Understanding Key Performance Indicators (KPIs) in Product ManagementOctober 6, 2023 2023-10-08 15:28
Understanding Key Performance Indicators (KPIs) in Product Management
Understanding Key Performance Indicators (KPIs) in Product Management
Today, you should understand that products do not just succeed independently with no support and direction. Career fields like product management exist to ensure that products deployed and launched out there serve and fulfill their purpose.
With product management, it is easier to make informed decisions that facilitate the success of your product. One of the things that product managers look for in a product once deployed is its performance rate.
As a product manager, you should ensure that your product is always on the right track, and for this to be guaranteed, it is vital to set metrics that will assist you in effectively measuring the performance and success of the product.
These metrics that guide this process are called key performance indicators (KPIs), and in this article, we will dive into how KPIs play a crucial role in product management.
What Is The Essence of Key Performance Indicators (KPIs) in Product Management?
The performance of every product should be measured, at least to have a hold on its impact on users. And to ensure your product is effectively measured, Key Performance Indicators (KPIs) should be involved. But before we go further into the topic, let’s first of all define what Key Performance Indicators (KPIs) are.
Key performance indicators are tangible metrics used by product managers to measure & evaluate the performance rate of a product or an aspect of it. These Key Performance Indicators (KPIs) help to provide valuable insights that show and inform if a product is meeting the objectives & goals for its existence and delivering the value it is supposed to users.
To perfectly understand how to leverage KPIs in product management, it is vital to know their essence, and they include the following;
- Monitoring and keeping tabs on progress & performance: Tracking the progress and performance of your product can be challenging when there are no metrics to guide the process. This is because, without specific metrics, it will be hard to determine and conclude whether your product is heading in the right direction or not progressing. But with KPIs, we have a guide that assists product managers in navigating the complex journey of product development and ensuring that every detail of the product is on track. By establishing & monitoring KPIs, it is easier for product teams to assess whether their strategies for pushing the product to success are working or not.
- Helps to align product to business goals: Here is one secret in product management – everything you do to ensure the success of your product should align with your intended business goals. Not aligning your effort as a product manager to fit into the business goals will ruin all your efforts. This is why it is vital to establish KPIs that can serve as a stepping stone for the overall successful performance of your product. With a defined business goal/target, it is possible to have product-related KPIs that will contribute and ensure that whatever you do around your product will still lead to achieving those goals.
- Facilitates data-driven decision-making: With the existence of KPIs, product managers can access concrete data and insights that can assist & inform them on the most effective way of making decisions relating to the product involved. As you already know, KPIs as metrics analyzed allow product managers access to detailed insights. From these detailed insights, product managers can easily spot any pain points encountered in the user journey of their target audience.
How to Select The Right Key Performance Indicators (KPIs) For Your Product
Choosing the right KPIs for your product can be challenging. This is because, as a product manager, you do not just select any metric for your choice as KPIs.
Before concluding on the right KPIs for your product, you should consider putting some things in place. For example, you should ensure your selected KPIs are relevant, attainable, actionable and aligned with your product objectives.
If you are struggling with choosing the right KPIs for your product, here are some tips that can guide you through the process;
- A clear understanding of your product: The first step towards choosing the right KPIs is understanding your product. Before you choose your KPIs, you should ask questions like – What goals do you want to achieve with the product? How can the goals and objectives align with your company’s vision & mission? Answering these questions will help you gain clarification that will guide you on how to choose and select the right metrics that matter to your product and directly measure the success & performance of your product.
- Know the different types of KPIs: Before you go ahead with choosing the right KPIs for your product, it is vital to know and understand the different types of KPIs and how to balance them. There are two types of different types of KPIs, and they are leading and lagging indicators. The leading indicators are the metrics that provide potential signals and insights on the success or failure of a product. The lagging indicators are outcomes that result from past actions. When choosing your KPIs, you should endeavor to ensure that there is a balance between the both for your product. For example, a leading indicator can be knowing the rate at which your users complete the onboarding process, while a lagging indicator can be monitoring the customer retention rate.
- Stay away from vanity metrics: By now, you should already know some metrics are vanity metrics. Vanity metrics such as likes, number of followers counts etc. do not matter in the scheme of things, as it is hard to identify their impact on your product. The thing with vanity metrics is that they often appear impressive on the surface but do not pull any weight or impact beyond that. So, when choosing the right KPIs, avoid vanity metrics and go after the ones relevant to measuring your product performance.
Implementing Key Performance Indicators (KPIs) in Product Management.
Determining the success of KPIs on your product does not end with choosing the right KPIs. After selecting the most suitable KPIs for your product, it’s essential to understand how to implement them in product management.
Below are some tips on how to effectively implement KPIs in Product management;
- Set smart targets and benchmarks: Implementing KPIs in the Product management process requires that you set out smart targets and benchmarks. This means you have to be specific about the targets you want to hit with your product and figure out how to reach and achieve them. By establishing your targets, it is easy for product managers to focus their efforts on successfully measuring product performance.
- Monitor and report your metrics regularly: KPIs are not static metrics. Regularly monitoring and reporting the performance of your product over time helps to affirm what is working or not working. Monitoring metrics requires collecting data, analyzing trends and generating reports to access actionable insights. For e-commerce, regular monitoring and reporting metrics might imply generating reports on conversion rates, cart abandonment rates and page load times. It is also easier to identify any issues that will affect the success of e-commerce from the report and take corrective actions to improve the product’s performance.
- Promote iterative improvement: KPIs are not just tools for measuring a product’s performance & success. But they also help to drive iterative improvement. Regularly tracking and analyzing metrics makes it seamless to discover and identify areas where your product needs to be adjusted and improved. Product managers should embrace and accept the culture of continuously learning and improving, where insights from KPIs serve as a forerunner for iterative changes in product development.
Understanding KPIs is vital to the success of any product. They are also crucial in ensuring that the performance rate of your product is effectively measured as it helps to direct product managers in navigating the complex nature of product development.
Again, KPIs have proven to be resourceful in assisting to ensure that products are developed in the best way to provide solutions that address users’ pain points. Product managers should note in building products that users will enjoy using and interacting with, understanding how KPIs work should be a priority in product development.