5 PLG Metrics You Must Track To Succeed
Unless you’ve been “offline” for the past few years, you have undoubtedly heard about the many benefits of a product-led go-to-market strategy.
Leading product-led growth companies are growing 50% year-over-year, far faster than traditional SaaS companies (21%) according to recent benchmarks. Given the data — opting to grow through product-led isn’t a difficult decision, but getting it right is extremely difficult, and can be a lengthy, tedious journey.
I have done it right, and I’ve done it wrong. Most important, I learned along every step of the journey. In this article, I will share what “good” looks like and some of the critical metrics required to help you understand if you are on track or not, and what steps are necessary for improvement.
First, as a refresher, PLG is a go-to-market strategy where the product drives customer acquisition, expansion, and retention. Unlike traditional growth models relying heavily on sales and marketing (high CAC), PLG focuses on creating a product so valuable and user-friendly that it essentially sells itself (low friction, low CAC).
PLG is hardly new — a majority of B2B SaaS companies — 58% — have already deployed a product-led growth product. Almost all of these companies ( 91%), plan to increase their investment this coming year. With its lower-friction and reduced cost of acquisition, PLG is here to stay.
If you are new to PLG, don’t have a strong grasp of metrics, or are one of the 45% of companies have yet to make the move, keep reading — this article is for you!
Great SaaS PLG solutions: Built Through Trial & Error..and Patience
It takes time to get your product and PLG motion right. I’ve led many new PLG launches and even the most successful motions required a year of experimentation, measurement and tuning to get the model right. This requires patience, but it also demands real-time data and metrics to inform your actions.
To successfully implement a PLG strategy, tracking and understanding the right metrics is crucial. This article explores the critical metrics necessary for monitoring and enhancing Product-Led Growth.
Precursor: What Does “Good” Look Like?
Step One: Access To The Data!
Before we get into the metrics, make sure the data is available! Ideally, metrics streaming should be built into your product from the start. Design products, web forms, and physical and digital campaigns to capture metrics and centralize them for easy reporting and dashboarding. Going back and retrofitting this capability is much harder and painful!
Step two: What Does Good Look Like?
You and your team need to decide what good looks like and set some milestones to plot your journey to get there.
- Traffic: every company and brand differs, but how many eyeballs do you expect to get? What is your strategy to expose prospects to your trial, or freemium signup? This number should be high and growing, but figure out how to do so cost-effectively. Aim for a larger number than you think you’ll need to account for seasonality and lower conversion rates.
- Conversion: You will have an opportunity for conversion at every stage. You should track visitor to trial conversion, this should be in the 3–8% range. You should primarily focus on the number of overall trials that convert to paid. This second metric is your path to success.
Note: Trial to paid conversion industry benchmarks are typically in the 3–10% range. These vary based on demo vs freemium models and the involvement of sales assist vs self-service purchasing. Freemium will have a lower conversion rate, but greater overall retention of users, and helps build your brand. Overall, in terms of conversion to paid, assume that you will have a lower number initially, but model out a number in the 5% range.
Step Three: Access To The Right Dashboard
Easy access to all of your critical data without a data science team is critical. Make sure you have a single source of truth — pick the right data platform. One that is cost-effective, adaptable and easy to work with. There is no single answer, but many solutions are available.
The right tool will help optimize your PLG strategy product based on real user feedback and growth marketing metrics.
The data will also provide critical insights into how users interact with your product, enabling your team to understand a user’s journey, from initial contact to conversion and beyond.
This data can guide product development, inform marketing strategies, and identify potential upsell or cross-sell opportunities. Additionally, PLG tools often include features that provide personalized, in-app experiences. These can guide users towards desired actions, enhance user engagement, and increase the perceived value of your product. Some options are:
- A Robust CRM that supports the PLG model e.g., getting deals automatically from the sign-up process, scoring leads, showing engagement, filtering leads that require support from sales teams.
- PLG-centric tools: Pendo, Mixpanel, Intercom, UserIQ and Dashly are PLG-centric tools to help guide user onboarding, measure engagement and enhance user experience and track the critical metrics below.
Metrics That Matter: Monitoring the right data can determine the “life and death” of your PLG initiative
Below is a list of the top 5 metrics I recommend you should start with, and focus on until you start to achieve initial traction and see conversion. Yes, you can monitor more metrics, but keeping things simple and living by a small number of digestible datasets will be better. “Metrics fatigue” is a syndrome with a lot of downsides. Keep things focused by not overwhelming the team.
1. Activation Metrics
Activation: is the stage where a user experiences the value of the product for the first time. Some refer to this as the “aha” moment. Many teams don’t define and align on the definition of “activation”. Is it when they solve a known problem, complete a certain number of tasks, or perhaps invite their team members. Getting feedback from users will help you understand when this moment is first recognized, so you can track it.
