The following is adapted from my book, ‘Marketing for Product-Led Growth.’
Traditional marketing is a world of discrete activities where planned content is purported to generate a specific output, like some sort of engineered divination. Impressions, followers, circulation estimates, and click-through rates all claim to be useful for assigning the source of new leads. All this, of course, occurs in the hope of generating a predictable increase in revenue.
Because of this unfounded hope, leadership has demanded we track everything that could be tracked. Numbers roll in, and analysts do what analysts do best: manufacture metrics that purport to predict the future.
From a firehose of data, marketers have been forced to answer for cost to acquire, customer lifetime value, visitors that turn into leads, leads that turn into market qualifying leads (MQLs), MQLs that turn into sales qualified leads (SQLs), SQLs that turn into opportunities, and so on and so on.
The problem is that established metrics are outdated, largely meaningless, and convoluted. Most can’t account for growth. They’re easy to measure and, at one point, were indicative of future outcomes, but once they became the goal in and of themselves, they lost their meaning.
That’s why, instead of chasing vanity metrics, product-led growth (PLG) requires that you, the marketer, should only rely on the metrics that matter.
The metrics that matter
There are five metrics that matter. But before I talk about them, I want to clarify their overall goal. The metrics that matter only track two general elements: product value and its relationship to user experience. Behind this relationship is the philosophy that if the user is satisfied with the product’s value, they’ll continue to be your customer.
With that said, the five most important metrics are acquisition, value, time-to-value, retention, and delight.
As the PLG lead, you’ll still want to know how many folks made it to the website and how many started the freebie. Why you received a visit is largely meaningless in a product-led environment. All of your content and product language is geared toward solving a specific problem, and the implication is that your visitors are motivated by getting their problem solved.
For acquisition, the more important metrics are how many users visit the website in conjunction with the number of users that initiate a freebie. For every thousand users, you might expect sixty free sign-ups. With this information known, you can begin marketing to target a specific number of visits to create the desired freebie user base.
2. Value metric
The value metric quantifies the value you deliver to your user. How you measure that value is up to you. If you’re a messaging app, for example, an individual unit of value might be a single message. On the business-to-consumer side, a social media platform like Facebook will start suggesting friends to you immediately after sign-up. Each added friend becomes a unit of value for the user.
Having a clear understanding of the product’s value metric is crucial to the success of PLG marketing and setting up ceilings for freebies. Further, the messaging in and around your product will establish this value as intrinsically solving the user’s problem.
How quickly can you get your user to experience your value metric? The answer to that question is your time-to-value. Ideally, this metric is sub–sixty seconds. If at all possible, it’s under thirty seconds.
There’s a lot of research out there explaining why a shorter time-to-value is crucial to growing a user base. The more clicks within your website and the longer users have to navigate, the more users you’ll lose. Some estimate that every click loses 30 percent of visitors.
Putting value on the front page runs contrary to the established norm in marketing, but hiding something behind a meager two clicks will cause fifty-one out of one hundred users to fall by the wayside. Clicks mean time, and time is of the essence.
In the PLG world, we have to respect our users and understand that they’re smart. They’ve spent time on their research. When they arrive on your website, they want to get going. They don’t want to be bombarded with information, gated for value, or forced to click through multiple pages before experiencing value. They’ve heard that your product might solve their problem, so solve it.
For retention, you’re measuring how often the user returns to experience the product. Is it every day? Multiple times a day? Once a month?
The greater your retention rate—or the more frequently your users return—the better the chances are that users will turn into paying customers. At some point, you’ll have to put a division between what value users can experience for free and what is paid. Higher retention means the user trusts your product to solve their pain points. The value they experience is enough to push them into the paid experience.
This metric, sometimes called expansion, is tracking the number of acquired users that move to paying customers. Where possible, you also want to track who among that group is making referrals.
When it comes to the metrics that matter, the total referrals is probably the most important of all. The higher your referral rate, the more virality your product has and the greater the chance to help a larger portion of the total available market.
When it comes to retention and delight, there’s usually a relationship between the relative success of these metrics in conjunction with the value and time-to-value metrics. The better or more user-friendly the value and time-to-value metrics, the better the results you’ll see from retention and delight.
As you continue to increase the delight metric, you obviously want to encourage as many of your customers as possible to experience additional value from making a referral, whether that be through social proof or network effects. The more referrals you can encourage, the faster your product and company will grow.
The death of gated content
The metrics that matter help users freely flow into the product to do the one thing your product was created for: solve the user’s problem. No user wants to be gated and stopped from accessing that value, especially after putting in the time, effort, and energy to do their own research.
When you gate content, keep it locked away unless the user gives you their email; for example, you stifle the user in a variety of ways. Perhaps most importantly, users will click away, stifling user-base growth. Additionally, you prevent the user from experiencing your value metric, preventing a PLG strategy from getting off the ground.
The solution, then, is to ungate your content and make the most of these five metrics so your user will delight in their experience and feel good about recommending your product to their colleagues.