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Product metrics – finance [overview]

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  • 10 January 2023
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Product metrics – finance [overview]

Collecting data and their proper analysis allows you to learn about user behaviour and its impact on the business. Below, you will find a list of the most important product metrics related to the financial aspect along with their overview.

The guest author of the list is Michał Witkowski – Product analyst, team builder, psychologist, researcher. Since 2010, he has been dealing with the measurement and analysis of human behaviour, first at the university and then in business.

MRR – Monthly Recurring Revenue

The amount of revenue in the next month, assuming that all existing customers will stay with us for the next month and no new customer will buy us. Only useful for SaaS businesses or other businesses with a subscription model. A fundamental metric for SaaS businesses, used interchangeably with the ARR.


ARR – Annual Recurring Revenue

The amount of revenue in the next year, assuming that all existing customers who subscribe to our product will stay with us for the next year and no new customer will buy us. Annual Recurring Revenue. Only useful for SaaS businesses or other businesses with a subscription model. A fundamental metric for SaaS businesses, used interchangeably with MRR. The equation is always true: ARR = 12 * MRR.


iMRR – Increase in Monthly Recurring Revenue

Change in MRR from period to period. Usually year-on-year, quarter-on-quarter and month-on-month. A negative value indicates a shrinkage of the product, a positive value indicates an increase in the product.


Gross revenue

Gross revenue (before deduction of VAT, other taxes and fees) that was generated by the product in the selected period. In B2B businesses, it is usually reported in a month, quarter, or year. In B2C businesses, it also makes sense to report for shorter periods: a day, a week. A fundamental metric for non-SaaS businesses.


ARPU / ARPA – Average Revenue Per User/Account

Usually counted over the last month (28 or 30 days). Monthly Revenue or MRR, divided by active users or accounts for that month.

ARPU = Revenue Metric / Active Users

ARPA = Revenue Metric / Active Accounts


ARPPU / ARPPA – Average Revenue Per Paying User/Account

Usually counted in a month. Monthly Revenue or MRR, shared by paying users or accounts that month.

ARPPU = Preferred Revenue Metric / Paying Users

ARPPA = Preferred Revenue Metric / Paying Accounts


Conversion rate

In daily reporting, almost always counted per month: Conversion = MAPU / MAU. In A / B tests, they are often counted for the entire duration of the test. A very important metric in non-SaaS products.

Conversion rate = Paying users / Active users


ROI – Return On Investment

Always expressed as a percentage (e.g. -30%, not -0.3), it can apply to any form of product investment and return. Typically used in the context of marketing expenses, where the cost is money spent purchasing traffic and the revenue was generated by the traffic that was purchased.

ROI = (investment income – cost) / cost

or ROI = ((investment income – cost) / cost) + 1


CPA – Cost Per Action

It is usually broken down by marketing campaign and used to optimize your marketing efforts.

CPA = marketing expenses / number of users purchased as part of marketing activities


LTV —Life Time Value

Total revenue generated on average by a single user since the product was first used. LTV grows infinitely, limited by the users’ actual lifespan, but reporting it this way is impractical. In practice, LTV is usually calculated for a selected period, such as the first 90/180/360 /… days of the user’s life.

It is typical to calculate and compare LTV for user groups registered at a similar time (cohorts), for example one month, or for user groups from one marketing campaign.


Transactions

The number of transactions performed in the application by its users. A metric reported for a given period of time, usually a day, week, or month. Useful almost exclusively in products where one user can make any number of transactions.


Average transaction value

Often used to compare different user groups, such as men and women; young and old users; users from different countries; various campaigns; e.t.c.

Average transaction value = Gross revenue from all transactions / total number of transactions


MAPU – Monthly Active Paying Users

Number of users who paid in the last month. A month is defined as a fixed number of days (28 or 30) to avoid problems with different lengths of months.

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