Defining Product Metrics— The Ultimate Guide [Part 1 of 2]
By: Hani Azam
Tags: Interview, Metrics, Deep Dives, Product Management, Data Science

AAAERRR might seem like a lot to remember. But as we dig into it, you will see its pretty intuitive — in fact, it’s a lot like falling in love!

1. Awareness:

How many people are aware your brand exists?

Dating Analogy: Before someone can fall in love with you, they need to know you exist.

People can’t use your product if they don’t know it exists. Everything that a company does by way of marketing is in service of increasing awareness for their product.

If your target audience walks by a sign with your logo on it, and they are able to associate that logo with your company, then they are aware. While this interaction in particular is difficult to measure, there are a few things that can be measured including:

Awareness Metrics: number of website visits, social media metrics (number of likes, shares, impressions, reach), time spent on a website, email open rate

2. Acquisition:

How many people are interacting with your product?

Dating Analogy: Once the object of your desire knows you exist, do they seem interested in getting to know more about you? Did they give you their number? Follow you on Insta?

Once your target audience knows you exist, are they taking steps to interact with your product? Did they create an account? Sign up for a mailing list? Sign up for the trial?

In marketing, the holy grail of acquisition is capturing leads. A lead is any potential user who’s information you’ve been able to capture in some shape or form. For example, people who give you their email addresses when they sign up for your mailing list are considered to be leads. A lead becomes a qualified lead when they show additional interest in your product beyond giving you their information. For example, in addition to signing up for your mailing list they also watch a webinar or sign up for a demo.

Acquisition Metrics: number of leads, number of qualified leads, sign ups, downloads, install, chatbot interactions

3. Activation:

How many people are realizing the value of your product?

Dating Analogy: The elusive spark. Whether it happens on the first date or the fifth. It is the moment you realize how special the person you’re seeing really is. The moment you realize you want more than just a fling. The moment you realize that you are ready to be exclusive.

This is also known as the ‘Aha’ moment. It is “a set of actions that separates customers who find value in your product from those who don’t” according Benn Stancil of Mode Analytics.

Made by author in Canva— inspired by Amplitude

Take Dropbox. Their activation metric is the number of users that have stored at least one file in one dropbox folder on one device. This makes sense. If a user never stored a file in their Dropbox folder would they ever recognize the true value of the product? Even if they had created an account, opened the app, read through the tutorials. If they never bothered to take the most important step — how would they understand the value that Dropbox has to offer. Why would they become a user at all?

When the activation hurdle is crossed, an individual goes from unknown entity to actual user.

Activation Metrics: number of connections made, number of times an action is performed, number of steps completed

TIP: Activation metrics are a bit tricker than the rest. They depend heavily on the product in question. They are typically in the form of an action taken x times with in a period of y days.

4. Engagement:

What is the breadth and frequency of user engagement?

Dating Analogy: Now that you’re seeing each other exclusively, what does your relationship look like? Are you with each other every day all day? (Might be a bit unhealthy but oh well). And what do you do in your time together? Are you watching Netflix? Cooking dinners? Going on vacations?

Now that you have a user, you need to understand what their usage looks like. This consists of two parts, the depth of their usage and the breadth of their usage.

Depth refers to usage frequency. How often are they using your product? Is it above or below the average users frequency?

Breadth refers to their diversity of use. If there are multiple actions that can be taken within your product, are they performing every action possible? Are they favoring some more than others? What if you have multiple products? Are they using all of them?

Engagement Metrics: daily, weekly and monthly active users, time spent in a session, session frequency, actions taken in the product

5. Revenue:

How many people are paying for your product?

Dating Analogy: The commitment. The magic words. The ‘Will You..’ and the ‘I Do..’.

Users are nice but paid users are better. For some companies you can’t be a user without paying first. But there are many companies that work on a freemium or trial to paid conversion model. SaaS businesses derive revenue from subscriptions, whereas marketplaces work on a commission-per-transaction basis. The way users pay you will vary by the type of business you have. It is important to understand a company’s revenue model because it will influence the kind of revenue metrics they track.

But remember, a business should optimize for the value they bring to their customers, not the revenue they generate. And, if their customers are deriving a lot of value from the business, willingness to pay will be a natural byproduct.

Revenue Metrics: % of paid customers; average revenue per customer; conversion rate of trial to paid customers; number of transactions completed; shopping cart abandonment rates; ad-metrics like click-through-rate and conversion rate (crucial for ads based businesses)

6. Retention:

How many users are returning to your product?

Dating Analogy: Contrary to traditional belief, marriage is not an unbreakable bond. Divorce is always an option. An option you want to avoid at all costs.

How many of your users are coming back to your product? How often do they come back? For ecommerce platforms this could be how often users come back to make a purchase. For social media products it refers to how often users come back to the app.

The frequency with which users come back to the platform depends on the product. Turbo Tax is used once a year while Spotify is used once a day. It is vital to understand the cadence with which your product should be used. This will allow you to track the right metrics and determine if your product is sticky or if your users are churning.

Retention is not only a good gauge of how much value your products are bringing to your users but how much money you can save in marketing. The cost of acquiring a new customer can be five times more than retaining an existing one.

Retention Metrics: % of users coming back to your platform each day, month, year; churn rates; customer lifetime value

7. Referral:

How many customers are becoming advocates?

Dating Analogy: My less than exciting love life does not qualify me to speak to this.

Are your users so obsessed with your product that they want the world to know about it? Similar to retention, referrals not only an indicate how much your product is delighting your customers but also reflect how much money you are saving on marketing. Word of mouth is a powerful tool. It is the difference between a friend recommending a restaurant and you seeing an ad for it on Yelp. The power of a recommendation from a person you trust beats the intrusiveness of (often unwanted) advertisements any day.

Referral Metrics: Net Promoter Score, viral coefficient i.e. the average number of people that your users refer you to