crucial kpis b2b product

The Most Crucial KPIs for Your B2B Product

To track the performance of your product, it is crucial to consider a few metrics and KPIs and assess each data closely. Finding the right metrics for your assessment is vital to build a strategy and improve the ROI.

These include lifetime value, customer acquisition cost, retention rate, stickiness, customer effort score, and so on.

With that, here are some of the most crucial KPIs for your B2B product team to focus on.

1. Stickiness (DAU/MAU %)

DAU/MAU is the percentage of daily active users (DAU) as a proportion of monthly active users (MAU). By combining these into a ratio, you can find out the stickiness of your product.

Stickiness = Daily Active Users (DAU) / Monthly Active Users (MAU)

The definition of an ‘active user’ might differ across companies and products. Much like when thinking about product engagement in general, you could align an active user by if they’ve spent a certain amount of time using the software, if they’ve logged in or if they’ve taken specific key actions.

Analytics tools like Pendo.io and Amplitude should be able to help you calculate the stickiness of your product.

2. Customer Effort Score (CES)

Customer Effort Score (CES) is a metric that helps you understand how much effort is required by your customers to use your product to perform a specific action.

For example:

* How easy was it for you to change your billing plan?

* How easy was it for you to create your first roadmap? (Zeda.io)

* How easy was it for you to generate your first invoice? (Stripe)

Similar to NPS, CES is measured using a single question which can be customized depending on the action the user performed.

It generally starts like this:

“How easy was it for you to……”

The user will be asked to give a score to their response — ranging from ‘Very easy to ‘Very hard’. The CES score is then calculated by averaging the responses. Tools like Wootric and Recently can help you calculate the CES score of your product.

CES provides an ideal way to identify and address the problem areas of your product, leading to higher overall product satisfaction.

3. Monthly Recurring Revenue

Monthly recurring revenue is simply the revenue generated by the product in a month.

MRR is calculated by considering the MRR at the beginning of the month and adding it to the revenue that you got from the new customers and then subtracting it from the churned revenue.

It is considered best for the SaaS-based models where no extra sales are happening apart from the recurring customers.

4. Customer Acquisition

Now, customer acquisition is equally important as the monthly recurring revenue. Customer Acquisition is the process of acquiring a new customer by bringing them down in the sales funnel. Product teams can measure the customer acquisition rate by using various CRMs.

If there is a difference between the estimated number of customers and the customers acquired, then your product might need improvement. Maybe, the product hasn’t been widely accepted or there has been an overestimation.

Brainstorm with your team and figure out why your product failed. Change the strategies so that you don’t have to rework them again. Some KPI measures include a % increase in new users and a new number of users.

5. Customer Acquisition Cost

The cost of acquiring a new customer is referred to as the customer acquisition cost (CAC). CAC is a critical business metric that many companies and investors consider. In fact, many businesses fail because they do not fully understand their customer acquisition cost.

Hence, it is crucial to understand the CAC if you have planned to run your business eventually.

Now, what should you count to calculate the customer acquisition cost? This includes some important costs such as the money that is spent on marketing and advertising, the use of software to gather leads, and the sales team’s overhead.

That can even help you cut the costs of acquiring a new customer in the future.

6. Customer Lifetime Value

Customer lifetime value can be most decisive for cutting the costs and setting up the customer acquisition costs. Customer Lifetime Value or CLV is a metric that predicts how much revenue a single customer can generate for you in a lifetime.

This way, you can find out how much profit your customer can make for you before they stop spending on you.

These metrics can help you make smart decisions about product pricing, customer retention strategies, and customer retention channels.

7. Retention rate

Retention rate is a crucial KPI in product management because it tells how many customers can be retained for a certain period. Using this metric, you can tell how much there is a decline in the number of customers and what retention strategies you must adapt to increase the retention rate.

Retention rate can be calculated using the method- (Customers at the end of a time period)- (New customers/Customers at the start of the time period)*100

To increase the retention rate, it is important to talk to your previous customers and know why they left.

8. Churn Rate

Churn rate is just the opposite of retention rate. Churn rate tells us how many customers were lost during a certain period of time. It can be measured with two major metrics: Customer churn and Revenue Churn.

Customer churn gives an idea of the number of users who have cancelled their subscription whereas revenue churn is the amount of revenue that the businesses have lost in a certain period.

Both factors are decisive in determining customer satisfaction rates.

9. Net Promoter Score

To measure the customer satisfaction and happiness rate, the net promoter score could be the game-changer. You might have often seen the product website with a pop-up asking- “How likely are you going to recommend this product to a friend or family?”

On a scale of 1–10, customers who rate the products from 0 to 6 are more likely to churn away. They are called detractors.

Customers who are rated between 6 and 8 are somewhat satisfied with the product and might leave if they see a better product.

And, the customers with 9 and 10 are your most loyal customer base. They are called the promoters of your band.

NPS score= % of Promoters — % of Detractors

The higher the NPS, the more loved your product is.

10. Bounce rate

You might have heard a lot about this metric and Google prioritizes it as well. Bounce rate is the number or percentage of visitors that return from the home page or stay on a single page for a few seconds.

With a better bounce rate, you can optimize other pages and engage the visitors in more products. The goal is to create a better sales funnel.

The lower the bounce rate is, the better your product page is considered.

These are the most important metrics that you should focus on to drive your B2B product forward. While some product managers only focus on the features, they ignore the cause of the downfall and fewer sales.

The main goal of analyzing data is to focus on customer engagement and maintain a higher success rate.

In a nutshell, the most important KPI for the product team is their customer. Thus, these KPIs can effectively reduce the bounce rate, improve business performance and enhance product quality.

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