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- #49: Top 10 PLG Metrics
#49: Top 10 PLG Metrics
Essential metrics to accelerate product led growth
Marketers love an acronym.
If you don’t know the terms SaaS, ROI, CTA and GTM, are you even a product marketer?
Somedays, I hear so many acronyms I think my head might explode. And, PLG product led growth is the worst for this. If you’re anything like me, there may be times when you feel too embarrassed nervous to raise your hand and ask for an explanation.
Today, I’m here to help.
Because understanding and harnessing the right metrics is critical to driving growth. And if you can’t measure it, you can’t improve it.
From activation and engagement rates to conversion metrics and beyond, these metrics provide insights into user behavior, product effectiveness, and the overall health of the company's growth engine.
Let’s count down my top 10 PLG metrics (with accompanying acronyms, of course).
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Top 10 PLG Metrics
Product led growth is the future of go-to-market. There, I’ve said it.
Whether it’s true PLG or PLG with sales assist, you need to understand, measure and optimize the entire customer journey in order to drive sustainable growth.
Here’s the top 10 metrics I measure when building PLG engines.
Customer acquisition cost (CAC)
The cost you pay on average to acquire a new customer. This is critical to your ability to scale top of funnel growth
To calculate, take the total cost of sales and marketing and divide it by number of customers acquired
Product qualified lead (PQL)
A lead who has shown interest in your product and has experienced value (usually via a free trial or freemium account)
NOT to be confused with a customer who has created an account or signed up for a free plan
For example, at Slack, a PQL is when an account reaches 2,000 messages
Time to value (TTV)
The time from new customer signup to the moment they first experience value
Again, NOT to be confused with time to initial customer payment. A customer can pay for your product but still not experience value
Often measured in minutes, hours or days
The percentage of customers who have reached product activation (as determined by your company)
Activation is about taking the user all the way from signup to the moment a habit is established around your core value proposition
Reforge breaks it down into three key moments: the setup moment, the aha moment and the habit moment. Once you hit the habit moment, the customer is activated
To calculate, take the number of customers who established the habit and divide by the number of customers
The percentage of customers who have adopted your product or features
To calculate, take the number of adopted customers and divide by the total number of customers who have access
Be careful not to use the entire customer base as the denominator unless the entire customer base is eligible to use the feature
Customers who are disengaged and are no longer using your product for an extended period of time
May be categorized as voluntary or involuntary
At a high risk of churning because of lack of usage - want to move to “engaged user” as quick as possible
The percentage of customers who remain with your product at the end of a specific time period (usually calculated monthly)
Often contrasted with churn rate. If retention rate is the percentage of customers you retain, churn rate is the percentage of customers you lose
To calculate, take the number of customers who are retained at the end of the period and divide by the initial number of customers
Expansion revenue rate
The percentage increase in revenue from an existing set of customers
Used to demonstrate customer growth opportunities
To calculate, take the recurring revenue at the end of the month and subtract the recurring revenue at the start of the month. Then divide this number by the recurring revenue at the start of the month
Lifetime value (LTV)
An estimate of the average amount of money you’ll earn from a customer over their lifespan with your company
To calculate, take the customer value and multiply by the average customer lifespan (for example, $25/month times 36 months)
Lifetime value to customer acquisition cost (LTV:CAC)
A ratio that measures how profitable it is to acquire a specific customer segment based on both affordability and tenure
To calculate, take the Lifetime Value (LTV) and divide by Customer Acquisition Cost (CAC)
There you have it - my 10 go-to PLG metrics. I’m curious, which ones did I miss? Hit reply and let me know your fave PLG metrics to measure.
📚 Reading List: Learn how to build habit-forming products and customer experiences with Hooked by Nir Eyal
📚 Reading List: Double the reading, double the fun. One essay series I return to time and time again is the Four Fits for $100M+ Growth by Brian Balfour. Seven essays that will change how you think about go-to-market strategy
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