The product management world (and particularly the SaaS product management world) is full of metrics, KPIs, and other numerical measures. In fact, even experienced PMs can struggle to keep them all straight. To help, we’ve created this brief primer on SaaS product metrics you’re likely to come across during your career. We hope you find it useful as you navigate your role as a data-driven PM.
Customer satisfaction metrics
How happy are your customers with your product? These metrics aim to measure the hard-to-quantify quality of customer satisfaction.
Customer effort score (CES)
This metric measures satisfaction as a function of ease or difficulty of use. A CES survey asks customers to rate their experience with a product on a seven-point scale from “Very Difficult” to “Very Easy.” The higher the score, the more satisfied a customer is said to be.
Customer satisfaction (CSAT)
A CSAT survey gets right to the point, asking customers to rate their level of satisfaction on some kind of scale. Options might include a range from 0-10, a range of one star to five stars, or text-based choices like “Very Dissatisfied” and “Satisfied.” The CSAT score is an average based on the overall results, often expressed as a percentage.
Net promoter score (NPS)
NPS is a metric companies use to measure their customers’ propensity to advocate for their brand. An NPS survey asks a single question: “How likely is it that you’d recommend this brand to a friend or colleague?,” with the answer limited to an 11-point (0-10) scale. Scores of 9 or 10 are designated as “Promotors,” 7 or 8 as “Passives,” and 0 through 6 as “Detractors.” Then, the percentage of Detractors is subtracted from the percentage of Promoters. To calculate NPS, use the following formula: NPS = [(# Promoters / # Respondents) – (# Detractors / # Respondents)] * 100.
Are your users actively spending time within your product, discovering valuable features, and integrating your application into their day-to-day lives? Engagement metrics focus on quantifying how “embedded” your product is in your users’ workflows.
Product engagement score (PES)
PES is an average of stickiness, feature adoption, and app retention that provides a holistic view of product engagement. It can be expressed mathematically as: [(Feature Adoption + App Retention + Stickiness) / 3] * 100.
Stickiness measures how effectively your product keeps customers coming back. It’s calculated as the ratio of Daily Active Users (DAU) to Monthly Active Users (MAU).
No SaaS product can hope to survive without holding onto at least some of their customers. Retention metrics reflect the number of users/customers who renew their business and continue paying for a product or service.
Customer churn is a vital metric for any subscription business, especially SaaS companies. It’s a measure of how many customers do not renew at the end of their subscription. Churn is generally measured in two broad categories — revenue churn, which measures the dollar value of contracts not renewed, and customer churn, which is commonly expressed as the percentage of companies up for renewal that do not extend their contract.
For SaaS businesses, customer retention is a measure of how many customers renew their contract at the end of their subscription term. It is the inverse of customer churn, and is also known in the industry as “logo retention rate.” Retention is measured by comparing the number of customers at the start of a given time period with the number of customers at the end of that period, excluding any new customers gained during this time.
Net revenue retention (NRR)
Net revenue retention looks at a set period and takes into account changes in account value (i.e. upsells and downsells). If revenue gained from upsells offsets or exceeds revenue lost from downsells and churned customers, the net revenue retention rate is greater than 100% (“negative churn”).
Also known as “cohort retention,” user retention is a key metric to measure the growth of SaaS and digital products. User retention looks at first-time users within a specific timeframe (typically one month or one week) and calculates the percentage of those users that return in subsequent time periods. User retention can measure user logins globally, logins for a subset of users, or retention for specific behaviors like visiting a part of an application, using a specific feature, or completing a key workflow.
Let’s not forget about an important group of numbers — the metrics around money. These KPIs measure how well a company is doing financially.
Annual recurring revenue (ARR)
ARR is an especially important metric for subscription-based SaaS products. While there is no “one-size-fits-all” approach to calculating ARR, it should always reflect the contracted amounts of recurring revenue across a year-long period. It is expressed as a dollar (or other currency) amount.
Customer acquisition cost (CAC)
CAC refers to the sum total of the sales and marketing costs spent to acquire a customer. It can be expressed with the following formula: CAC = (total cost of sales and marketing activities over a specific time period) / (# of customers acquired during that time period).
Customer lifetime value (LTV)
Customer lifetime value is the total amount of revenue a company can expect from a certain customer over the course of their business relationship. Calculating LTV is a bit complicated. To get started, you need to figure out the APV (average purchase value) and the APFR (average purchase frequency rate). Then, divide the APV by the APFR to get the average customer value. Next, calculate the length of the average customer’s lifespan. Finally, multiply average customer value by average customer lifespan. The result is LTV.
How frequently are users interacting with your product, and which features do they use the most? The answers to these questions can help you make critical product decisions, such as which features to sunset or where to invest in user onboarding and education.
The acronyms DAU, WAU, and MAU stand for daily active users, weekly active users, and monthly active users, respectively. Daily active users (DAU) refers to the number of unique users interacting with your application on a specific day. These users have completed some action within your product, such as logging in, filling out a form, or clicking a button. Weekly active users and monthly active users refer to the same thing, but over a different time period.
Feature adoption is a user activation metric that is measured by interaction with a specific feature. It is usually measured relative to logins: Monthly Feature Adoption Rate (%) = [feature MAU / monthly logins] * 100.