What’s the #1 KPI for Product Managers?
I asked 20 product leaders and got 20 answers.
User satisfaction. User delight. User experience. User flow. Risk reduction. Story points per sprint. Features released. "Define the product strategy." (Is that a KPI?) "Being the glue." (Can that be measured?)
I asked Gemini:
ChatGPT says differently:
I Googled. Let’s just say the results didn’t clear anything up.
No wonder Product Managers are confused.
No wonder outsiders don’t get how we deliver value.
No wonder some execs wonder, “Do we really need more product managers?”
A painful lesson
In 2007, I was leading a digital product with terrible customer satisfaction. I pitched the exec committee:
“Better UX will boost adoption and usage. Our research says 70% of users would do more business with us if the experience improves.”
Proposal approved. Resources assigned. The team worked like crazy. We launched improvements. Satisfaction soared past 90%
Victory dance time? Nope.
The next year, my funding was slashed.
The CFO explained:
“Shardul, we invested to boost purchases and save money through digital. But your users are <2% of our base. We’re a $220M company. How can we continue to justify a $3M annual investment on such a small return?”
Ouch.
That’s when I realized: our primary KPI in Product Management isn’t velocity, features shipped, or even user satisfaction.
Our real job
Our job in Product Management is to continuously deliver monetizable customer value — things customers will profitably pay for, directly or indirectly.
When we do that, we drive sustainable business growth of our product. THAT is what Product Management is responsible for.
How do we measure monetizable value? Two ways:
Net Revenue Growth
Margin Velocity
Which leads to the #1 KPI for Product Management:
Return on Invested Capital (ROI)
Our role is to ensure every R&D dollar (including our own salaries) produces the maximum possible return.
Whether we’re:
Launching a new product (how fast until it makes money?)
Supporting an existing one (should we keep spending or reduce costs?)
Growing a product (what will maximize revenue for the same spend?)
Expanding a product (does extra investment make sense?)
Every backlog grooming, roadmap debate, and delivery date negotiation boils down to this: maximizing ROI.
Why PMs struggle to tell this story
We often:
Lack the language. We talk in features, Jiras, velocity, user satisfaction — but what does that mean to the business?
Don’t know the link between our work and company results.
Were never taught this.
As Product Managers, we need to understand the business of our product. And product leaders have an obligation to help connect the dots for their teams.
Let’s break down ROI
ROI = Net Revenue Growth + Margin Velocity
Net Revenue Growth = how fast we gain and keep profitable customers. The quicker we can earn revenue, the quicker we can make a return on the money we’ve invested in our product.
Margin Velocity = how quickly (velocity) and economically (margin) we can deliver product and capture that revenue.
Today, we’ll focus on Net Revenue Growth. (Margin Velocity is a future topic.)
Net Revenue Growth
Net Revenue Growth breaks down like so:
Any well run company will know where revenue is coming from. How much is from new customers vs. existing ones, and how much customers spend with the company over time. The specific financial and supporting metrics will depend on the specific business model. As Product Management, we need to understand what these are.
Putting this into practice
Yes, revenue is a team sport. And, yes, some PMs are in roles that don’t directly deliver revenue. Even in those situations, our “product” needs to provide some form of measurable ROI and we, as Product Managers, MUST know how to drive it.
Here’s something I want to sear into your mind:
Product Management has a critical influence on the financial performance of the product. We have the ability and the responsibility to drive both revenue growth and margin velocity.
PMs influence these two metrics in many ways — directly or indirectly. PMs typically find themselves in one of six roles:
Driving direct financial impact
Moving a supporting metric
Owning a specific feature
Leading a non-revenue “product”
Managing an “internal product”
Leading a re-platforming effort
Let’s go through them. Because knowing your role changes how you talk about your impact.
1. Driving direct financial impact
If your metrics are directly tied to money, you’re closest to the top-line. Your prioritization, roadmap, and success stories should always connect to revenue impact. Examples:
You are wholly responsible for the financial success of a product.
You’re responsible for reducing churn for a monthly subscription SaaS product.
At an education payments company, one of my PMs was responsible for our tuition payments product. Share of the school's tuition payments and tuition dollars transacted were key financial metrics she was responsible for.
At a financial services company, one of my PMs launched an “auto pay” feature. $payment volume was the primary financial metric — conversions, enrollment, and usage were important supporting metrics.
2. Moving a supporting metric
Example: You own onboarding success rate. Why does it matter?
Because bad onboarding causes churn. Churn shrinks customer lifetime value, which shrinks ARR growth.
See how the dots are connected? That’s what we need to understand. It’s not good enough to know the metric. We need to understand why that metric is important.
Knowing this, would it change how we approach prioritizing product work? Absolutely.
Would it change how we talk about our impact in performance reviews and job interviews? 100%.
Boring version:
“We did some user research and found 70% of users didn't like the onboarding experience. I wrote the requirements, worked with UX and engineering to design the new user experience, and blah, blah, blah. 80% of users liked the new experience."
Exciting version:
"40% of new customers were churning in 32 days, costing $500k in MRR. I led onboarding improvements, which dropped churn to 5%, and added $X in MRR.
You tell me: Which one gets your attention?
3. Owning a specific feature
A PM I managed owned the scheduling module of our enterprise SaaS platform. Customers hated it. Two big clients were threatening to leave. Sales said it was our #1 RFP loss reason.
Millions in potential lost revenue due to this one feature.
She drove the roadmap for the necessary improvements. Six months later customer satisfaction, task completion time, and task completion rate had dramatically improved.
So what?
