – New customers gained during the period) / (Customers at the start of the period × 100%)
When your CRR is growing, it indicates your startup goes in the right direction. When your CRR decreases, you’ll quickly become aware of problems with your customer service, discover new competitors, and learn how to maximize your retention.
Monthly recurring revenue (MRR)
The last and most important metric for any startup is estimated monthly revenue. Calculate your MRR to understand the health of your business. To calculate your net MRR, determine your MRR at the beginning of the month, add the extra revenue generated by users who upgraded their tariffs, then deduct lost revenue (from cancellations or downgrades). The simple formula is:
Net MRR = New MRR + Upgrade MRR - Churn MRR
If the churn MRR is greater than the sum of the new MRR and upgrade MRR, your company is in trouble. Break down your net MRR for a better understanding of the reasons for your trouble.
Six key product metrics
To improve your product’s performance over the long term, you need to understand which metrics to analyze according to your product strategy. Let’s briefly discuss the key categories of product metrics and understand their importance.
This category of metrics allows you to understand the number of people who use your product over some period of time. With the help of reach metrics, you can see your maximum number of simultaneously active users. In addition, you will be able to see how many users became active organically and how many of them were re-engaged.
Metrics within the reach category include the number of signed-in users, number of subscribers, and number of account holders. These metrics may have different names depending on the industry.
This metric represents the percentage of new active users. The activation metric helps understand how your actions are helping to activate new users over time.
An example of an activation metric is the percentage of users who made their first purchase.
Active users are those who benefit from your product over a period of time. This value can be defined in different ways — for example, taking one or more actions. These metrics will help you know if more or fewer people are getting value from your product.
Examples of active use metrics are daily, weekly, and monthly active users (DAU, WAU, MAU).
Engagement metrics help you understand the extent to which your users are engaged with your product. You can measure interactions by the number of completed transactions, recommended product views, number of actions taken, etc.
The primary purpose of retention metrics is to understand whether your product is sustainable. In other words, retention measures the percentage of your active users retained for a given period. The general recommendation is to use a seven-day retention period as a leading indicator for 30- or 90-day retention.
Despite the critical product metric categories described above, there are always metrics specific to your business model. To determine what they are, just ask yourself how else your business can deliver value.
For example, a dating site might analyze the “good churn” metric to reveal how many users have found a relationship. The loss of these users can be helpful in this case, as they can recommend your product or come back on their own.
A variety of startup metrics
How to gather and analyze your metrics
Many tools exist for efficiently gathering metrics and tracking KPIs. We offer some examples of the top software tools for small and midsize businesses to collect and analyze quantitative data.
- One of the most universal and comprehensive tools is Google Analytics. It allows you to gather various types of data, analyze it, and present it in convenient forms. Google Analytics works well with both web and mobile products, including iOS apps.
- Mixpanel is a comprehensive analytics tool covering web and mobile platforms.
- Created exclusively for mobile applications, UXCam is a leader in the in-app product analytics market.
- One more proven tool is Amplitude. It covers all that’s necessary for analyzing digital products, including support for qualitative and quantitative data. Unfortunately, the starting plan costs $995 per month, which is expensive for startups. The app, however, offers free processing of 10 million events each month.
Take into account that there’s no silver bullet for any type of product. That’s why you should analyze your needs, research the tools market, then choose the right one for you.
How to choose the key startup KPIs and metrics to achieve success
Let’s fill in the final gaps of choosing key startup KPIs and metrics to achieve success. A successful product brings value and raises the level of customer satisfaction. It also meets all expectations according to the business goals.
After exploring this topic in detail, you should now better understand how to narrow down a list of KPIs and metrics that best match your product’s characteristics.
Here’s some advice to help you choose the main KPIs for your startup:
- Define the goals (for both the product and the business).
- Define timeframes and milestones.
- Choose applicable metrics you can control to track goal-oriented KPIs.
Also, some tips on how to use your defined KPIs:
- KPIs are dynamic, so you should track them continuously.
- Metrics can also be reviewed when necessary.
- All product development team members must be aware of plans, metrics, and KPIs.
- Defined and accepted KPIs must always be the basis for any planning activity (sprint planning, release planning, etc.).
No matter what area your business is developing in, you should always consider what drives your success.
Here are the main takeaways:
- Your startup’s progress depends a lot on the effort you put into business development.
- Metrics are values used to track startup progress, while KPIs are specific values of those metrics that you would like to achieve.
- The correct measurement framework is a must in determining the success of a startup product.
- The more accurately you determine what affects the value of your product and increases your customer satisfaction, the faster your product will mature and become competitive.
The most important KPIs and product metrics for startups vary. Your job is to find those that suit your goals.
The main difference is that metrics are quantifiable variables. And KPIs are some values of these variables that should be achieved.
The most popular are reach, activation, active use, engagement, and retention.
The correct measurement framework is a must in determining the success of a startup product. Once you determine what affects the value of your product and increases your customer satisfaction, you can understand when and how your product will mature and become competitive.