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How a product manager can find growth metrics and bring Unit Economics together

In anticipation of the start of the practical online course “Product manager” , an open lesson was held with Sergey Koloskov , product manager at Ozon. Participants learned to find growth metrics and build analytics around them, as well as count and reduce unit economies. In this article, we provide class breakdowns and helpful diagrams and examples from the presentation.




Key Product Metrics


Business metrics describe the success of the company: revenue and average revenue per user, profit, margin, volume of products sold. Product metrics characterize user behavior and product economics.

What a Product Manager Should Look At:



All metrics add up according to the pyramid principle, i.e. it is a hierarchy from operational to top-level metrics, classified to reflect different aspects of the business. The pyramid does not have a strict structure; each time it is formed for the purpose of a specific organization and product.



One of the key tasks of the Product Manager is to correctly determine the main ones from the metrics. For example, the problem - there are 2 projects:

  • Project A will bring 100 MNU
  • Project B will reduce MCU by 100
  • We expect users to be similar: the same habits, the same consumption
  • Projects are the same in complexity, cost, time and risk.

Which project do you choose and why?

The right manager would say that there is not enough information to make a decision. Firstly, it is not known whether Project A will lead an audience of buyers. Secondly, it is possible that a product is bought only 1 time in a lifetime, so “consumer dying” is not an important indicator in this case.

Another example: a site for a service for selecting private specialists in the field of domestic services. What metrics will we consider for the product? This can be a conversion to orders, an average check per user or return masters.

Pyramid of metrics for growth metrics (North Star) on the example of Ozon


Note that different KPIs are affected by different product initiatives.



A checklist of questions will help to identify the growth metric:

Value : Does this metric reflect the user's experience in relation to the core value of the product?
AHA-Moment : Does it reflect the moment when users first experience the core value of the product?
Business : Is this the only thing that shows that the business is moving in the right direction?
Analytics : Does the metric show the level of actual interaction and activity?
Strategy : Is the metric related to the long-term value of your product?

The table below shows the growth metrics that Sergey Koloskov described for well-known products (in the telegram channel Fresh Product manager):

Whatsapp
Messenger.



( —
),

Instagram.


, ,

Youtube.



,

Telegram
messenger.

,

.

«.».


,
,

Facebook


, ,
,
7 10

Facebook
Messenger


,

Booking


//,

Spotify


Wildberries


, ,

Netflix




.


Airbnb


//

Medium

,

Bookmate


Skyeng


Uber


//,

Ozon.Travel


,
.

Amazon


prime

Walmart


Dropbox

-
free- 3

Slack


,
//

Quora

The number of
questions the user
answers

Twitter


User time spent in the feed,
daily user activity



The growth metric is always the output metric. The output metrics are indicators that show a concrete result from the work done, while the input metrics reflect the actions performed. For example, the number of applications or the time spent in the application.



The next task: to identify the growth metrics of Google Drive. According to the product concept, the user can store up to 15 GB for free. Additional volume in the cloud is already paid. Therefore, we can say for sure that here the growth metric is the number of accounts with files with a total weight of 15 GB.

A similar task for the social network TikTok. Only here you need to take into account another type of monetization - viewing ads. In this case, the growth metric is the number of views, the time spent by the user per day. Sometimes OUTPUT metrics are confused with INPUT metrics like the amount of generated content in a social network, the convenience of downloading videos, etc.

Growth metrics are meaningless without financial success.
If you look at the complete funnel of sales channels and communications of the E-commerce product, you can see that it consists of several large blocks:

  • Awareness
  • Attitude
  • A wish
  • Purchase
  • Loyalty

And each of this stage has its own metrics, tools and directions of analysis.

Below you can study the management scheme of online stores, which in principle applies to most IT products.



LTV and CAC - Two Key Product Metrics


Unlike LTV and CAC growth metrics, metrics that ultimately determine the financial success of a product.

LTV (Live Time Value) - the money that the average user spends in your product for the entire time of its use.

CAC (Customer Acquisition Cost) - your average user engagement cost.

Engagement is described by the following steps in the user's life cycle:

  1. Application Activation
  2. Sticking in the application, or activity of use
  3. Returnability, i.e. how many users continue to use the product a month, two, and so on after registration

Monetization is described by the following sequence of stages in the user's life cycle:

  1. Application Activation
  2. I saw a selling screen
  3. Made 1 purchase
  4. Made 2 purchase, etc.

Unit economics is a product


There is a simple formula for calculating the profitability of a product:
User Acq * (-CPA + AMPU) = Profit
CPA - cost of attracting a user
AMPU - average income from a attracted user
User Acq - number of users who activated interaction with the product The

example below clearly illustrates how this formula works in practice:



Unit-economy is decomposed into metrics to identify bottlenecks. Product managers use Unit Economics as a tool that helps them identify which parameters can be influenced in order to improve product profitability.

It looks something like this: the manager lays out all expenses and conversions and looks for solutions that can be reduced, and what to grow, and how this will affect operating income.

A few more life hacks on unit economics


Ready services . If you enter in Yandex “Unit-Economy Calculator”, you can easily find sites where you only need to drive numbers to calculate the margin profit.
Separate channels . To understand the result for sure, evaluate it separately for each advertising channel. After all, it is advertising that bites off a large chunk of expenses.

By products . If you have a wide range of products, then evaluate the unit economy for each individually or at least for each individual group.

Conversion . To improve the final figure, work on the conversion. This indicator is not directly taken into account here, although it participates in the end.

Payback period. If in the first month the unit economy does not go up (you have recurring payments), then calculate the period when this will happen (CAC Payback) using the CAC / MRR –ACS formula.

The easiest way to find bottlenecks is to try to answer the question “What prevents us from growing sales by 5 times?” Among the most common answers are usually found:

  • We have an insufficient number of incoming leads at the top of the sales funnel
  • We have a sufficient number of website visitors, but only a small part of them are converted into registered users
  • We have a sufficient number of registered users (in trial or limited free version), but they are poorly converted to paying users
  • We are unable to make appointments with decision makers in organizations
  • We have everything in order with the first sale, but subsequent revenues are too small.

Of course, this is just a small squeeze out of how to work with metrics and Unit economics, which we assign 9 webinars to the Product Manager course . Classes are interactive - first, students try to solve problems on their own, generate hypotheses, and then we analyze the answers together. This is an opportunity to learn from the strongest Russian market leaders, such as OZON, Avito, Yandex, Booking, etc., both in the B2C niche and in B2B. (Just a lot of useful Sergei Koloskov puts at the channel .

The first session today April 27 , so if you were thinking for a long time to try his hand at managing positions - during this week you can join. Catch a good moment to master the missing knowledge. Next week, OTUS is giving big discounts on many courses, but there are not many places left!

This course is complemented by the online customer development workshop , which starts in May. In 8 lessons, you will test the idea of ​​a product using in-depth problem interviews in your target audience and create a product that you will buy. This is a useful addition for both start-ups and novice managers, as well as product managers with experience. We are waiting for you at OTUS!

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