In a product-oriented company, it is the product itself that serves as the primary means of interacting with customers: acquiring, increasing their number, and retaining them.
Any conversion action during a marketing campaign — a click on a call-to-action button, a subscription, a tariff change — generates data. It is very important for marketers to listen to what the received information can tell them in order to discover new approaches.
The best way to use data is to build metrics based on it and monitor indicators in real-time.
This article lists 25 key metrics that are essential for tracking in a product-oriented company. These 25 indicators relate to five different departments found in any product-oriented company: marketing, sales, product, finance, and human resources.
We will examine each indicator in detail and show how to track the relevant metrics in a way that enhances the decision-making effectiveness for both individual departments and the company as a whole.
It is important to note that any indicator should be closely linked to a key business goal. Based on the above, for each department mentioned below, a number of goals will be presented, with which the tracked metrics are directly related.
First of all, let's consider what it means to be a product-oriented company.
What is a Product-Oriented Company?
Allan Wille (Allan Wille), co-founder of the cloud service Klipfolio, describes a product-oriented company as a business for which:
...the product is the primary means of acquiring customers, increasing their number, and retaining them.
To ensure that your product-oriented company is moving in the right direction and growing every day, it is very important to ensure the following condition is met: each team must always understand their goals, tasks, and trends, as evidenced by data.
Marketing
1. Website New Users
The number of users who visit your site for the first time. Google Analytics assigns a unique identifier to each site visitor. If the user has not deleted their cookies or is not using a new device unknown to Google, this unique identifier allows the search engine to determine whether this visitor is new or returning.
2. Marketing Qualified Leads (MQLs)
This is a universal metric used by marketing teams to measure the quality of the leads they generate and pass on to the sales department. Most marketing teams have MQL-related goals, including the number of qualified leads and the acceptance rate, for example, the number of leads subsequently taken over by the sales department.
3. MQL to SQL (Sales Qualified Lead) Conversion Rate
This is the percentage of leads qualified by the marketing department that successfully convert into leads that meet the requirements of the sales departments.
4. Customer Acquisition Cost (CAC)
This is the company's expenses for acquiring a new customer. CAC includes fully accounted costs of marketing and sales departments for attracting a potential customer and convincing them of the need to purchase a product.
Four main tasks for marketing teams in product-oriented companies:
- Generate high-quality traffic at the top of the marketing funnel.
- Evoke intent using compelling educational content.
- Reduce the time to transition to a trial period of using the product.
- Focus on funnel efficiency.
Sales Department
1. Lead to Win Rate
This is the percentage of leads that enter the sales funnel and are now considered "completed" or "acquired" customers. For the sales department, this is one of the most commonly used conversion metrics, as it is a compelling testament to the product's market fit, correct pricing, and sales execution. This rate is also a key indicator of the consistency of your teams engaged in marketing, sales, and product development.
2. Average New MRR (Monthly Recurring Revenue)
MRR is the sum of all subscription revenue, expressed in terms of monthly service cost. For most companies, MRR is the sum of all new paid subscriptions and upgrades (sometimes referred to as package extension), minus downgrades (or reductions) and canceled subscriptions. Although MRR is not one of the Generally Accepted Accounting Principles (GAAP), this indicator is used as a common equivalent of "income" used by SaaS companies. The MRR metric is used interchangeably with ARR (Annual Recurring Revenue).
3. Won Customers
This is the number of new accounts in the sales funnel that are "completed/acquired". This is an indicator of success for both the sales team and the marketing department. Customer acquisition is the stage at which the lead subscribes to the product in print or electronic form and is now considered a real customer. Unlike won opportunities, the "won customers" metric is applied to an account only once, while you may have several opportunities for each account.
4. Net Promoter Score (NPS)
This is an indicator of the willingness of the customer base to promote the product or service to colleagues and friends. It is based on the results of a current customer survey in which respondents are asked to answer the following question: "how likely are you to recommend (brand or product X) to a friend or colleague?"
5. Lifetime Value (LTV)
The lifetime value of a customer indicates the total revenue that the company can reasonably expect from one customer account. This metric takes into account the amount of revenue received from the customer and compares this number with the projected duration of the customer's loyalty to the company. Businesses use this metric to identify the most valuable segments of their customer base.
6. Net Churn Rate
The net churn rate of monthly recurring revenue (Net Monthly Recurring Revenue Churn Rate) is the percentage change in MRR due to expansions, cancellations, and downgrades. Negative net MRR churn occurs when the number of upgrades exceeds the number of downgrades and cancellations, thus being a positive indicator of the company's health. This metric is usually expressed as a monthly rate, although it can also be used as a parameter determined by the financial results of the year: the net churn rate of annual recurring revenue (Net Annual Recurring Revenue Churn Rate).
