To build effective product metrics, it helps to understand the different types of indicators that can guide decision-making. Metrics are generally categorized into lagging indicators, direct (or leading) indicators, and bridge metrics.
Lagging indicators reflect outcomes that have already occurred, such as revenue, ARR/MRR, churn rate, or net profit. They show whether a strategy or initiative has succeeded but cannot be directly influenced in real time.
Direct or leading indicators track user behavior or engagement that drives these outcomes, like activation rate, daily/weekly active users, feature adoption, or conversion from free to paid plans. These metrics are predictive and actionable, giving teams insight into what changes are likely to influence future results.
Bridge metrics connect direct and lagging indicators, showing how specific user behaviors translate into business outcomes—for example, LTV:CAC ratio, retention cohorts, or engagement scores tied to revenue. Together, these three types of metrics provide a structured approach to understanding not only what happened, but why it happened, and what actions can improve future results.
To identify which metrics matter most, start by mapping potential levers for business growth using the RARRA (Retention-First) model, an evolution of Dave McClure’s AARRR framework. RARRA is especially useful for Product-Led Growth (PLG) and SaaS companies, as it emphasizes that sustainable growth begins with retaining existing customers. Once retention is solid, teams can focus on Activation, Referral, Revenue, and finally Acquisition. This ensures that the metrics you define are focused on product outcomes that truly drive business value, rather than chasing lagging indicators in isolation.
Creating the RARRA Flywheel
Retention first. Activation is hard, but if you nail it and speed up time-to-value, referrals and user growth almost take care of themselves.
The ultimate goal of using RARRA is to create a flywheel of sustainable growth. As Jim Collins describes in Good to Great, the “flywheel effect” occurs when small, consistent wins accumulate momentum over time, generating continuous improvement. By prioritizing Retention first, each incremental improvement in Activation, Referral, or Revenue adds energy to the flywheel. Over time, these gains compound, producing a self-reinforcing cycle of product and business success.
Step 1 - Defining RARRA metrics for your product
Focus on what matters, not everything
Don’t try to measure everything - you’ll end up measuring measurement itself.
Concentrate only on metrics that truly impact product growth and user experience.
Select 1–5 key metrics per RARRA stage
RETENTION, ACTIVATION, REFERRAL, REVENUE, and ACQUISITION.
Choose metrics that clearly indicate whether your core product is working and users are realizing value.
RARRA Stage – Practical guidance
💡 Practical tips
Keep the focus on delivering value to users.
Update KPIs as your product and user base evolve.
Measurement alone isn’t enough -> react to insights.
If a KPI drops, analyze the reason and experiment with corrective actions.
Step 2 - Continuous delivery indicators
Continuous delivery indicators provide valuable insights into team performance and the sustainability of software development. DORA metrics, such as change lead time, defect rates, and levels of rework, help identify process bottlenecks and ensure software can be reliably released on a continuous basis. At the same time, employee-focused metrics, such as eNPS, employee satisfaction, and team happiness, support sustainable development by measuring workload impact and preventing burnout. Together, these indicators enable a balanced, efficient, and long-term approach to software delivery.
Step 3 - Defining metrics to guide strategic hypotheses
To guide a strategic hypothesis, such as "We believe we can grow revenue 20% by targeting enterprise accounts," and validate its impact, a systematic metric framework is essential. If you don’t have a strategic hypothesis or product strategy, it’s worth starting with a goal workshop. The hypothesis itself provides direction, and its success is measured using two complementary sets of metrics that collectively allow for measuring the factors that impact the hypothesis and ultimately achieving the desired Product Outcomes.
The first group is the Continuous Delivery Indicators (like Lead Time and Change Failure Rate), which ensure sustainable development and the ability to deliver continuously.
The second, and more critical group for the hypothesis, is the Product Metrics, structured around RARRA growth flywheel. For this specific example, key metrics include
Acquisition (e.g., Cost per Acquisition for enterprise accounts),
Retention (e.g., Enterprise customer churn rate), and especially
Revenue (e.g., ARPU for enterprise customers), which directly track the hypothesis's objective.
The combination of these indicators provides a complete picture of whether the strategy is being executed with technical sustainability and is generating the intended business value.
Final Step – Gather the metrics
Gather all the product metrics and continuous delivery indicators you have previously defined. Then, perform the following critical check to ensure strategic coverage:
Classify Your Metrics: Categorize every metric into one of these three types:
Leading Indicators: Fast-moving, action-related metrics that predict future outcomes (e.g.,
Deployment Frequency).Lagging Indicators: Outcome-measuring, historical KPIs that measure realized results (e.g.,
MRR,Customer Churn Rate).Bridge Metrics: Efficiency and economic ratios that link actions to results (e.g.,
LTV:CAC Ratio).
Verify Coverage: Ensure that every area you are tracking (such as Retention, Activation, Revenue, and Continuous Delivery) has representation from all three metric types. This ensures you are monitoring not just the final results, but also the actions and efficiencies that lead to them.
Need help setting or measuring your product metrics?
We help product teams create clear, actionable metrics that turn decision-making into a fact-based process instead of guesswork. By combining goal-setting, the right analytics tools, and practical tracking, we ensure your team sees real impact quickly and can focus on what truly drives the product forward.
