Every business wants to achieve success for their product, so it makes sense that it's one of the biggest buzzwords in the startup world. But how can you give your product the best chance for success?

Keep reading to find out how you can achieve startup success with metrics, and what the best metrics to measure are.

What do you need for your product to succeed?

There are four key components every successful startup team or product needs.

Goals and objectives

You can't exactly "wing" a startup. In order to be successful, you'll need an actionable plan for success, and that includes knowing what your over-arching product goals and objectives are. You need to have a good idea of what your product will accomplish, what you need to do to get there, and what problems you aim to solve in your industry along the way.

Product-market fit

A viable product has good product-market fit. This is a measure of where your product will fit in your chosen industry and what its value within it will be; successful products need to fill a gap in an industry that is thriving and actively growing. Knowing your product's market fit is a crucial part of preparing your business plan and setting yourself up for success later on.

Scaleability

Growth is one of the fundamental goals of every start-up, and in order to continue growing, your product needs to be scalable and grow quickly without significant losses. Your product needs to have the potential for scalability in the early stages of product growth, and proven scalability in the later stages. This will also help you attract investors and shareholders to your company.

Key metrics

Metrics help you quantify your progress and in turn, reach your goals. Without them, it can be hard to gauge how well your startup is doing. So let's talk a little more about them.

Why you should track product metrics?

Tracking specific metrics for your products can have many benefits. Here are a few of them.

Set and measure goals

As we mentioned earlier, metrics are great for helping you set goals and measure your progress towards them. Though it can be easy to let numbers fall to the wayside at the beginning of your product journey, this can be one of the most crucial times to gather metrics known as product KPIs. These stages are the riskiest, and you'll need all the data you can to back your decisions up and make smart choices.

Each of your teams should have goals that are revisited regularly, and metrics that are specifically chosen to track their progress towards those goals.

Figure out pain points

Startups require work, and you'll likely go through several prototypes before you settle on your final product. Failure is a necessary part of the product development process. But tracking metrics can help you figure out where some of the biggest pain points and obstacles are. Where do people leave your site? What do they tell you in exit interviews? All of this information can help you build a better product.

Keep your customers happy

Lastly, measuring customer satisfaction and keeping track of those metrics can help you keep your user base happy. By knowing what potential customers like and what they don't, you can tailor your product toward your target market and actively incorporate their feedback into your product. This keeps everyone happy and loyal to your product.

Key metrics to measure

Here are some of the most important metrics to measure throughout your product journey.

Customer acquisition cost

CAC (or customer acquisition cost) measures how much money you spend on acquiring a single user. Knowing this can help you figure out if your marketing strategies are working, or if you should reevaluate your tactics. Having a high CAC could also mean you haven't quite achieved product-market fit.

To calculate your CAC, you add the cost of sales to the cost of marketing and then divide that number by the amount of new customers acquired. 

Customer lifetime value

Customer lifetime value (LTV) measures the average amount of money you get from a single user. Comparing your LTV against your CAC is a great way to check if you're making money on the average customer after marketing and sales expenses and therefore have longer-term viability.

Calculating your LTV is easy; you simply subtract the CAC from the average revenue you get per user.

Retention rate

Retention rate is a crucial metric for determining the growth potential of your product. It measures repeated use of your product, which can help demonstrate that your product has value for customers. Furthermore, the more people use your product, the more likely it is to become a habit for them--turning them into long-time, loyal users.

How you calculate your retention rate depends on how you define "active users" and the interval you choose to measure. Shorter time periods may make sense for your product (e.g. weeks or months), or longer ones (e.g. quarterly). 

The formula for retention rate is a little more complex than the others we've mentioned so far. First, subtract the number of new users across your chosen period from the number of active users at the end of that period. Next, divide that number by the number of users at the beginning of the period.

Retention is measured as a percentage, so you will then have to multiply that number by 100 to get your final rate.

Conversion rate

Conversion rate is the ratio of how many new users become paying users for your product. While it's always good to have a steady flow of new users coming in, turning those users into paying customers is even more important. A low conversion rate can mean that your product hasn't yet found its niche in your industry, or customers are having issues--both huge potential problems for the future.

To calculate your product's conversion rate, divide the number of new users who made a payment by the total number of new users (both active and inactive).

Churn rate

Churn rate is also known as your attrition rate, and is essentially the reverse of your conversion rate. It shows the percentage of customers that stop using or paying for your product, and as such can be an early warning sign of problems with your product.

Successful products have a positive churn rate in terms of customers, and negative attrition in turns of money. It's a good idea to look at churn then in two parts: customer churn rate and revenue churn rate.

To measure customer churn rate, subtract the number of customers at the end of the period from the number of customers at the beginning of the period, and then divide that new number by the number of customers at the beginning of the period. To change this number into a percentage, multiply it by 100.

To measure revenue churn rate, divide the amount of revenue lost over the period by the revenue at the beginning of the period, and then multiply that number by 100 to change it into a percentage.

Feedback as a metric

Now, feedback in and of itself isn't an easily measurable metric. But it's still incredibly important to keep track of and analyze.

People, generally speaking, will tell you what they think. Did they like your product? Did they hate it? What did they like about it? What disappointed them? Why did they choose you? Or, conversely, why did they leave your product?

Of course, it's impossible to incorporate every piece of feedback into your plans for your product team, but looking at the larger picture will help you notice trends or common pain points. Are your customers asking for the same or similar things? Do they complain about a certain feature, or have trouble at a certain stage? Knowing these things can help you keep your customers satisfied and adapt to their growing needs.

One of the best and easiest ways to collect and analyze feedback is to use a feedback management system like UserVitals. Our product helps you bring in feedback from around the web through Chrome extensions, various integrations (for example, Slack, Gmail, and Intercom) and email, as well as dedicated feedback widgets and customer portals, into your dashboard. Each individual piece of feedback, known as an Insight, can be sorted into larger, customizable groups known as Stories.

These Stories can be based on type of feedback, source, stage of product usage, or whatever else best suits your company. This allows you to look at the bigger picture of the feedback you're getting so you can better notice trends, common pain points, and figure out what you should prioritize next on your roadmap.

UserVitals also helps you easily build and release a roadmap and changelog. Learn more about UserVitals and how it can help you today.