Metrics for product-led growth and principles to understand

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It’s important for your team to have a common language and reporting system to enable internal alignment. Selecting the right success metrics and aligning your teams around them is a crucial part of the process. They should be informed and impacted by cross-functional teams who can leverage the data to make more informed decisions and enact coordinated changes across your business.

So how do you measure success in a product-led growth model? What are PLG metrics?

Whether you realize it or not, you’re probably already tracking some product-led growth metrics. Many key SaaS metrics are also essential to PLG, although some may be more or less important under a product-led approach than other business methodologies, or may be leveraged differently.

A short time to value (TTV), for example, is a critical component of consumer -grade products . TTV is the time it takes for new users to reach their first “aha” moment or activation event. The goal of any good user onboarding clinical nurse specialist email database experience should be to reduce TTV as much as possible, helping new users realize the value of your product as quickly as possible.

Other important metrics are:

Acquisition – The number of users who sign up for a free trial or freemium plan.
Activation : The activation rate is expressed as the percentage of users who have achieved value, out of the total number of users acquired.
Revenue : can be measured by average contract value (ACV ), monthly recurring revenue (MRR ), average revenue per user (ARPU ), etc.
Retention : Measures the number of users who continue to use or pay for your product (usually month over month, but can also be year over year or even day over day).
Referral : The percentage of current users who successfully recruit new users to your product.
Benefits of product-led growth
Clearly, PLG is not a “set it and forget it” strategy. It is not a quick fix, and transitioning to product-led growth from a sales- or marketing-led approach requires more alignment, more dedication, and (at least initially) more effort from almost everyone in your company. It is a business methodology that changes the traditional order of doing things.

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So why should any company bother? Why product-led growth?

On the one hand, money.

On the other hand, product-led growth leads to higher revenue per employee – in other words, higher financial productivity. That’s because when the product is the driving force behind acquisition, engagement, retention, and expansion, companies can reallocate or save large sums that would traditionally be spent on increasing sales, marketing, and service efforts.

Additionally, product-led companies take a bottom-up, low-touch approach to acquiring new customers. A freemium or free trial opens the door, and because the product itself does much of the work for sales, marketing, and CS, it results in lower customer acquisition costs (CAC) and shorter sales cycles. The smaller deal size inherent in a PLG approach also means greater revenue diversity and can minimize the impact of losing individual accounts.

And of course, a product designed for product-led growth is almost always a better, more intuitive, easier-to-use product. Building a quality consumer product may require forethought, empathy, and additional resources, but the result will be a product that people enjoy using. That means happier customers, higher customer satisfaction and NPS scores, longer customer lifetime (and higher LTV), and more viral growth.

Product-led growth starts with the product, that much is obvious. But what makes PLG so powerful is that the momentum is sustained and grows exponentially because of the increased inbound interest and word-of-mouth promotion that comes from having a well-designed product.

But surely the biggest benefit of adopting a product-led growth methodology is that it is a path to greater team alignment. And aligned teams move faster and more effectively and efficiently.