The year is 2023, and product-led growth (PLG) is becoming the strategy of choice for businesses looking to drive growth. With a PLG approach, companies can exploit their product to drive growth, focus on exceeding customer expectations, and make sure that their product roadmap aligns with their business goals.
However, implementing a PLG strategy is not always straightforward, and it's crucial to track the right metrics to ensure that you're on the right track. In this article, we discuss the key objectives and metrics that every PLG business should be looking at in 2023 and beyond.
Assessing the Health of Your PLG Strategy
To monitor the health of your PLG strategy, there are four key objectives and 15 metrics that you should track.
1. Exceed User Expectations
To be successful, a product-led growth strategy requires a product that surpasses users' expectations, not just meets their needs. This can be achieved by offering a flawless user interface and intuitive user experience, as well as features that create tangible value for your specific target segment. To assess how well your product resonates with your ICP, consider the following metrics:
- Trial Activation Rate: Measures how often users sign up for a trial and actively use the product during that timeframe. Learn more about activation in our playbook
- User retention: Measures how many users and how many times different segments of users continue to use your product. Learn more about retention in our playbook.
- Net Promoter Score (NPS): measures customer loyalty and satisfaction by asking them how likely they would be to recommend the product or service on a scale from 0 to 10
2. Create a Product That Generates Revenue
Your product needs to provide real value to your customers. If it doesn’t, they won't want to upgrade from the free version and may cancel their subscription months after signing up. The following metrics can help assess the revenue-generating potential of your product:
- Conversion Rate: measures the frequency with which customers upgrade from the free version to a paid plan, e.g. trial to purchase.
- Expansion Rate: measures how much of the recurring revenue in the current period comes from upselling existing customers.
- Retention Rate: measures the portion of recurring revenue generated by existing customers, including downgrades and churn. The retention rate can either be gross or net, depending on whether or not it takes into account the expansion rate.
3. Evaluate Your Revenue
Assessing your revenue is crucial to ensure that the amount users are currently paying is meaningful for the business. The following metrics can help you assess your revenue:
- Monthly Recurring Revenue (MRR): measures the amount of revenue that is generated on a monthly basis from existing customers.
- Average Contract Value (ACV): measures the average value of each account to the company’s top line
- Lifetime Value (LTV): measures the total revenue that a customer generates throughout their relationship with your company
4. Monitor the cost of acquiring customers
To assess the effectiveness of your PLG strategy, you should evaluate whether putting your product at the forefront of your growth efforts is reducing the cost of acquiring new users. To do so, make sure to rely on the following metrics:
- Customer Acquisition Cost (CAC): measures the cost linked to acquiring new customers across all marketing channels
- Organic Sign-ups: measures the proportion of users who register for the product without any incentives from paid advertising campaigns, but instead from channels like organic searches or social media posts.
- Referrals: measures the signups resulting from customers who promote your product to their networks. These users are incredibly valuable to you, as they are essentially performing marketing for your company. The significance of this metric is greater when there is less monetary incentive for users to share the product with others.
5. Involve Your Sales Team
For successful product-led growth, the product and sales teams must work together. While self-serve buyer journeys are now the most popular option among B2B buyers, sales teams are still mission-critical for closing complex deals or encouraging hesitant users to convert. The following metrics can help you evaluate the synergy between product and sales:
- Self-Serve Conversions: measures the proportion of users who are converted or upsold without any assistance from the sales team, but instead through an in-product prompt or other similar mechanisms.
- ACV of Sales-Assist efforts: Measures the ACV of conversions or upsells in which sales play a key role. Monitoring this metric validates that the sales team prioritizes difficult-to-convert leads with high value
- Sales Cycle Length of Sales-Assisted Conversions: Measures the average time elapsed between initial sales outreach and the final sale. To ensure that the handover from product to sales is timed optimally, sales should receive real-time notifications indicating when leads are most likely to convert based on their product usage. This metric helps to guarantee that the synergy between product and sales is optimized.
If you're curious about whether software can assist you in creating a synergic relationship between product and sales, you can check out the product of our friends at Userled.
Beyond Your PLG Health Check
Conducting regular PLG health checks can help companies remain alert to growth opportunities. Monitoring these metrics can aid in determining the performance of your product, identifying areas for improvement, and optimizing your product-led growth strategy. Review and analyze these metrics frequently to ensure that you are making headway and achieving your business objectives.
Track Your Product Goals With June!
June can help you understand whether your product resonates with your ICP.
We offer ready-made reports that help you monitor the progress of your product goals and determine where your business is meeting your users’ expectations and where it’s falling short.