You can tell when you’ve created a product or service people love: when they write to you asking how they can get more.
The kind of feedback where they take time out of their day to say “thank you” means that there is a need being filled by your product, and people will want more.
Perhaps you can call this a successful product.
But this is also kind of vague. So when can you call a product — successful and how do you measure its success?
There are many answers to this question. But they all boil down to one thing: customer satisfaction. A product that doesn’t satisfy the needs of its users is a failure, even if it’s profitable.
Successful products solve problems for customers and provide value for them. They create new opportunities for those who use them and facilitate their lives somehow. And make them more efficient or effective.
The key word here is “problem”. If you can’t identify this in your product, chances are you’re not building something valuable.
So a successful product:
NPS is a simple way to gauge how happy your customers are with your product. It asks one question: On a scale of 0 to 10, how likely is it that you would recommend (product name) to a friend or colleague?
The responses from 0-6 are considered detractors and responses from 7-10 are promoters. The magic number is the percentage of promoters minus the percentage of detractors. For example, if 50% of respondents give you a 9 or 10 rating and 30% give you a 6 or below, then your NPS score would be 20%.
This is one of the most important metrics for any business, and especially important for products that have recurring revenue.
The client retention rate is calculated by taking the number of clients at the end of a given period divided by the number at the beginning of that same period.
For example, if there are 100 clients at the beginning of a month, and 110 at the end, then your CRR would be 110/100 = 1.1 or 110%.
One of the most basic and popular ways to measure product success is by measuring active users.
You can calculate this by dividing your total number of monthly active users by the total number of new users during a specific period (for example, 30 days).
If you want to see the percentage of repeat users over time, you should divide your total number of monthly active users by the average number of daily active users during a specific period (for example, 30 days).
MRR is the amount of recurring revenue your product brings in each month.
It’s important to track this metric because it can help you predict long-term profitability and growth.
You can also use MRR to compare different products against each other or against your total revenue.
For example, if you have 10 new customers who pay $500/month. But they cancel after six months and never renew again, then your MRR will be $5,000 per month ($500 x 12 months).
However, if they stay on for two years and then cancel at $500/month, then your MRR is $30,000 per month ($5,000 x 24 months).
CLTV measures the total revenue that a customer is expected to generate over their lifetime with your company.
This number can be calculated in different ways based on your business model and marketing strategy.
For example, let’s say you run a subscription business where customers pay $10 per month for access to a service like Netflix or Hulu. In this case, CLTV would simply be 10 months multiplied by $10 — or $100 per subscriber.
For subscription businesses like this one, calculating CLTV is pretty straightforward because they have fixed costs and predictable revenue streams.
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