What Are The Most Important PLG Metrics?

DEFINITION
PLG metrics are parameters that can help track the performance of your product-led growth (PLG) strategy, informing business decisions and product development strategies. 

💡Understanding PLG Metrics

Product-led growth (PLG) is a SaaS go-to-market strategy where your business success and growth are anchored to your product experience. Revenue acquisition, revenue expansion, and revenue retention all are driven by delightful product experiences. 

PLG metrics help you quantify how your customers are interacting with your product and understand your revenue growth from the inside out. 

A key pillar of PLG is the alignment of each department toward delivering the best product possible and optimizing the user experience to the fullest. This goal cannot be achieved without the necessary data at your disposal, which is why it’s important to track the necessary PLG metrics.

At its core, PLG metrics attempt to make sense of the chaos surrounding the customer journey, from onboarding to retention. To this end, you’ll need to track customer behavior and product revenue in multiple different ways. 

The most important metrics are derived from the PLG flywheel, a marketing framework based on the classic ‘Pirate Metrics’ that were defined by Dave McClure in 2007. It essentially maps out each stage of your customer journey: Activation, Adoption, Adoration, and Advocation—and focuses on a few key metrics to track and optimize the user experience.

🖋 Takeaway

PLG metrics provide you with the information you need to optimize customer experience and, in turn, product revenue at each stage of the customer journey. 

They also help align diverse teams toward a single goal—delivering the best product experience to your customers. Tracking and reporting on the same set of metrics will help remove the walls between departments and incentivize teams to work in tandem.

The most important PLG metrics are ones that are identified after grouping your customers into different stages of the customer journey, as per the PLG flywheel. Once you have narrowed it down to those select few metrics, you can start optimizing them to delight customers during every stage of their lifecycle.   

What Are PLG Metrics?

Product-led growth is a shift in perspective that reorients your product to serve as the primary channel for both acquisition, retention, and expansion. 

PLG metrics provide a single source of truth by which every department can measure and improve individual performance and contribute to overall customer and revenue growth.

From determining the time it takes for your customers to discover their Aha moment and which features they like the most, to figuring out their average revenue and lifetime value, there’s no lack of metrics that you can track.

It’s worth noting that knowing the ‘why’ behind all the data is much more important than the data itself. The end goal of optimizing any metric needs to be product enhancement and enhanced customer experience. Simply optimizing PLG metrics for the sake of it won’t do you good if you aren’t focused on the end result.

Most Important PLG Metrics To Track

The most important PLG metrics are the ones that can help you deliver the best experience to each customer at every stage of the PLG flywheel. Here are the six most important metrics you need to track:

1. Time To Value (TTV)

TTV is the time it takes for a new user to discover their aha moment and become an activated customer. You should strive to bring this down to seconds by integrating ‘stickiness’ as the core driver for introducing any new feature.

2. Product-Qualified Leads (PQLs)

PQLs are the leads that have discovered your product’s value and can be passed on to your sales teams. These are typically using free trials or freemium accounts and are ready for conversion to paid users.

3. Expansion Revenue

This is the revenue generated from existing users through upsells, cross-sells, etc. Generating expansion revenue is thrice as cheap as the cost of acquiring a new customer. You should target users who’re in the adoration stage and are primed to adopt more features of your product.

4. Average Revenue Per User (ARPU)

This is the average revenue you’re making from each user. It’s simply your Monthly Recurring Revenue (MRR) divided by your total customers. 

ARPU = MRR / number of customers

ARPU can help you determine your revenue share from each of your user segments. You might be surprised by the insights.

5. Net Revenue Churn

Net revenue churn is defined as the quantum of revenue lost during a given period after accounting for new and expansion revenue. It is a percentage calculated as:

Net revenue churn = (Revenue lost – new and expansion revenue) / Starting revenue

A negative net revenue churn percentage will indicate a successful business with great promise. 

6. Virality 

Virality is the number of new users that an existing user can onboard and convert into paying customers. It’s indicated by the coefficient ‘k’ that measures the effectiveness of an existing customer’s invitations to new customers.

k (virality) = Number of customers at the end of a specific period [C (N)] / Number of customers at the end of the specific period [C (0)]

Virality is closely related to your advocates, the customers who are championing your product to new users by using and promoting it.