What Metrics are Crucial in Product Management

Imagine you’re driving a car without a speedometer. How would you know if you're driving too fast or too slow? You might pass through a school zone with a speed limit of 25 kmph, or hit a highway with a minimum speed limit of 80 kmph. Without a speed indicator, how would you know if you're maintaining the right speed?

Similarly, in product management, understanding the success of your product isn’t straightforward. You need a dashboard that gives you insights into whether you're moving in the right direction or not. But what does this dashboard show?

It shows metrics—the key numbers that measure the success of your product. These metrics are significant because they guide teams, track performance, and ensure the product stays aligned with its goals. Let’s dive into what these metrics look like:

1. Primary/L1 Metrics:

These are the core metrics that reflect the health of the product or feature you’re focusing on. They help measure whether your efforts are leading to real value for users and driving business results.

For example, in a food delivery service like zomato, a great primary metric for the marketing team would be the number of quality food vendors that sign up through their email campaigns. A key assumption here is that more quality vendors would lead to more satisfied orders.

Similarly, Airbnb uses primary metrics like the number of active listings and guest bookings to measure the success of their platform. If more hosts sign up, the assumption is that the platform will attract more guests, leading to more successful bookings.

2. Supporting/L2 Metrics:

These metrics complement the primary metrics by providing deeper insights and additional data. They break down the primary metrics into smaller components, offering details such as location, demographics, or features.

Continuing with the zomato example, supporting metrics could be things like:

The number of sales emails sent to food vendors.

The number of emails that were opened.

The click-through rate of those emails.

For Airbnb, supporting metrics might include things like:

The number of inquiries sent by guests.

The booking-to-inquiry conversion rate.

The average review score of listings.

These supporting metrics give more granular data, helping teams understand behavior, where improvements are needed, and what’s influencing user engagement.

Why Are Metrics Important in Product Management?

Understanding and tracking the right metrics is crucial because it helps product managers determine whether the product is moving in the right direction. It’s not just about collecting numbers—it's about interpreting those numbers to understand user behavior, product adoption, retention, and overall business success.

Example Scenarios to Understand Metrics:

Customer Acquisition Problem:

Imagine Snapchat, where 10,000 users sign up every hour, but only 1,000 are actively using the platform. Is there an issue with customer acquisition or activation?

Retention Issue:

In a Maruti showroom, 100 customers visit each month, but only 80 of them end up buying a car. Is the retention rate low?

Booking Conversion Problem:

For Airbnb, if hosts are receiving a high number of inquiries but few actual bookings, it could indicate a conversion issue. Metrics like conversion rates from inquiry to booking would reveal where the friction lies in the user journey.

Tracking the right metrics ensures that teams focus on what truly drives the product forward, whether it’s acquisition, retention, user engagement, or feature adoption.

How to Figure Out the Right Metrics?

Understanding metrics starts with knowing your North Star Metric (NSM), which is the overarching goal of your product—typically driving user value and contributing to revenue growth. The NSM is a company-wide focus that aligns teams across the board.

Primary (L1) Metrics: These are more specific to products or features and help teams focus on actions that drive outcomes. For example, in Zomato, the quality of food vendors signing up would be tracked by the marketing team.

For Airbnb, a great L1 metric could be the number of active listings, as more listings attract more bookings.

Supporting (L2) Metrics: These metrics provide deeper context to the primary metrics, breaking them down further. They give insights into aspects like user behavior, feature adoption, and performance at a more detailed level.

In Airbnb, supporting metrics could include:

The number of inquiries per listing.

The booking-to-inquiry conversion rate.

Average review scores per listing.

These metrics give a more complete view of what’s happening at the operational level, helping identify areas for improvement.

So not based on which team you can figure out the funnel of metric and which primary and supporting metric you are required to focus on. By focusing on the right metrics, product managers can effectively guide their teams, ensure the product stays aligned with business objectives, and make data-driven decisions.