Building a KPI Tree for Product Success

When it comes to product management, measuring the right things is crucial. Without the right KPIs in place, it’s easy for product teams to lose focus or become overwhelmed by irrelevant data. In my earlier post about KPIs, I discussed the importance of selecting meaningful indicators that align with your overall business goals. Now, let’s take it a step further and look at how you can apply a KPI tree specifically at the product level.

A KPI tree connects the dots between your high-level objectives and the granular metrics that drive product success. In this post, we’ll explore how to structure your KPI tree, break down key metrics like the North Star Metric, and show you how to align your product’s KPIs with long-term goals. Let’s dive in.

The Role of KPIs in Product Management

For product teams, KPIs are more than just numbers; they are vital tools that guide decisions, prioritise work, and measure the success of everything from feature releases to customer satisfaction. Without clear, focused KPIs, it’s easy to get overwhelmed by data or distracted by short-term wins that don’t contribute to long-term success.

KPIs drive the prioritisation process—whether you’re deciding which feature to develop next or what technical debt to handle. One KPI that’s crucial for most digital products is the User Retention Rate. In my experience working with product teams, focusing on user retention has led to clearer priorities and more meaningful product improvements. The challenge, though, is to avoid the temptation to measure everything, which can dilute focus and slow down decision-making.

This is where the KPI tree comes into play.

Introduction to the Product-Level KPI Tree

A KPI Tree is a structured approach to tracking and managing KPIs. It connects high-level business goals with product-specific metrics, ensuring that everything the product team is doing contributes to larger objectives. Think of it like a branching system: your top-level goals are the roots, the main drivers of success are the branches, and the granular details are the leaves.

At the product level, a well-structured KPI tree helps ensure that all metrics are aligned, from the overall product success down to the specific actions of individual teams. For instance, while the broader company may be focused on revenue, the product team could be more focused on engagement and adoption metrics that lead to long-term revenue growth.

North Star Metric: The Ultimate Product Success Indicator

At the root of the KPI tree lies the North Star Metric—the single most important indicator that reflects the success of your product. It’s called the North Star because it acts as a guiding light for the product team, keeping everyone focused on what truly matters.

For a product, the North Star Metric should capture long-term value, both for the user and the business. Let’s take a subscription-based SaaS product as an example. The North Star Metric could be “Daily Active Users” (DAU) or “Customer Retention Rate”, depending on whether your focus is on engagement or longevity.

When coaching product teams, I’ve often asked them to simplify their metrics by focusing on a North Star. Once you find this metric, it becomes much easier to align everyone’s efforts toward achieving it. It also provides clarity on what’s most important, helping teams avoid distractions from vanity metrics that look good on a dashboard but don’t contribute to long-term success.

Primary Metrics: Key Product Performance Drivers

Once the North Star Metric is established, the next step is to identify Primary Metrics. These are the KPIs that directly drive progress toward the North Star and give the product team tangible levers to pull.

For instance, if your North Star Metric is Customer Retention Rate, the following could be your Primary Metrics:

• Feature Adoption Rate: How many users are actively using new features?
• Customer Satisfaction Score (CSAT): How satisfied are your customers with the product overall?
• Monthly Recurring Revenue (MRR): How much revenue are you generating from customers on a recurring basis?

These primary metrics help the product team focus on what’s driving value for both the users and the business. In one of the projects I worked on, we focused on improving the Feature Adoption Rate, which had a direct impact on overall retention. By identifying key drivers of user engagement, we could design better features that customers actually wanted, leading to higher satisfaction and retention.

Secondary Metrics: Drilling Down for Deeper Insights

Secondary Metrics sit at the next level of the KPI tree and offer more granular insights. While they don’t directly affect the North Star Metric, they give essential data that can help diagnose issues or spot opportunities for improvement.

Let’s continue with our example of Customer Retention Rate. Here, your Secondary Metrics might include:

• Onboarding Completion Rate: How many users successfully finish onboarding?
• Customer Support Tickets: How many customers are experiencing problems that need assistance?
• Time Spent Using Key Features: Are users engaging with the product’s core functionalities?

These secondary metrics give you deeper insights into the factors that influence your primary metrics. For example, in one project, we noticed a drop in the Onboarding Completion Rate. By investigating further, we discovered that certain steps in the onboarding process were unclear, leading to lower feature adoption and, eventually, lower retention. Adjusting these details had a significant impact on the product’s success.

Case Study: Applying a KPI Tree to a Product

To bring this all together, let’s look at how you might build a KPI tree for a hypothetical product—a music streaming platform.

• North Star Metric: Time Spent Listening (key indicator of user engagement and satisfaction).
• Primary Metrics:
  • Feature Adoption Rate: Are users discovering and using new features like playlists or radio stations?
  • Customer Engagement Score: Are users returning to the platform regularly?
  • Customer Lifetime Value (CLV): How much value are you generating from each user over time?
• Secondary Metrics:
  • Song Completion Rate: Are users listening to full songs, or skipping too early?
  • Playlists Created per User: How much are users engaging with personalized features?
  • Customer Support Tickets: Are there frequent issues with music playback or account access?

By structuring your KPIs in this way, the product team knows exactly what to focus on: driving engagement and retention. Each level of the KPI tree aligns with the North Star Metric, making it easy to find out what’s working, what’s not, and where to focus improvement efforts.

Best Practices for Building and Managing a KPI Tree

Building a KPI tree is not a one-time activity. Your KPIs will evolve as the product grows, new features are added, and user behavior changes. Here are some best practices I’ve learned along the way:

• Start Simple: Don’t overcomplicate the tree by adding too many metrics. Focus on the KPIs that truly drive success.
• Align with Business Goals: Make sure your North Star Metric aligns with overall business objectives to avoid misalignment between teams.
• Make It Actionable: Every KPI should lead to a decision or action. If it’s not actionable, it’s not worth tracking.
• Iterate Regularly: As your product evolves, revisit your KPIs to make sure they still align with your goals. Don’t be afraid to adjust them as needed.

Conclusion

A well-structured KPI tree is one of the most powerful tools you can use in product management. It connects high-level business goals to daily operations, ensuring that every metric you track is meaningful and contributes to your overall success. By focusing on the North Star Metric, identifying key Primary Metrics, and drilling down with Secondary Metrics, you can build a system that not only tracks progress but also informs better decision-making.

If you’re ready to apply the KPI tree to your product, start by defining your North Star Metric. From there, build out the Primary and Secondary Metrics that will drive your success. And remember, your KPIs should always be dynamic—review and iterate on them as your product grows and evolves.

What KPIs do you use in your product development process? I’d love to hear your thoughts in the comments below!

Books to dive deeper

“Measure What Matters” by John Doerr
This book dives into the concept of Objectives and Key Results (OKRs), which are closely related to how KPIs can be used to align goals and track progress in product development and business success.

“Lean Analytics” by Ben Yoskovitz and Alistair Croll
A practical guide for understanding the right metrics at each stage of a startup’s growth. It’s perfect for learning how to focus on actionable metrics, much like the KPI tree approach.

“The Lean Product Playbook” by Dan Olsen
Focuses on creating successful products by aligning customer needs with product development, with a strong emphasis on using metrics to measure product-market fit.

“INSPIRED: How to Create Products Customers Love” by Marty Cagan
Cagan’s book is an excellent resource for product managers, helping to connect product strategy, customer needs, and the right metrics to drive product success.

“The Four Disciplines of Execution” by Chris McChesney, Sean Covey, and Jim Huling
This book covers the importance of focusing on the most important goals and how to implement metrics and KPIs to achieve them effectively in any organization.