📊 Key Performance Indicators (KPI)

Metrics that define your success and track progress

📊 What are KPIs?

➕ Key benefits

☑️ KPI checklist

📊 Key Performance Indicators?

KPIs, or Key Performance Indicators, are specific, measurable metrics used to assess the success, performance, and effectiveness of a product or its related initiatives. They provide objective data that helps you make informed decisions, track progress, and ensure that your efforts are aligned with established goals.

🏎️ Think of KPIs as the dashboard of your product management “car.” Just like a car’s dashboard offers real-time insights into speed, fuel levels, and engine performance, KPIs give you a clear view of your operational health and progress.

3 Benefits of KPIs

➕ Data-informed decision making

KPIs offer objective and measurable insights into your product’s performance. By tracking these indicators, you shift from relying on assumptions to making decisions based on real-time data. This shift to a data-informed approach allows you to effectively prioritize features, implement necessary improvements, and optimize your product strategy.

➕ Clear performance assessment

KPIs act as benchmarks, enabling you to assess the effectiveness of your product in meeting its goals and objectives. They offer a clear and concise method to evaluate success and pinpoint areas requiring improvement. Whether it’s tracking user engagement, conversion rates, or revenue growth, KPIs provide a straightforward approach to measure performance.

➕ Focus and alignment

KPIs effectively align your entire product team and stakeholders around common objectives. By clarifying which metrics are most critical, they simplify maintaining focus on essential targets. This alignment diminishes ambiguity and ensures that all efforts are consistently directed towards achieving shared goals.

KPI Checklist

☑️ Aligned with objectives

Are your chosen KPIs directly tied to your product’s goals and objectives? Do your KPIs reflect the broader strategic goals of your organization or business unit?

☑️ Relevant and meaningful

Are the selected KPIs relevant to the success of your product? Do your KPIs provide meaningful insights that help guide decision-making?

☑️ Specific and measurable

Are your KPIs specific and well-defined, leaving no room for ambiguity? Can you measure your KPIs using quantifiable data or metrics?

3 Bad Practices to Avoid

⚠️ Overloading with too many KPIs

Avoid the temptation to track an excessive number of KPIs. Overloading with too many metrics can lead to information overload, obscuring what truly matters. Instead, prioritize a small set of high-impact KPIs that align with your product’s goals. This focus ensures clarity and enhances your ability to concentrate on the metrics that genuinely drive your product’s success.

⚠️ Not revisiting regularly

Establishing KPIs without regularly revisiting them can lead to stagnation. Business environments are dynamic, and your KPIs need to adapt to these changes. Make it a practice to periodically review your KPIs to ensure they stay relevant. As your product’s goals or market conditions evolve, adjust the KPIs accordingly to maintain their effectiveness.

⚠️ Ignoring context and nuances

Interpreting KPIs without considering the context in which they are measured can lead to misinterpretation. Remember, factors external to the KPI itself may influence its fluctuations. Always take into account the context surrounding your KPIs. It’s crucial to understand how external factors could impact the results and to interpret the data within the broader business and market landscape.

Taking KPIs further

⭐️ North Star Metric

Your North Star Metric is the key performance indicator that best reflects your product’s success. It represents the core value delivered to your users and guides long-term growth strategies.

🔄 Delivery Value vs Capture Value

Each KPI can be categorized based on whether it helps you deliver value or capture value:

➡️ Delivering Value metrics focus on ensuring that the product provides value to your users. These include user engagement metrics (like DAU) and product performance metrics (like Feature Adoption Rate). These metrics show whether your product is meeting user needs and expectations.
⬅️ Capturing Value metrics focus on ensuring that your product generates business value. These typically include business metrics like Revenue or LTV, which track the financial return and sustainability of your product.

🌲 KPI Tree

The KPI tree allows you to break down your key metrics into sub-metrics that reflect your objectives at every level, helping you connect the dots from high-level goals to actionable tasks.

Examples

Subject: 🏡 Property marketplace (like Airbnb)

🤩 Customer engagement

User Sign-ups (Monthly/Quarterly): Measures the growth rate of new users, indicating the effectiveness of your marketing and outreach strategies.
Average Daily Active Users (DAU): Indicates user engagement level and platform stickiness, reflecting how often users return to your platform.
Net Promoter Score (NPS): Assesses customer satisfaction and likelihood of recommending your service, crucial for organic growth among young travelers.

💰 Financial performance

Customer Acquisition Cost (CAC): Measures the cost-effectiveness of acquiring new users, crucial for sustainable growth.
Lifetime Value of a Customer (LTV): Understanding LTV helps in making informed decisions about how much to invest in customer retention.
Revenue Growth Rate: Directly reflects the financial health and growth trajectory of your business.

Disclaimer: This is a hypothetical example created to illustrate how KPIs can be applied to track relevant data for a property market place like (Airbnb).

KPI Prompt for ChatGPT

Hi ChatGPT, I need help in defining KPIs for my product, [Your Product/Company Name]. Our product is [provide a brief description of your product or service]. We are primarily targeting [describe your target market or audience]. Our main business objectives include [list your primary business objectives, like increasing sales, improving customer satisfaction, market penetration, etc.].

Given this context, could you suggest relevant KPIs that would effectively measure our progress towards these objectives? I’m particularly interested in KPIs that are specific to [mention any specific aspect of your business, like customer engagement, operational efficiency, financial performance, etc.], and I would appreciate it if you could explain why each KPI you suggest is important for our product’s success.

Additionally, if you have any insights or best practices on how to monitor and analyze these KPIs effectively, that would be extremely helpful.

✏️ Note from the author

The content on this page offers a high-level overview of KPIs in product management, sharing my approach based on personal experience and what has worked well for me. While I aim to explain the theory and core principles, the actual implementation of KPIs can vary greatly depending on your specific resources, tools, and context. There are many ways to define and track KPIs, and this page presents just one perspective. Use these insights as a starting point, and remember that adapting them to fit your unique needs and environment is key to success.

Tolgay B.

More Resources for Inspiration

Articles

📄 Atlassian | OKR vs KPI: What’s the difference?

📄 Itamar Gilad | The Three True-North Metrics that Your Product and Business Need

📄 Ant Murphy | Long Backlogs and Unmeasurable Work

Other Strategy Pages

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