23 Critical Product Development KPIs to Track

Are you planning to develop an important product and interested to track product development KPI?

Tracking your product development KPIs (key performance indicators) is important to manage the process well and evaluate the business performance.

Read on, as we explain the critical product development KPI.

Product Development KPI, Product Management KPI, and Metrics: A Quick Recap

You often come across terms like product development KPIs, product management KPIs, and metrics. We quickly recap these product KPIs and metrics to set the context.

Assume you are a start-up or enterprise building a software product. During the development, you likely focus on product development KPIs. They help you to monitor the product development process.

Assume you launched the product. After onboarding customers, you need to focus on the entire gamut of product management KPIs. They help you monitor the product management process.

You will continue to enhance the product though, therefore, product development KPIs remain important. You will need to focus on both product development and management KPIs.

You might measure several metrics. Some of them might concern key business objectives, therefore, those are KPIs. Metrics that don’t measure key business goals aren’t KPIs. To sum up, all KPIs are metrics but all metrics aren’t KPIs.

Which important product development and product management KPIs should a product manager track?

Products managers should track the following product development and product management KPIs:

1. Research and development (R&D) as a percentage of sales

This product development KPI tells you how much of your income is spent on creating new products. It covers the investment in enhancing existing products too.

A high percentage of R&D expenditure indicates that your company is trying to innovate more. You will likely have satisfied customers and a better market share. A uniform benchmark for this KPI doesn’t exist, therefore, decide your target.

Use the following formula: R&D as a percentage of sales = (R&D expenditure x 100)/gross company sales.

2. Total R&D/product headcount

This product development KPI indicates the number of people in a company that is engaged in R&D concerning new products. You should measure it over a period of time.

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When you develop new products, you will likely see an increase in this headcount. A decrease in R&D/product headcount indicates a reduced pipeline of new products.

To calculate this, count the total R&D or product team members.

3. New patent generation

This product development KPI helps enterprises or large companies track their progress around patents. A healthy number of new patents indicates that the company will create new revenue streams. The company might also compete well in the market.

Track the following:

• The number of patents you have filed;
• The number of patent applications pending approval;
• The number of many patents you have secured;
• The number of rejected patent applications.

4. New products released

This product development KPI enables enterprises to measure how many new products they launch. Large companies measure products in the conceptualization and planning phases.

They also measure products under development. If you don’t plan and develop products, then you will obviously launch fewer new products.

You track the following:

• The number of new products in the conceptualization and planning phases;
• The number of new products in development;
• The number of new products released in a year?

5. Average product ROI

This product development KPI indicates how much ROI (Return on Investment) each new product generates. There isn’t a benchmark for this KPI, however, you want a high average product ROI.

Calculate it as follows:

Average product ROI = (the net profit earned by new products) x 100/the costs to produce new products.

6. Story points retired

Product development teams using the Scrum framework use this product development KPI. This is one of the important metrics to measure performance. A story point refers to a unit of work, and one shouldn’t confuse it with the number of hours. 

The number of story points retired indicates the amount of work completed by a team. You can measure the following key metrics:

• The number of story points retired in a sprint, i.e., iteration;
• The number of story points retired per team member.

7. Team velocity points

One of the key metrics in Scrum teams, this product development KPI measures how many story points can be retired in a sprint.

You have estimated your project. You know how many story points are there. You can find out how many sprints you need if you know the team’s velocity points.

The formula is “Team velocity points = the average number of story points retired by a team per sprint.”

8. Sprint burndown

This product development KPI is popular with Scrum teams. They create sprint burndown charts to represent the rate of completing work and the remaining work.

The horizontal axis of this chart represents the days within a sprint. On the other hand, the vertical axis represents the work remaining. Scrum teams should update this chart every day.

The burndown line should track downwards by the middle of the sprint. This indicates that the team is completing the work planned in the sprint.

The team needs to take corrective measures if the burndown line doesn’t track downwards.  

9. Errors per 1,000 lines of code (KSLOC)

This product development KPI helps software development teams measure product quality. Teams measure the number of defects for every 1,000 lines of source code or “Kilo Source Lines of Code” (KSLOC).

They can compare their results with industry benchmarks. Teams need to take corrective and preventive actions if the error rate is high.

The formula is “the number of errors / 1,000 lines of source code committed”. 

10. Customer satisfaction (CSAT)

Among product management metrics, customer satisfaction (CSAT) helps you to measure the overall customer experience.

All companies including enterprises, start-ups, SaaS companies, etc., can use this measurable indicator.

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Use a survey tool. Design questions that cover all aspects of the user experience. Analyze the customer satisfaction score and detailed responses.

You can see which customers are unhappy, subsequently, take corrective actions.

Calculate CSAT as follows:

CSAT = (the number of positive responses from customers) x 100/the total number of survey responses.

11. Retention rate, i.e., the rate of customer retention

The customer retention rate is an important product management KPI for you to measure customer loyalty. Different stakeholders like sales teams and product teams in organizations can use this KPI.

