The Complete Guide to Product Benchmarks

A great way to understand how an existing product is performing is to compare it to similar products belonging to competitors. Product benchmarking allows companies to build a picture of where their product ranks within their market.

Product performance benchmarks are particularly used by SaaS companies to gain a clearer picture of the market and to make data-backed decisions aimed at continuous improvement. This way, they can continue to ensure that their product is best in class.

What is product benchmarking?

The benchmarking process uses different parameters, which are the product benchmarks (PBs) themselves. These parameters, also known as product performance benchmarks, are usually presented in percentage form and make it easier for companies to match up their products’ performance to that of their competitors.

These benchmarking studies are a form of external benchmarking since the comparison is being made to something outside of the company. Internal benchmarking, by contrast, is when a company compares a product’s present and past performance side by side.

Benchmarking is a crucial part of product management and development, as it provides insights to improve current products, as well as help develop new products that are more likely to succeed.

Benefits of product benchmarking

Undergoing product and benchmark testing helps you improve your product’s stickiness by measuring its relative performance and using this insight to make data-backed improvements. Product performance benchmarking:

• Helps you remain better informed about your market and identify trends. By keeping an eye on the competition on a regular basis, you uncover new market trends and ideas that are gaining momentum and use them to improve product performance. Similarly, you can quickly identify features that have become outdated and remove them from your product.
• Allows you to see how your product stacks up against direct competitors. You can measure key metrics like activation rate and product engagement to uncover your strengths and weaknesses.
• Enables you to make data-backed decisions to improve your offerings. By staying up to date with market trends and uncovering your own products’ strengths and weaknesses, you have the insights you need to make strategic decisions. Product benchmarking allows you to improve your product performance as well as your business processes.

Common product benchmark metrics & KPIs

Accurate product benchmarking is dependent on choosing and accurately measuring a number of different metrics and KPIs.

Activation rate

This refers to the percentage of users who have completed a key action while using the product. This action will, in turn, help them experience the product’s full potential or value. Measuring activation rate can be tricky since different companies could have different definitions of what an activation benchmark is for their product.

An activation behavior could be when a user tries a specific feature in your product or when a new customer tries your product for the first time. One study shows that a 25% increase in activation rate led to a 34.3% increase in monthly recurring revenue (MRR) after a year.

Product stickiness

This is a type of engagement index that measures what portion of your users use your product regularly. Product stickiness helps product managers understand usage cycles and patterns for different customer segments.

The product stickiness ratio is calculated by dividing your daily active users (DAU) by your monthly active users (MAU) and multiplying the answer by 100:

Product stickiness ratio = DAU / MAU * 100

While product stickiness is a helpful metric to measure, it doesn’t tell you anything about why your users are sticking around or why they’re leaving. It also might not be applicable to companies whose product does not require their users to sign in regularly.

Feature adoption rate

This is the percentage of users that adopt specific features on your app or product. A high feature adoption rate is usually indicative of great customer satisfaction. If your adoption rate is low, you might want to look into what it is that is stopping your customers from taking their usage to the next level. It could be indicative of friction along the customer journey or an unwillingness to pay the price for usage.

Adoption rate = users of specific feature / total number of users

The average industry adoption rate is 33.67%.

Free-to-paid conversion

This is the percentage of your users who have upgraded from their free account to a paid subscription. Some SaaS companies offer new users a free trial before giving them the opportunity to convert to paying customers. Others offer a free-tier option with limited functionality.

In 2022, the industry benchmark was found to be 14.65%. Research shows that companies that offer a time-limited free trial have a higher free-to-paid conversion rate (16.7%) than those that offer a free tier (11.37%).

Net Promoter Score (NPS)

This is a customer loyalty metric that measures the likelihood that a customer will recommend a product or service to another person. It is measured simply by using surveys to ask customers to rate this likelihood on a scale of 0 to 10, with 10 being the most likely.

Based on that score, customers are put into one of three categories—promoters, detractors, and passives. The metric ranges between -100 and 100, with negative numbers being more indicative of greater numbers of detractors.

The average NPS score in 2022 was found to be 29.66.

User retention

This metric shows you the rate at which a customer will continue to use your product after a period of time or after their trial period is over. You can measure retention rate (or app retention) based on users or on time. Calculating it based on users means you can find out the rate of retention amongst either your entire user base or paying customers or customer cohorts. Time-based calculation allows you to uncover your retention rate after users signed up, after a specific date, or within custom periods.

Knowing your retention rate helps you understand how much you’re depending on acquiring new customers or how loyal your current customers are.

PB for feature adoption

One of the main goals of carrying out product benchmarking is to improve your feature adoption. To remain competitive and to drive customer lifetime value, you need to create constant feature discovery.

In-depth benchmarking exercises give you insight into how your feature adoption rates compare to those of your competitors. They also identify gaps and opportunities that can help you drive your adoption numbers higher through activities such as secondary onboarding. Secondary onboarding is a process by which you enhance your customer journey to make it easier for them to discover and engage with more features of value.

This can be done by adding in-application tips that will increase the visibility of the features you want your customers to engage with.

PB & user retention

Another primary goal of product benchmarking is to improve your customer experience in a way that will retain more customers and improve loyalty. It helps you identify your most active and loyal customers and the ones that are providing you with the highest value.

Once you know these customers, you can build a template of the typical power user customer journey and aim to get your least-engaged users to replicate it.

How to use product benchmarks

Product benchmarking makes it possible for you to maintain a continuous improvement cycle. This is done through the measurement of your products’ relative performance and identifying room for improvement. You can incorporate the following techniques and tactics into your methodology to help you in your product benchmarking process:

1. Create your user journey map—Visually represent the typical customer journey through your funnel. Mapping out your user journey makes it easier for you to see all of your key touchpoints and provide you with insights about how to reduce friction throughout. A typical user journey map consists of four main phases—awareness, consideration, conversion, and adoption.
2. Overlay metrics throughout the user journey—Identify which metrics you want to use for your product benchmarking process and overlay them across the journey. Activation-related metrics should be collected during the consideration and conversion phases, while retention-based metrics are collected during the adoption stage.
3. Implement continuous testing—Consistently test each of the metrics you have chosen to obtain the most accurate results. Create your hypotheses, run experiments to test them, evaluate your results, and repeat.
4. Use the right tools to get the job done—Incorporate the right tools in your company’s tech stack to ensure that you can test more accurately, efficiently, and at scale. Products like Amplitude Experiment and Amplitude Analytics help streamline your product benchmarking process and provide you with data-backed insights that will set you up for success.