What are KPIs?
Key performance indicators (KPIs) are metrics that measure how your product is doing. Effective KPIs help you understand if your product is creating the desired value for the users, the customers, and the business. Without KPIs, you end up guessing how well your product is performing. It’s like driving a car with your vision blurred: You can’t see if you are heading in the right direction or getting closer to your destination. You might have a hunch, but you don’t know if it is correct. Using KPIs and collecting the relevant data helps you balance intuition with empirical evidence. This increases the chances of making the right decisions and achieving product success.
A Goal-directed Approach to Choosing KPIs
To select the right KPIs, I recommend taking the following three steps: First, use the user and business goals in the product strategy to select an initial set of indicators. Then take into account the product goals on the product roadmap to discover additional KPIs. Finally, choose further indicators to assess the health of your product and team. This, of course, assumes that you have a validated product strategy and a realistic product roadmap in place. If that’s not the case, then I recommend creating those two plans first.
As you may have noticed, I suggest using a goal-directed approach to identify the right indicators. I am not a big fan of “standard” KPIs, for example, customer acquisition cost (CAC), churn, and number of active users for SaaS products.
