Creating Success: A Guide to Product Manager KPIs

Introduction

For product managers (PDMs), key performance indicators (KPIs) are the strongest, defensible tool in decision making. They identify the progress of the work of the team, the progress of the product and the overall business. Product manager KPIs include specific activities associated with the product, customers, and the overall process for bringing a product to market.

KPIs should be used to celebrate success and identify risk. Conversely, the lack of KPIs leave a product manager blind to what’s going on and show a weakness in management style. Product managers should determine which product management metrics are the most important to track and report.

The role of a product manager can be mystifying to many stakeholders. Some view it from their understanding of a project manager—keeping the progress on track and coordinating people to work together. Others view the role as a liaison between the sales teams and the engineering organization—translating business requirements into technical requirements.

Progressive executive teams recognize product managers as the overall business owner or a business unit manager for a specific set of deliverables—the product. Product managers are responsible for the perception they want for their role. Strong PDMs leverage product management success metrics as a tool to demonstrate their proficiency in managing their product. More importantly, KPIs for product management are the foundation for monitoring the success or failure of products or the company.

Product Management KPIs Define Performance

KPIs for product managers cover a broad set of topics. Product managers that come from an engineering background often focus on creating KPIs associated with the product. For product managers with a marketing background, the response is usually associated with usage or customer behaviors.

Product managers must make the judgment call identifying what is most useful to assist them in their decision-making and their communications strategy. They should work with the executive team to identify the product management metrics that help them with their decision-making and in support of corporate goals. When pitching new ideas and asking for the investments required, having data about previous trends, and identifying methods of validating investment strategies will create a stronger business case.

KPIs can be organized into various categories. It is important for product managers to explore which product management KPIs are important to communicate as part of building credibility, encouraging engagement, celebrating success, or identifying trends and issues.

When to Use Which KPIs

Professional PDMs will be selective when creating KPI reports. Depending on the level of automation, KPIs can involve many people. Pick the top five or six that give you the confidence in your progress and in your decision-making.

Business Performance KPIs

The most common set of performance targets are the business KPIs that product managers often overlook. Creating KPIs for business performance will help identify trends in the success of the growth of the business. These are focused around customers, customer lifetime value, bookings, revenues, costs, and profitability. For executives, these business performance metrics will be the ones that drive investment decisions, lay a foundation for additional headcount, or drive go-no-go decisions at the departmental or product level.

The following table identifies some KPIs relating to business performance, a suggested cadence, and descriptions.

Product managers should monitor customer related KPIs as an indicator of how well the sales and customer success engagements are working. If customer velocity is reducing, then it’s critical to understand why. Is it a new competitor? Is it a pricing issue? Is it a customer communications/expectation issue? If customers are leaving (churn or attrition) then a deep dive should immediately ensue to explore remediation activities.

A rapid increase in growth can lead to a discussion about market share, pricing increases, and new investments in the growth of the product line. Rapid growth can impact the performance of your operating environments, especially in a SaaS environment as it relates to COGS and OCOGS. Do you have enough capacity? Is Support sufficiently staffed? Is Customer Success able to handle the volume of customers? Are trends showing that you need to act immediately to prepare for the additional overhead?

When considering financial or revenue forecasting and planning, find out about seasonal implications. These might include a need for “use it or lose it” budget situations at the end of the fiscal year. Most companies close their year in December. Consider March break as a down time and summer as a slow-down time for many businesses as people take vacations. Year over year comparisons will show those trends. Plan product releases, launches, and announcements with those considerations in mind.

Product Usage KPIs

Product usage KPIs will help to identify how the product is perceived and used. It will help drive roadmap decisions relating to key feature functionality and user experience (UX). Create the tracking mechanisms within your applications to understand behavior as a tool for continuous improvement. Track often and report trending over a period of time.

Utilize the product usage KPIs to identify potential customers that might churn due to performance issues. Monitor these KPIs to address situations before they become escalated issues. A program of continuous improvement will leverage these KPIs to demonstrate success.

Product Development KPIs

Product development KPIs help with identifying process improvements, velocity, and speed of development. Monitoring and sharing the results from the team can create new energy and competitiveness.

It’s important to work with the engineering leads to agree on appropriate KPIs and to share them with the team. KPIs can form a basis for recognizing achievements, managing team size, or identifying areas for improvement.

Product Quality KPIs

Product quality KPIs will identify trends and risks in delivering an extraordinary customer experience. Product managers should consider tradeoffs in quality against delivery timelines, keeping in mind that a single failure found by a single client can have a profound impact on the business. As more customers leverage social networking to share their displeasure, quality KPIs should be high on the priority list.

Product quality can form a validation of the quality of the engineering organization. Properly used, KPIs can create a foundation for continuous improvement, reduction in testing, automation, and overall improved customer experience.

Cross-functional Collaboration

When building relationships with other organizations within the company, recognize that they also have KPIs. Many of those are shared (e.g., revenues, customers, usage, etc.). For product managers with goals around meeting analysts’ comparisons (e.g., Gartner Magic Quadrant), working with Marketing to promote positive results can support the competitive market positioning needs. The foundation may start with customers that are loving the product (usage is increasing), which improves the brand (a marketing KPI). This could turn into a customer success story, be used with analysts to drive further brand recognition, or can be tied to word-of-mouth qualified lead generation.

Identification of negative trends can lead to mitigation plans that will remediate the situation as a team. For example, if Finance identifies that renewals revenues are dropping off, Product Management can coordinate with Marketing to create a sales renewals campaign around a new (or upcoming) functionality to address the situation. In this scenario, not only does the renewal (revenue) challenge get resolved, but Product Management can identify potential MVP or beta users to test and promote new functionality.

Understanding how product management KPIs fit with each organization’s goals can create synergies to drive successful relationships. A regular cadence of communications with the rest of the organizations can help with early identification of opportunities to improve. Here are a few discussion topics where other departments may be involved when certain trends are identified.

Communicate Often and Consistently

As the center point to the overall product business, a product manager has the unique opportunity to influence and drive success for the company with clear communications. Explore the following business scenarios and consider which product manager KPI examples will create the best positive impact when communicated regularly.

Summary: Use KPIs in Product Management for Clear Communications

Ambiguity is the bane of any communications. Exactly how bad is it? How great was it? What are the facts? Creating a data-driven foundation helps to eliminate fuzzy conversations and creates definitive, clear communications. An informed product manager will have their finger on the pulse of the business performance, product development, product quality and product usage KPIs that are the foundation of a well functioning business.

The opportunity for product management teams to drive a business lies in the knowledge, based on real data, of how the key factors of the product and business are running over time. Pick the top five or ten KPIs—monitor them religiously and repeat them at every opportunity.

By continuously communicating successes and dealing rapidly with negative results, the surprises and challenges that always come with the job of a product manager will be minimized. Knowledge is power, and product management KPIs allow product managers to own success. Skills in getting this right can make or break a company.