Why should Product Managers love data?

4 minutes read

Product managers use data at every stage of the product development process - be it to understand early design ideas, customers' needs and wants, or to gauge how the product is performing. But the key aspect is to ensure you know which data you want to use and why you want to use it to achieve your product goals and strategy.

Some of the key benefits of using data are:

  • To measure progress over time
  • To make objective comparisons
  • Ensuring that the product is heading in the right direction
  • To align and get everyone on the same page
  • Gain stakeholder buy-in
  • Validating assumptions about customers
  • Understand which features are most popular, underutilized, or missing the mark altogether
  • To learn how users engage with a product
  • To measure customer satisfaction with your product
  • To identify power users and other user cohorts etc

What are metrics?

Metrics are values that tell you when you’ve accomplished your goals i.e it defines and tracks the success of your product. It can detect problems and helps to make informed decisions.

A good metric is understandable (10,000 new users this quarter), comparative (15% reduction in cart abandonment compared to this time last year) and is a rate/ratio (Average user opens the app 5 times per day).

Depending on what your objective is – attracting a new customer segment, improving popularity with users, getting ideas for new features, understanding how the product is performing – you need to choose the right metrics.

Which metrics should Product Managers use?

Product managers should determine which product management metrics are the most important to track and report. Metrics are key points in building a product roadmap – they allow product managers to evaluate engagement, feature usage, user experience, and, of course, commercial success.

Metrics can take many forms like - Customer feedback, customer behavior, customer satisfaction, market size, market dynamics, competitive insights, business goals, OKRs, budget estimates, time estimates, resources available, sales, customer growth, customer referrals, return on investment, revenue, development costs, customer growth, usage, market dynamics, competitive insights etc.

A few key metrics which Product Manager can explore are:

  • NPS (Net Promoter score) and CSAT (Customer Satisfaction)
  • Feature adoption rate (time taken to adopt, number of customers who adopt, duration of adoption, sessions per user, number of user actions)
  • Customer retention rate (daily active users, monthly active users) and Churn rate
  • Conversion rate (number of user actions, time to convert from free to paid user)
  • Revenue (monthly recurring revenue, average revenue per user)

What to do with the data on your metrics?

Just gathering and tracking metrics is not enough. Once you have your metrics, you need to interpret it. Interpreting is a hard task, but product managers can involve multiple people in the analysis of it ex: data scientists, data analysts etc.

You can possibly set up a metric dashboard and monitor the data on a regular basis as dashboards can highlight specific areas of concerns. The most important question to ask yourself is - Are they useful? Are we using these metrics to make meaningful decisions and are they accurate?

Conclusion

Data-driven decisions help to eliminate and avoid fuzzy conversations with stakeholders. With the help of data, a product manager has insights about business performance, product development, product quality and product usage KPIs that are the foundation of a well-functioning business. Dashboard reports can be shared with stakeholders who love numbers and can build trust and confidence. You can also explore the HEART Framework, by Google, which defines product metrics that follow product goals and strategy.