Introduction

Creating a product which is lovable and sticky is the final goal of any company following the go-to-market strategy as Product-Led Growth. A successful product-led companies are defined by “How much cross-section teams are aligned” and “How much value are you able to generate from a user”. So, to measure the growth or success of any product-led growth company it is necessary to measure, analyze and optimize certain metrics to understand the scale of growth.

Metrics provide common language and reporting system for cross-sectional teams to align on a common goal. Let's dive deeper into tracking the right ones.

 

How to Measure Product-Led Growth?

To make a product more lovable a company needs to invest more in customer and improve the customer experience. There are 4 steps as per the product-led growth flywheel to understand and measure the metrics.

 

Step 1: Activation

Users at this stage are just introduced to the product and they are curiously looking at the product to understand how the product can solve the issue. MajThe majority the users at this stage are using demo versions of the product and here companies really need to focus on that “Aha! moment” for the users to stick with the product and love them.

 

Step 2: Adoption

This is after the initial “Aha! moment” when users want to learn more about the product features and also try and understand whether they are willing to adopt the product or not.

 

Step 3: Adoration

This stage is critical as it asks companies to measure the satisfaction of users (i.e., Net Promotor Score). It’s recommended to ask for feedback both in-app and on email as well.

 

Step 4: Advocation

This phase can also be called as virality phase, where user recommend the product to their peer via referral programs and also gives best ratings and becomes an influencer in promoting the product.

 

7 Metrics to Measure the success of Product-Led Growth

                  

 

 

1. Time to Value (TTV)

The time taken by the new users to reach the “Aha! moment” or to reach to activation moment.

Here, the goal to is create the product which can help us to minimize the time. Ideally it, should be down to minutes and not by hours or days. Lesser the time, more likely it is that a user will stick to the product.

 

2. Product Qualified Leads (PQLs)

Product Qualified leads are typically activated users who already had their “aha! moment” and users have definitely understood the value of the product. The users present here are the one using a demo or a free trial version. These are kind of leads which you are ready to pass on to your sales team.

The success of this metrics depends upon the improvement in conversion rate of sales team to convert users from free trail model to paid model.

 

3. Expansion Revenue

Expansion revenue is the revenue generated from the customers who are already using the product. Revenue generated from add-ons, upsells, cross-sells and more are included here. 

Generally, around 30 percent of companies revenue should be generated from expansion revenue as the users here are product adaptors. Expansion revenue is cost-effective, recommended and a sustainable way to of growth.

 

4. Customer Lifetime Value (CLV)

Customer lifetime value (CLV or LTV) predicts the amount of revenue your business will receive from a single customer over the lifetime of their account. This is a very important metrics as it helps company to understand the not the present worth of a customer but also helps company to understand the future worth of a customer.

 

5. Net Churn

Unfortunately, after certain period of time some users will leave your product whether we like it or not. The formula to calculate net churn is difference between revenue lost in the time period and expansion revenue divided by revenue in the beginning. Revenue churn is more important metric then customer churn rate in terms of measuring the growth because let’s be true to ourselves even thought we hate to lose a customer it hurts the most to lose the most profitable customer.

 

6. Customer Satisfaction Score (CSAT)

One of the aims of Product-Led Growth strategy is to improve the customer satisfaction of users. It would be difficult to gauge the personal happiness of users while using the product, but when is come to gauging how much average our customer likes your product for that we can use CSAT metrics. Formula for CSAT is percentage of positive user survey response over the total survey response. 

 

                    

 

 

Like all other metrics, your CSAT score will vary over time. The longer someone uses a product, the more time they have to either find more value in it or discover its challenges, so be sure to measure CSAT regularly.

 

7. Virality

One of the main aims of the company is to create a product which can stick and is loved by customer. Virality is one the metrics which can help you to determine whether you are successful in creating a lovable product or not.

Virality is the average number of new users a single user can refer, bring onboard, and convert into paying customers. Virality is when the product adoption rate increases as more people believe it. When the rate of product adoption increases with each user that is when product virality occurs. Users must want to promote your product on their own- this is when viral growth is achieved.

 

Conclusion

Product-Led Growth metrics are necessary to understand product performance, reduce churn rate, improve customer satisfaction. The data collected from the above-mentioned metrics can help companies tweak the product design, add some more product feature which at the end of the day reduce the churn rate and improve the satisfaction such that it can have that virality effect.