The Magnificent Seven

Today’s “Magnificent Seven” stocks are names that everyone knows: Apple, Microsoft, (Google parent) Alphabet, Amazon.com, Nvidia, Meta Platforms, and Tesla. There have been prior versions of the great stocks (the FAANG), but they serve the same purpose. People look to these companies and their performance as leading indicators of the health of the market.

Product management is no different. Product managers have seven key metrics that indicate the health of your product of product portfolio. Depending on your product, there may be some variation, but what are the magnificent seven metrics of product management for most products? 

1. Revenue

   This is what is generated from selling the product. The movement of revenue (up/down, cyclical) can help you assess the future of your product. 

2. Gross Margin

   Tells you how profitable your product is.  You need to constantly be managing the balance of costs and revenues. Your Gross Margin = (revenue-COGS)/revenue, where COGS = cost of goods sold.

3. Net Income

   Your bottom line is what you earn after all your expenses.  Beyond being profitable, you want to monitor this to see if you are efficient in what you build. 

4. Return on investment (ROI)

   You want to measure the profitability of a project or product build.  You can look at the impact/gain achieved by an investment / investment cost (times 100 for the percentage).

5. Customer acquisition cost (CAC). 

   You also need to know what it costs to gain a customer to help focus your marketing and sales costs.   You can use the total cost of marketing and sales / # of new customers in a period to measure this. 

6. Customer Liftetime value (CLTV). 

   Some clients will be more valuable than others, so this is best measured as an average. Take the average revenue per customer and multiply it by the average lifespan. You can evaluate then the long term value of customers and look for trends. 

7. Churn rate

   Churn is created when subscribers or purchasers with renewing contracts stop using your products. If you attract a lot of buyers with a new launch, but they don’t renew or they cancel, you need to make some adjustments in order to achieve the right product market fit.