Key activation metrics include:
- Activation Rate: The percentage of users who reach a key activation milestone. For example, in a SaaS product, this could be completing a setup process or using a core feature for the first time.
2. Time to Value (TTV): The time it takes for a new user to realize the product’s value. A shorter TTV often leads to higher user satisfaction and retention.
Ideally, activation rates should be in the 25–35% range.
Common mistake: Startups often put their most valuable features behind a paywall because they fear giving away too much value. But if you’re PLG and don’t have strong marketing channels, your free plan is your marketing. And if your free plan doesn’t expose your value, it doesn’t exist to your users. If users don’t see value, wont don’t buy. Help activate and engage users with a great user experience.
Strategies for Improvement:
- Simplify onboarding processes.
- Provide in-app tutorials and guides.
- Use personalized onboarding experiences
- Don’t hide value behind a paywall
2. Engagement Metrics
Engagement measures how actively users interact with the product. High engagement often indicates that users find the product valuable and integral to their daily activities.
Measure:
Daily Active Users (DAU) / Monthly Active Users (MAU). These metrics measure the number of unique users engaging with the product daily and monthly, respectively.
- Feature Usage: Tracks how often specific features are used, helping to identify which features are most valuable to users.
- Session Duration: The amount of time users spend in the product per session.
Strategies for Improvement:
- Introduce gamification elements to keep users engaged.
- Regularly update the product with new features based on user feedback.
- Use push notifications and emails to re-engage inactive users.
3. Retention Metrics
- Retention is critical for PLG because retaining existing users is often more cost-effective than acquiring new ones. Key retention metrics include:
- Churn Rate: The percentage of users who stop using the product over a specific period.
- Retention Rate: The percentage of users who continue using the product over time.
- Customer Lifetime Value (CLV): The total revenue a company can expect from a single customer account over the course of their relationship.
Strategies for Improvement:
- Offer personalized customer support.
- Continuously collect and act on user feedback. This can be done with a survey at the end of each trial. Make sure you ask a good mix of quantitative questions to generate a trackable score, but also open-ended questions to ensure that you get the best, most valuable feedback.
- Implement loyalty programs and incentives for long-term users.
4. Conversion Metrics
Conversion metrics track how well the product converts free users to paid customers, which is crucial for revenue growth.
- Free-to-Paid Conversion Rate: The percentage of free users who upgrade to a paid plan.
- Sales Cycle Length: The time it takes for a user to move from initial product interaction to purchase.
- Trial Conversion Rate: The percentage of users who convert to paying customers after a trial period.
Strategies for Improvement:
- Optimize the product’s free version to demonstrate value without giving away too much. Moving your so-called “paywall” will likely be necessary to find the very thin line between “use” and “conversion”.
- Provide limited-time offers or discounts for new customers.
- Ensure a seamless and frictionless upgrade process.
5. Referral Metrics
- Referrals: are a powerful growth driver in PLG as satisfied users recommend the product to others, creating a viral growth loop. This can be as simple as inviting others from their own company. Example: “Invite a teammate, get two more weeks on your trial”. Another mechanism for driving growth is a review on the website G2. This page shows a large number of satisfied users just after the product launch of Scout Insight, my company’s first Product-Led Cybersecurity Tool.
- Net Promoter Score (NPS): Measures user satisfaction and their likelihood to recommend the product to others. This can be obtained through a simple post-trial survey or through more sophisticated means, such as a tool like Pendo.io, Qualtrics or Gainsight.
- Referral Rate: The percentage of users who refer others to the product.
Strategies for Improvement:
- Encourage real trial accounts and customers to write honest reviews.
- Implement a referral program with incentives.
- Encourage users to share their experiences on social media.
- Provide exceptional customer experiences that naturally lead to word-of-mouth promotion.
Conclusion
Tracking the right metrics is crucial for the success of any Product-Led Growth strategy. By focusing on activation, engagement, retention, conversion, and referral metrics, companies can gain valuable insights into user behavior and product performance.
Taking a data-driven approach enables continuous improvement, ensuring the product remains valuable and appealing to users, ultimately driving sustainable growth. For businesses aiming to leverage PLG, these metrics provide a roadmap to monitor progress, identify areas for enhancement, and achieve long-term success. Make sure you define what “good” looks like, measure it, discuss it, share it with your team and commit to weekly improvements and experimentation to drive constant improvement.
Good luck, and drop me a line if you want any advice or an experienced sounding board for your PLG initiative!
Bio: Dan Schoenbaum is a former 2x CEO/COO. Most recently, he was the acting CMO, and now Head of Business Development for Market-leading Threat Intelligence and Cybersecurity company, Team Cymru.
Venture
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