The account teams endorsed that the improvements went a long way toward winning those customers back — $300K in annual contract value (ACV).
The sales team told us:
The scheduling feature was eliminated as the #1 product-related Deal Loss Reason.
4% improvement in sales pipeline velocity as a result of being more competitive in RFPs and sales conversations.
Overall improvement in sales qualified leads (SQLs).
Now, that’s impact.
How could my PM talk about this?
Boring:
"I managed our scheduling module. Customers were unhappy with the experience. Two customers were threatening to leave us and Sales was complaining too. I led the customer conversations to uncover the things they didn't like and identified the requirements for the improvements. Then I worked with the design and engineering to blah, blah, blah. In the end, the customers were very happy with the new experience."
Exciting:
"I was assigned to lead our scheduling module. Two logo clients were threatening to leave. And Sales reported that it was the #1 product-related Deal Loss Reason at the RFP stage representing $X million in pipeline value.
I developed and led the strategy to vastly improve the scheduling experience. Our goals were to improve C-Sat, task completion time, and task completion rate. And I'm happy to share we improved these by X, Y, and Z, respectively, saving $300k in ARR. And Sales told me not only did the improvements make us more competitive with RFPs, but also they saw a 4% improvement in pipeline velocity and an overall improvement in SQLs.
Based on which story would you hire her?
4. Leading a non-revenue “product”
Remember: it may not deliver revenue, but the the company has decided to invest in this “product” because it will indirectly protect or grow revenue or margins.
Example:
Switching costs for auto insurance customers are low and claim processing is expensive. So keeping customer satisfaction high and claim costs low is a big win. You’re the PM of the mobile app. While sub-metrics like claim filing completion rate, response rate, and overall satisfaction will be important to track, real ROI could be measured in terms of:
Cost savings per digital claim vs. phone (human) claim.
Since you know what customers are paying for their insurance, it’s feasible to put an economic value on a customer, and then extrapolate to calculate the economic impact of customers leaving because of a poor mobile experience.
How can you talk about this in performance reviews and job interviews?
Boring:
"I improved user satisfaction of the claims filing experience on our mobile app. I did the user research, wrote the requirements, worked with engineering, provided updates, blah, blah, blah..."
Exciting:
"Our mobile app handled 60% of claims filed, but we wanted to see if we could do better. Every claim filed digitally vs. the phone saved the company $X. We set a goal to increase this to 75% by year's end. Plus, we knew every 1-point increase in the customer's claim experience resulted in $Y in incremental value in terms of customer retention. I developed and executed the roadmap. By year’s end, we got to 70% and delivered $Z in cost savings. We estimated our overall economic impact in terms of additional customer stickiness was $N.”
Which story sounds more compelling?
5. Managing an “internal product”
Some PMs are hired to lead solutions for the company’s own users (for reasons I’ve never understood).
Like #4, the company has invested in this “internal product” for some measurable outcome. Know what that is, and you’ll know how to drive impact.
Example: You’re the PM responsible for the system used by your company’s field sales reps to input customer orders.
You discover the following:
Difficulty in data entry, slowing order flow.
Lack of follow-up reminders, slowing the sales cycle.
Difficulty finding customer info, slowing opportunity follow-up.
Difficulty for supervisors to get a bird’s eye view of how each rep is performing, hampering optimal territory assignment.
If we know the average value of a customer order is $X, then:
Adding follow-up reminders could help reduce sales cycles by Y days, resulting in Y * $X acceleration in the sales pipeline.
Putting the best reps on the most ripe territories could improve win rate by Z%. That’s Z% * $X in increased value for the bird’s eye view feature.
6. Leading a re-platforming effort
An insurance company I consulted for wanted to modernize a key system used by their agents. The main issues were:
Frequent system outages and performance concerns.
High user dissatisfaction.
Disparate sub-systems making it difficult to deliver new capabilities.
High cost of ownership of current environment.
Compare these two PM narratives simply in terms of describing the problem space:
Boring, tech nerdy way:
“There were frequent outages and performance problems. Poor documentation and the different sub-systems made it hard to develop new features. The web servicing environment was well beyond its useful lifespan and had a high cost of ownership. And users were really unhappy. So the goal was to build a new, more resilient infrastructure with a new tech stack that enabled new features to be delivered more efficiently and effectively, and deliver a more integrated and modern user experience.”
Exciting, results nerdy way:
“The system had suffered 10 outages in the previous 6 months — $10M in lost business and productivity. Because it ran on multiple sub-systems, even changing a button would take 6 weeks to complete — $1M just to change a button! User satisfaction was at 10%. IT was spending $60M a year just to keep the thing afloat. Re-platforming was going to be a 12-month $30M investment, but with an anticipated $120M in savings over the next 3 years, it was worth it.”
Which nerd would you continue the conversation with?
Key Takeaway
The #1 KPI for Product Management is Return on Invested Capital (ROI).
Every metric we track — velocity, releases, C-Sat — should ladder up to ROI. If it doesn’t, ask “So what?” until you find the link.
Your action steps
Identify which of the 6 PM roles you’re in.
Learn the financial and economic metrics for your product.
Connect supporting metrics to them.
Map your day-to-day work to real business outcomes.
We don’t need an MBA to connect our work to ROI. But we do need curiosity, business context, and the courage to tell our story in those terms.
Because the PM who can clearly link their work to ROI is the PM who gets noticed, funded, and promoted.
That’s it for today.
Have a joyful week, and, if you can, make it joyful for someone else too.
cheers,
shardul
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Shardul Mehta
I ❤️ product managers.