6 main tasks for sales departments in product-oriented companies:
If the goal is customer acquisition:
- Focus on high-quality leads.
- Onboard potential customers as early as possible.
- Become a true product expert.
If the goal is customer retention:
- Interact with engaged customers, encouraging them to use and expand the set of available options.
- Collaborate with partners in expanding their business to subsequently attract their customers to use your product.
- Provide product development teams with feedback on the ground and access to customers for their training.
Development Team
1. True Trial Engagement
This indicator corresponds to a user who logs into their account again within the first 7 days after registration. Tracking true engagement makes sense for any software company that offers potential customers a trial version of the product before they decide to buy it. Trial version users who log into their account twice during the first 7 days of the trial period are more likely to convert into paying customers. Tracking genuine engagements allows you to assess the quality of leads, the degree of engagement in using the product, and the likelihood of acquiring a customer much earlier than just based on the lead-to-customer conversion rate.
2. Average Server Response Time
This is the average time it takes for a web application server to return the results of a request to the user. This indicator is influenced by several factors, including network bandwidth, the number of users, and the number and type of requests sent.
3. Churn or Retention
Churn is "enemy number one" for any SaaS company. Customer churn is the number or percentage of users who subscribed to a service and then dropped it over a certain period of time.
4. Active Users per Account
The total number of unique users who log into their own account.
5. Product Performance
The "product performance" key performance indicator (KPI) ranks product sales based on revenue metrics, allowing you to provide your sales department with relevant information about which products/services are selling well. At the same time, you should rank the least effective products to determine which of your marketing offers do not resonate with your customers.
6. Bugs
The product development team should always monitor their bug pool. You should always know where you stand in terms of quality. Segment this metric by components and/or services, severity (critical, major, normal), type (performance, usability, security), and any other aspects that help teams prioritize and determine where there are large clusters of bugs and what developers should focus their attention on.
Top 4 tasks for product development teams:
- Improve the conversion rate of trial versions of products.
- Stimulate engagement and increase revenue.
- Maintain partner ecosystems.
- Ensure product efficiency, quality, and safety.
Financial Department
1. Revenue
These are receipts obtained from the company's main business operations, such as the sale of products or services, or revenue from rent or interest income, minus any discounts or returns.
2. Net Burn Rate
Net loss is the amount a company loses per month by spending (or "burning") cash reserves. This state is observed when a company's operating expenses exceed its revenues. A company that is profitable and generates cash has a "negative net burn rate".
4. Current Ratio
This indicator demonstrates your company's ability to pay all its financial obligations within one year. This ratio takes into account not only current assets such as accounts receivable but also current liabilities such as accounts payable, allowing for an assessment of the solvency of the analyzed business. Generally, a ratio between 1.5 and 3 is preferred and indicates good financial performance of the company.
Top 3 tasks for financial teams in product-oriented companies:
- Improve your business model, achieve a deep understanding of your team's financial levers.
- Increase efficiency through automation.
- Work on creating a single source of reliable financial data.
HR Team
1. Time To Fill
This is the amount of time it takes for HR staff to fill a vacant position. This indicator can point to existing opportunities for optimizing the workflows of HR teams. This metric can also demonstrate current changes in the labor market.
2. Employee Turnover Rate
This is the percentage of employees who voluntarily or involuntarily leave the organization (this metric is usually calculated over an annual period). You should consider the categories of voluntary and involuntary terminations separately, in addition to calculating the overall turnover rate.
3. Revenue/Expenses per Full Time Equivalent (FTE)
Full-Time Equivalent (FTE) is a calculated metric that adds up all full-time employees to fractional values assigned for all part-time employees, contractors, students, and interns. From a financial perspective, knowing the FTE size in your company allows you to more easily calculate various efficiency indicators, such as Revenue per FTE.
4. Cost Per Hire
This is a fundamental recruitment metric that helps HR specialists budget, calculate the return on their efforts, and understand how effective their brand's reputation is in recruiting talent. The cost of hiring is determined as the internal and external costs required to hire a new employee.
5. CAC Payback Period
This is the time it takes for a customer to recoup the funds spent on attracting them. This value depends on how high the customer acquisition cost (CAC) is and how much the customer contributes to the company's monthly or annual income.
6. Revenue Retention Rate
The Monthly Recurring Revenue Renewal Rate is the percentage of monthly recurring revenue retained from existing customers, calculated taking into account MRR expansions, as well as downgrades to cheaper tariffs/cancellation of certain services and subscription cancellations.
Top 4 tasks for HR teams in product-oriented companies:
- Maintain a high level of culture and engagement.
- Encourage diversity and inclusivity.
- Keep the employee turnover rate low.
- Recruit and hire talented people.
That's all folks!
Many thanks for reading.