PMs & Metrics: Net Promoter Score (NPS)

During our last post of the PMs & Metrics series, we covered the details of retention rate. In today’s post, we’ll be going over another important metric that PMs should be familiar with – the net promoter score, also known as NPS.

For our discussion, let’s break it down into the following sections:

  1. Definition: What is the net promoter score?
  2. Measurement: How do you measure net promoter score?
  3. Impact: Why does the net promoter score matter?
  4. Insights: What insights does the net promoter score yield?
  5. Limitations: What are the shortcomings of the net promoter score?

Definition

The net promoter score is a great way to gauge how well you are serving your customers.

To calculate your net promoter score, all you have to do is ask this single question:

How likely is it that you would recommend this product to a friend or colleague?

Your respondents should be given a scale of 0 – 10, with 10 being “extremely likely” and 0 being “not at all likely”. You can then classify your respondents into the following 3 categories: Continue Reading

PMs & Metrics: Retention Rate

During our last post of the PMs & Metrics series, we covered the details of the conversion rate. In today’s post, we’ll be going over another important metric that PMs should be familiar with – the customer retention rate.

The customer retention rate measures the proportion of customers that have continued to use your product over a period of time. 

“Retention rate: proportion of customers that have continued to use your product over time.”

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There are two key phrases here to pay extra attention to – “continued to use” and “period of time.” Let’s break them down further.

“Continued to use” refers to customers that have been using your product, and does not include brand new customers. Keep this in mind because we’ll be seeing this concept again when we discuss the formula to calculate retention rate. Continue Reading

PMs & Metrics: Conversion Rate

PM Metrics - Conversion Rate

As a PM, what are some important metrics to measure for your product? In each post of this series we’ll be covering a different metric, why this particular metric is important, and how it’s measured.

If you’re a PM of a website, a product that’s sold on a website, or an app, one of the most important metrics to measure is the conversion rate. Simply put, the conversion rate is the percentage of all visitors or users who take a desired action.

“Conversion rate is the percentage of all visitors or users who take a desired action.”

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 One of the most common examples is the percentage of visitors who end up purchasing on a website.

Why is conversion rate such an important metric, not just for PMs but for the company as a whole? A solid conversion rate is indicative of a good user experience and means that the company is efficiently capturing sales. It’s the barometer of all the efforts spent to optimize the user experience through user research, A/B testing, interviews, etc. In other words, the conversion rate quantifies and validates whether the team’s efforts to improve that page or product has been successful. A higher conversion rate after a page redesign, all else equal, typically means that the redesign had a direct role in having more customers purchase the product. Continue Reading