Measure customer retention rate over a period of time and monitor the trends. Calculate it as follows:

The customer retention rate = {(the total number of customers at the end of a time period – the number of new customers onboarded during this period) x 100}/the total number of customers at beginning of the period.

12. Customer churn rate

The customer churn rate is a product management KPI to measure how many customers you lose. You might lose some customers due to various reasons, e.g., they didn’t like the new features introduced.

The customer churn rate is opposite to the customer retention rate. You measure it as follows:

The customer churn rate = (the number of customers lost during a specific time period) x 100 / the total number of customers at the beginning of the period.

13. Conversion rate

The conversion rate is a product management KPI with relevance if you offer a free trial. This KPI measures the proportion of trial users that become paying subscribers.

You can then determine the effectiveness of the free trial.

Calculate this KPI as follows: The conversion rate = (the number of users that become paying customers) x 100/the total number of users.  

14. Customer lifetime value

The customer lifetime value is a product management metric that indicates the revenue expected from customers in the long term. Measure the following metrics for this:

• The average customer lifetime, i.e., the duration of product usage by a client;
• The average revenue per client.

Calculate this KPI as follows: The customer lifetime value = the average revenue per client x the average customer lifetime.

15. Customer acquisition cost (CAC)

The customer acquisition cost (CAC) is a product management KPI that shows your costs to acquire new users or new customers.

Include relevant costs like operational costs, infrastructure costs, compensations, marketing expenses, etc. Revisit your product strategy and pricing model based on CAC.

Calculate this KPI as follows: the customer acquisition cost = the relevant costs for securing and onboarding customers for a time period / the number of new customers acquired during that period.

16. The counts of daily active users (DAUs) and monthly active users (MAUs)

Determine whether your product engages users sufficiently by measuring product management KPIs like DAUs and MAUs. Account for the following parameters:

• The interaction;
• The time period of the interaction.

Users that perform the above-mentioned interactions during the specific time period are active users. The DAU is the number of active users in a day, whereas, the MAU is the number of active users in a month. 

17. The number of support tickets created

The number of support tickets created is a product management KPI. It indicates the amount of customer support your clients need.

You can also use other associated metrics, e.g., tickets resolved, average resolution time, etc. These metrics indicate the effectiveness of your customer support team.

You can count all support tickets created in a specified period. Gather other information like severity, resolution time, etc., as applicable.

18. Stickiness

Stickiness, a product management KPI helps you to understand how often users utilize your product. You can find out whether users return to your product.

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Calculate this KPI using a method of your choice. Assume you have a SaaS product intended for daily use. Measure the stickiness ratio as follows:

The stickiness ratio = Daily active users (DAUs) / Monthly active users (MAUs).

The above example shows the proportion of monthly active users that utilize the product daily.

19. Bounce rate

The bounce rate is a product management KPI that indicates how often users leave your website or app after visiting only one page.

If you need users to visit multiple pages of your website and app, then you don’t want a high bounce rate. Optimize the website or app to engage users better.

Well-known analytics services like Google Analytics measure bounce rates. The calculation is as follows:

The bounce rate = (the number of single-page sessions) x 100 / the total number of sessions.

20. Monthly recurring revenue (MRR)

Several companies including SaaS businesses measure their profitability using the monthly recurring revenue (MRR), a product management KPI.

These companies can monitor this KPI to find whether they have a predictable and recurring revenue stream. Use the following formula to calculate the MRR:

The monthly recurring revenue = average monthly revenue per user x the total number of users per month.

21. Net promoter score (NPS)

The net promoter score (NPS), a product management KPI helps you to find the number of customers that might promote your product.

You can find the number of detractors. Detractors are those customers that don’t promote your product. Calculate the NPS as follows:

• Request your customers to rate your product from 1 to 10.
• Establish a standard to identify promoters and detractors. You can consider customers rating your product 8 or above as promoters. The other customers are detractors.
• Calculate the % of promoters and detractors.
• Calculate the net promoter score as (% of promoters – % of detractors).

Make appropriate product decisions to turn detractors into promoters.

22. Roadmap scoring

You might have multiple enhancement/feature requests in your product roadmap. The product roadmap scoring is a product management KPI to prioritize the enhancement/feature requests.

This prioritization helps you to align your product roadmap with your strategic objectives. Use your own method to calculate this KPI, however, use it consistently.

The following is an example:

• Find out the reach of a feature request by analyzing the number of users impacted.
• Calculate the impact of the request.
• Determine the confidence level in your impact assessment.
• Calculate the total effort needed to complete the enhancement/feature request.
• The product roadmap score is {(reach x impact x confidence)/effort}.

23. Average revenue per user (ARPU)

The average revenue per user (ARPU) is a product management KPI. It helps to measure the revenue per user. You can validate the key product decisions like the pricing model or target audience.

You can calculate the ARPU as follows:

The average revenue per user = total revenue during a specific period / the number of users during that period.

Final thoughts

This guide should help with tracking product development and business performance KPIs. Contact DevTeam.Space if you need additional help to develop your strategic software product.

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