Product-led growth (PLG) is a powerful strategy that focuses on using a company’s product as the primary driver of customer acquisition, retention, and expansion. However, in order to effectively implement a PLG strategy, it’s essential to measure the right metrics. Here, we’ll explore the most important metrics for product-led growth companies to measure, and why they matter.
User Activation Rate
User activation rate measures the percentage of new users who complete a key action within your product. This might be signing up for a trial, setting up their account, or taking any other action that indicates they are engaging with your product. Measuring user activation rate is important because it can help you identify areas where users may be dropping off or struggling to complete certain actions, allowing you to make improvements and optimize the user experience.
Retention rate measures the percentage of users who continue to use your product over time. This metric is crucial for PLG companies because it indicates how effective your product is at meeting the ongoing needs of your users. By measuring retention rate, you can identify trends and patterns in user behavior, and make improvements to your product to increase retention and reduce churn.
Net Promoter Score (NPS)
Net Promoter Score (NPS) is a measure of how likely your users are to recommend your product to others. This metric is important for PLG companies because it indicates the level of customer loyalty and satisfaction with your product. By measuring NPS, you can identify areas where you may need to improve your product or customer support, and also identify opportunities to leverage your existing user base to drive growth.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) measures the cost of acquiring a new customer. This includes all marketing and sales expenses, as well as the cost of providing any free trials or other incentives to get users to try your product. Measuring CAC is important for PLG companies because it can help you identify areas where you may be overspending on customer acquisition, and make adjustments to your marketing and sales strategies to reduce costs and increase ROI.
Lifetime Value (LTV)
Lifetime Value (LTV) measures the total revenue generated by a single customer over the course of their relationship with your company. This metric is important for PLG companies because it indicates the overall value of your customer base and can help you make decisions about how much you should be investing in customer acquisition and retention. By measuring LTV, you can identify your most valuable customers and prioritize your efforts to retain and expand their business.
Measuring the right metrics is essential for product-led growth companies to effectively implement and optimize their PLG strategy. By focusing on user activation rate, retention rate, NPS, CAC, and LTV, you can gain valuable insights into the health of your business and make data-driven decisions to drive growth and success.