If you’re still in shock it’s 2023, you’re not alone. But what’s not shocking is why more and more business leaders are switching to a product-led growth (PLG) strategy.

By adopting a product-led growth approach, these companies can leverage their product as the primary growth driver, concentrate their efforts on creating delightful experiences for customers, prioritizing their feedback, and ensuring that their product development remains closely aligned with their business goals.

However, getting the most out of a product-led growth strategy is rarely cut and dry, and business leaders must make sure they’re working towards the right objectives. This is where metrics come into play.

How to check the health of your product-led growth metrics

To gauge the health of your current product-led growth strategy, I’ve outlined the 4 key objectives and 15 metrics every PLG business should be tracking this year, and beyond.

1. Build a product that delights users

In a PLG strategy, the goal is to go beyond meeting the needs of the user. If your goal is to exceed their expectations, you’ll need impeccable UI, intuitive UX, and useful features designed to delight them.

Ask yourself how your product resonates with your users. What value does it offer them?

Metrics to asses this:

  1. Trial Activation Rate — How often users sign up for a trial and actively use the product during that period.
  2. Average Customer Engagement Time — The amount of time spent using or interacting with products or services across different customer segments.
  3. Net Promoter Score (NPS) — A metric used to measure customer loyalty and satisfaction levels based on responses to survey questions asking people how likely they would be to recommend the product/service.

2. Create a product users will pay for

While the product may be delightful to use, it also needs to provide tangible value, otherwise, customers will not be willing to upgrade beyond the free version, or worse. They’ll cancel after the trial lapses or churn only months after becoming subscribers.

Metrics to asses this:

  1. Conversion Rate – How often buyers convert from the free stage of the journey to a paid plan, e.g. trial to purchase.
  2. Expansion rate — The percentage of recurring revenue attributable to upselling existing customers
  3. Retention Rate — The percentage of recurring revenue coming from existing customers, including downgrades and churn. The retention rate can be gross or net, depending on whether it excludes or includes the expansion rate.

3. Make sure the revenue adds up

Don’t sleep on revenue assessment. Moreover, that means assessing whether the amount that users are currently paying for is meaningful for the business. Are users paying simply because you are undercharging them?

Metrics to asses this:

  1. Monthly Recurring Revenue (MRR) – A measure of how much revenue is regularly generated from existing customers on a monthly basis.
  2. Average Contract Value (ACV) – The average payment made for each sale or account that is created by the company’s sales efforts.
  3. Lifetime Value (LTV) – The total amount of revenue generated by a customer over the duration of their time with your brand.

4. Keep an eye on customer acquisition cost

A clear indication of whether your PLG strategy is working is to look at your acquisition. Ask yourself if relying on your product is making it less expensive to acquire users.

At this stage, you’re evaluating whether the product is complementing your marketing efforts in acquiring users, creating new lead sources, and driving down the acquisition cost.
Metrics to asses this:

  1. Customer Acquisition Cost (CAC) – The cost associated with acquiring new customers through all marketing activities and channels
  2. Organic sign-ups — the percentage of users that sign up for the product without being prompted by paid marketing campaigns. This includes sign-ups from organic searches or social media posts
  3. Referrals — customers that spread the love for your product to their teams or friends are effectively running marketing for you. Obviously, the importance associated with this metric will be higher the lower the monetary incentive for users to spread the word

5. Get Your Sales Team Involved

Finally, the most important component of all. Is your sales team working synergically with your product to convert users? Successful PLG is when the product acts in concert with the sales team.

While B2B users increasingly prefer to self-serve, sales teams remain essential to close more complex deals or nudge uncertain users towards converting. If you are wondering whether software can help you create harmony between product and sales and create in-product experiences that convert users, you can check out Userled.io.

Metrics to asses this:

  1. Self-serve conversions — the percentage of users that convert to paid plans or upsell to a higher tier directly in-product, e.g., as a result of a prompt, without any input from sales
  2. ACV of sales-assisted conversion — ACV of conversions or upsells initiated by sales. Tracking this metric ensures that sales focus on high-value leads that are most difficult to convert
  3. Sales cycle length of sales-assisted conversions — The average length of time between initial contact with buyers and when the final sale is completed. Sales should receive a real-time notification alerting them of when the lead is most likely to convert, based on their product usage. Tracking this metric ensures that the handover from product to sales is timed optimally.

Go beyond your PLG health check

Getting in the habit of performing routine PLG health checks can enable companies to stay alert to growth opportunities earlier.

Tracking these metrics can help you understand how well your product is performing, identify areas for improvement, and optimize your product-led growth strategy.

Review and analyze these metrics regularly to ensure that you are making progress and meeting your business goals.

Focusing on the wrong metrics can slow or even halt the growth of your product. If you want to deliver the most value, you'll need to illustrate where your strengths and shortcomings lie.

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