This article was originally published on Shifta’s blog, an online school where I teach Product Management and Marketing.

For a long time, the digital mantra was clear: growth first and think about revenue later. This mindset, consolidated in the 2010s thanks to cheap money and a winner-takes-all dream (where a single player dominates the market), prompts many companies to prioritise growth at any cost. However, since 2021 and due to the rise of  capital, the investors started to demand sustainable revenue.

This change transformed the model into a new one that seeks a balance between growth and profitability. Ideas such as optimising the business before expanding to other countries or getting more profitable users (instead of just more users) have become the pillars of this new model.

As it cannot be any other way, this fact implies variations in how digital products are being made and scaled up: the goal is not only growing but to grow intelligently to achieve a profitable and sustainable business over time.

Growth in front of profitability: the new challenge of digital products

Although the circumstances of any company or project can be different, keeping the balance between growing and profitability have become the main challenge for countless CPOs and Product Managers over the last few years.

With this paradigm change, one of the main difficulties is to forget the standard metrics and to find some indicators that consider short-term growth without losing sight of the long-term strength of the business.

A triangle of metrics to practice the balance

“Show me the incentives, and I will show you the result” to quote Charlie Munger. So, it is essential that, at the moment of defining the KPIs, we use metrics that find the counterbalance between different business goals.

In traditional business models, where growth is the only objective, teams tend to prioritise initiatives that maximise fast revenue, although they affect  the client experience (eg: aggressive low price strategy). This generates low-loyalty clients, and it implies being more vulnerable to competitors.

It is also pretty common to put retention projects on the back burner (such as those that improve client support), or innovation initiatives (add new technologies that lead to more agile management in the future). Although these actions do not generate immediate revenue, they are the basics to guarantee business growth in the long term.

​If, on the contrary, we are looking for a more sustainable growth, in addition to the revenue, we should encourage other initiatives that increase the value of the product and the retention of users.

​But finding the balance is not easy. Many times, the role of a Product Manager is to handle the strain between different metrics. An approach to achieve this is working on different scope metrics that help to balance the scenario. The most common approach is to use one metric from each of these types:

• Sales or revenue (MRR, ARPU, CAC payback): we know if the business is generating money and if it will be viable in financial terms.
• Use or adoption (DAY/MAY feature adoption): we can evaluate if there are more people using the product. In the case of metric growth, it will be a reliable indicator of organic growth.
• Client satisfaction (NPS, CST, churn): it helps us to understand if the users are happy and intend to use the product, due to the metric being related with our future relationship with our client.

Following this model and bearing in mind use and satisfaction metrics, we achieve a healthy counterbalance that avoids an excessive polarisation to the revenue or profits.

Use metrics to assure you that you are selling, but also that people are using and valuing your product, something essential for retention and growth. Satisfaction metrics must measure the quality of the experience: satisfied clients repeat, recommend, and forgive occasional l errors while frustrated clients leave, no matter how important their current money is.

How to apply the model to a real case

To illustrate this concept, I am going to use an example of a digital product that helps small companies manage their projects, and its business model is a monthly and annual subscription.

• If we only measure revenue, the team throws itself into aggressive sales campaigns or discounts (regardless of whether the user actually obtains value) that can generate  customers who pay for one month but cancel the following one.
• If we only measure use, the product can become popular for free users or lower fare accounts, without meaning a solid business.
• If we only measure satisfaction, we can get obsessed with remarkable features that are requested by clients but with low impact on revenue or real adoption.

Using metrics that generate this balance forces the team to pursue profitable growth that neither sacrifices user experience nor product adoption. In a nutshell, digital products not only need to grow, but grow properly: finding the balance between revenue, use, and satisfaction to build a solid and sustainable business.