Where other growth models would measure success through the number of new leads generated or meetings arranged, the product-led growth model requires an alternative approach. This kind of growth can not solely be measured by traditional metrics but instead by things like user engagement and customer satisfaction levels.
Key performance indicators (KPIs) can play a key role in assessing the success of product-led businesses. KPIs are measurable metrics that reflect a company’s success in meeting specific goals, allowing for a uniquely tailored approach. In this article, we look at three KPIs that can be used to measure success in a product-led business.
To measure customer engagement, this KPI considers a variety of user behaviors to assess the frequency with which users interact with your product. From analyzing logins and feature usage to time spent interacting with the product, businesses can determine how engaged customers are and whether they’re getting value from the product.
A high customer engagement score is desirable as it indicates that the product fits well within the target market and possesses a satisfied customer base. Any businesses with an engagement score on the lower end should encourage customer feedback more proactively or could even curate new variations for specific customer profiles to promote retention.
The customer retention rate or 'Churn Rate' is a crucial metric for product-led businesses to track. Measuring the percentage of customers who discontinue the use of the product over a given period of time, this KPI can be used to easily recognize and address difficulties as they happen.
Understanding the causes of low customer retention rates can help identify pain points or underused features that may contribute to customer dissatisfaction. Increasing customer retention should be a key focus of any product-led business, as one of their most valuable marketing strategies is often word of mouth.
Tracking the activation rate of products is key to analyzing the customer journey, showing how successful a business is at converting new sign-ups or trial customers into paying clients. For online businesses, it can be done by measuring the number of users that complete a specific activation event or perform a series of actions within the product. It’s thought that when they reach a certain point in the journey, most users will begin to recognize the value of the product.
A high activation rate shows that a product’s onboarding process is efficient and user-friendly, whereas a low activation rate may suggest that users are struggling. Whether this results from a lack of understanding of the value or a poor onboarding process, it demonstrates that something needs to be improved. A great starting point to identify the issue is to look out for bottlenecks where users might get stuck and work backward.
Success in a product-led company can be complex, requiring unique KPIs and metrics to accurately measure key areas of performance. The key is to make data-driven decisions and consistently analyze these three crucial KPIs in order to promote growth and long-term success.