The three metrics that matter for a product

Product management people live off the feedback loop. And they get plenty. Customer care centres, channels, blogs as well as the friends and the family of outspoken executives and employees tend to keep the information flow coming, day and night. That is great, but the volume doesn’t tell it all. It is not easy to make sense of it. Is the situation good, bad or ugly? And if yes, against what? Against one’s own expectations, competitors or historical performance.

In my career, I’ve found that the trend/benchmark-beating score in all of the three following metrics is the closest proxy to determining sustainable product success (at least for computing gadgets)

  • Net Sales – how well the product finds an audience
  • Gross Margin – how well the product creates unique, recognizable value
  • Net Promoter Score – how sustainable is the momentum

The first two may sound “quite MBA-ish”, but there is a lot of truth to the saying ‘consumers vote with their wallets’. Talk is cheap, blogging even cheaper and so on. Unfortunately, the exact financial product performance is hard to know outside the inner circles of the industry. Today’s technology companies have made the ‘numbers game’ – or, more precisely, obstructing that visibility and/or misusing individual random numbers for propaganda – into a form of art. They claim it is because of competitors (not true, they tend to know/guess close enough, being also in the inner circle), but it is mostly to avoid public embarrasment over duds.

Net promoter score (NPS), on the other hand, is an intriguing, emerging metric of this and the last decade. It completes the picture with the consumer view, providing checks & balances if the financial numbers were met with an overaggressive push that is sure to backfire. You may have not heard the name of the method, but you certainly have run across the question “In the scale 1 to 10, how likely are you to recommend this product/service to your friends”. Well, that’s the NPS question that measures the ratio of people who promote the product, who are neutral about it, and who detract (i.e. badmouth) it. It has been developed by (and is a registered trademark of) Fred ReichheldBain & Company, and Satmetrix. You can read more in the article in the Reichheld in his 2003 Harvard Business Review article “One Number You Need to Grow”. See also my separate post about what to watch out for with NPS if you start deploying it.

Get those three right, and the odds are that you have a winner in your hands

 

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3 Responses to The three metrics that matter for a product

  1. Pingback: The one question to ask about Net Promoter Score in the product review » Real Box Score

  2. Leon says:

    Nice post. Do you have any thoughts on the best ways to evaluate a new product before it enters the market, especially if it is also introducing a new category (i.e. cannot leverage historical performance for trends)?

    I think this could make for an interesting post.

  3. Pingback: Product guy – make one scoreboard » Real Box Score

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