As a product growth manager, you are responsible for making sure your product hits its growth metrics. You might not be in charge of the actual numbers, but without hitting your goals, you won’t have that job for long. And while it can be challenging to track all the data you need as a PM, with the right tools and strategies, it’s much easier than you think.
As a product growth manager, there are 5 key metrics that you should track and optimize to achieve your goals. Let’s take a look at each one in detail:
Product Growth Metric #1: User Acquisition
The first metric to track is user acquisition. This metric shows the rate of new users that are discovering and using your product. Users might discover your product through a new marketing channel, or they might be returning users who have discovered new features.
And user acquisition is broken down into 2 sub-metrics:
Organic Growth – Organic growth is when existing customers refer your product to new users and gives you a better long-term ROI than paid acquisition. This is why it’s important to track your customer referrals because this is free user acquisition and is the best way to scale your business.
Paid Acquisition – Paid acquisition includes any marketing that you pay for such as online ads, referral programs, and brand partnerships. This is a great source of short-term growth, but can be very expensive if you don’t know what you’re doing.
Product Growth Metric #2: User Retention
The second metric to track is user retention. This metric shows the rate of users coming back to your product after they’ve discovered it. One of the biggest mistakes companies make is to focus on getting new customers before retaining their current ones. Even the best marketing campaigns only have a 1 in 10 chance of converting a visitor into a customer.
So, the best way to scale your business is to make sure your existing customers keep coming back. Retention metrics include: – Churn Rate – The churn rate is the percentage of customers who leave your product. If you have 100 customers, but 10 of those customers leave every month, you have a 10% churn rate. The lower your churn rate, the more likely your customers are to stick around.
This is usually tracked per cohort: – Retention Rate – The retention rate is the percentage of users who come back to your product after using it. If you have 10,000 customers and 9,000 of them come back after using your product once, your retention rate is 90%. This is one of the best ways to scale your business and is usually tracked per cohort:
Product Growth Metric #3: Cohort Analysis
The third metric to track is cohort analysis. Cohort analysis shows you the behavior of specific groups of customers, called cohorts. You can group customers by when they joined your product, how many times they used your product, or a combination of both. This is a great way to track and optimize your customer experience.
You can also optimize your customer acquisition by studying cohorts that join after new marketing campaigns. Cohort analysis segregates user groups based on their behavior and usage of the products. The groups consist of related users that share common characteristics. For e.g. in an ecommerce portal, the customers whose order value exceeds $10,000 annually may form a cohort.
Cohort analysis helps companies analyse the behavioural analytics for the most relevant customer groups. The company may offer loyalty benefits to its most valuable customers. Say, the ecommerce company provides discount coupons to customers whose order value exceeds a given threshold. The cohort analysis can help companies develop actionable triggers for achieving the business results.
Product Growth Metric #4: Net Channels
The fourth metric to track is net channels. This metric shows how much traffic to your product is coming from different sources. You can track this by calculating the difference between your referrals and your organic traffic. If referrals are higher than organic traffic, then you’re getting more customers from referrals than word of mouth. This is a great way to identify which new marketing channels are working best for your business.
The product growth manager needs to analyse the most relevant channels for revenue. By looking at he net channels, company can put its marketing budget to good use.
When the word of mouth creates an organic customer base for a product, companies can continue to invest in building superior user experience for its customers. It creates a win win situation for product and marketing teams.
Product Growth Metric #5: Bottom Line
The last metric to track is the bottom line. This isn’t a specific metric like the others, but it’s still vital to track and optimize. In order to track the bottom line, you need to understand your profit margin.
Profit margins show how much of the revenue you make is profit. There are dozens of ways to improve your profit margin, but they all boil down to one thing: increasing your revenue while keeping costs low.
There are many ways to track your revenue, but to track your profits, you need to know your revenue, your costs, and your profit margin. That’s it! Those are the five key metrics that product growth managers need to track and optimize. If you’re tracking these metrics, you’ll have a much easier time growing your product and reaching your goals.
A product growth manager needs to understand the impact of adding features, providing high quality customer & product experience on the bottom line. Profitable products can scale to help companies achieve their long term business horizons.
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