Product-Led Growth Metrics

Building a successful Product-Led Growth (PLG) experience is the holy grail for SaaS businesses. The ability to scale your business, acquire new customers, and convert them to revenue without relying heavily on expensive salespeople is incredible.

As someone who has gone through the journey of building a product-led SaaS business, I understand the challenges that come with it. One of the biggest questions:

What metrics should you track to ensure proper product-led growth, and how do you optimize those metrics?

In this article, I’ll walk you through the key components of a PLG funnel and the top metrics that you need to know to build a product-led experience that converts to revenue and scale your SaaS business.

Product-Led Growth Framework Components

I always think of the product-led experience as a core funnel. Before understanding the metrics to track, it is important to break down where the potential issues may lie. So, what goes into this core funnel?

1. Ideal Customer Profile

Your Ideal Customer Profile (ICP) is the most important part of your core funnel. Knowing your target market well helps align your marketing, sales, and product teams with strategies that best serve those who would benefit most from your product.

2. Acquisition

The acquisition process focuses on bringing new customers or users to your product. It entails using different marketing tactics to increase awareness, spark interest, and ultimately convert your ideal customers into active users.

3. Activation

After acquiring leads, your product should smoothly guide users through onboarding experiences to encourage initial engagement and value recognition. This can be achieved through either a product demo or a free trial.

4. Revenue

After your lead becomes an active opportunity, the next phase of the funnel begins: they're now ready to become a paying customer. The focus shifts to monetizing the value delivered to customers and maximizing the profitability of your user base.

5. Retention

Once they become paying customers, you’ll need to maintain and nurture those customer relationships to encourage ongoing usage, satisfaction, and loyalty.?

6. Referrals

Your best customers know your future customers. In the last section of your funnel, you’ll need to turn satisfied customers as advocates to drive organic growth through word-of-mouth referrals.

Key Product-Led Metrics to Track

As you walk through the product-led growth funnel and your strategies, there are four major metrics you need to track.

Traffic

Many people make the mistake of assuming that if you’re product-led, you don’t need Marketing. Despite this, you still need to drive traffic. In order for your product to lead the growth for your company, you need people to discover your product in the first place. Marketing drives initial traffic and creates awareness for your product.

By tracking traffic, you can identify which marketing efforts are most effective in driving initial awareness and user engagement. This data helps optimize marketing strategies, refine targeting, and allocate resources efficiently to maximize ROI. It also allows for continuous monitoring of user acquisition trends, enabling you to adapt and evolve your PLG strategy and product roadmap.

Acquisition

Tracking the acquisition percentage, or the percentage of traffic that converts to leads is crucial for assessing the effectiveness of your marketing efforts. Acquisition refers to the number of people who actually start a trial or use your product. When you monitor this metric, you can gain insights into the effectiveness of your lead generation strategies, the quality of leads generated, and the overall health of the funnel you are using.?

It can also help you identify opportunities for scaling growth by optimizing product features, onboarding processes, and user experience to drive higher acquisition rates. A high acquisition percentage indicates that marketing efforts and your product are effectively attracting quality leads.?

Activation

Once you have acquired users, the next metric is to focus on activation. Your activation percentage measures the percentage of leads that took meaningful actions inside your SaaS product during their free trial or demo. Tracking this metric helps you identify areas for improvement and optimize the user experience to increase the likelihood of conversion to revenue.?

Having a high percentage indicates that users are successfully onboarding and engaging with your product, leading to increased retention and customer satisfaction. If you have a low activation rate, chances are that you need to work on your product demo for faster value realization.

Revenue

Revenue is the ultimate goal. It’s not just acquiring customers, but also about retaining them and driving expansion. This is where salespeople and customer success managers can play a crucial role in upselling and ensuring customer satisfaction.?

By examining what percentage of traffic converts to leads, how many of those leads activate the product, and ultimately what percentage converts to revenue, your business can track the efficiency of your strategies.?

It’s important to note that while these metrics provide a framework for success, there is no one-size-fits-all benchmark for success. It’s about understanding and improving your own metrics week by week. Continuously experiment and iterate to increase traffic, improve acquisition rates, drive activation, and ultimately boost revenue.

These are the tried and true principles to building incredible product-led businesses. Feel free to share the metrics that you track below and ask any questions you may have!

TK was CEO & Founder at ToutApp (backed by a16z, Jackson Square Ventures and prominent angel investors in Silicon Valley). After scaling ToutApp, it was acquired by Marketo where TK went on to join Marketo's executive team and serve as their Senior Vice President of Strategy. After running a 2-year transformation as part of the executive team, Marketo was acquired by Adobe for $4.75bn.?

TK now spends his time as a Strategic Advisor to 300+ B2B SaaS Founders globally. As the Founder of Unstoppable, he helps other SaaS Founders grow their startups faster through his Weekly Youtube videos and his application-only SaaS Go-To-Market Program.?

Want to learn more about building a proper GTM strategy for your SaaS business? Grab a complimentary copy of my 5-Point SaaS Growth Strategy Guide here.