9 product-led growth metrics to track PLG success

In this chapter, we take you through nine essential metrics you should consider tracking to measure the effectiveness of your PLG strategy.

What are product-led growth metrics?

Product-led growth metrics are qualitative and quantitative KPIs (key performance indicators) that measure the impact and success of a PLG strategy.

PLG metrics matter to any team or company aiming to scale using product-led growth. They:

• Provide a common language for teams to measure and report progress company-wide

• Keep cross-functional teams working toward the same product-led goal

• Help drive decision-making by focusing on the most meaningful and impactful opportunities

To make it easier to find the metrics you need, we've grouped them into two sections: revenue metrics (to measure and forecast financial growth), and customer and product experience metrics (to measure how valuable your product is to users). 

You’re not expected to track or focus on all the metrics in this list—pick the ones that align best with your product and business goals.

PLG revenue metrics

While PLG companies often offer freemium accounts (like we do here at Hotjar 👋), driving revenue is still the end goal for most businesses. 

These five revenue metrics will help you measure how efficiently your product attracts, retains, and grows paying customers.

1. Customer acquisition cost (CAC)

Customer acquisition cost (CAC) is the cost of getting a new customer, including all sales and marketing costs. 

Calculate CAC by dividing the total amount spent on sales and marketing by the total number of paying customers. CAC is also measured as a ratio of LTV (see below—a typical SaaS LTV:CAC benchmark is 3:1). 

CAC is typically very low for product-led companies, as new customers self-serve and find the product via word-of-mouth referrals or low-cost organic channels. 

2. Customer lifetime value (LTV)

Customer lifetime value (LTV, or CLV, or CLTV) is the average revenue a customer is expected to generate.

Calculate LTV by dividing the monthly average revenue per account (ARPA) by your user churn rate (see below). ARPA is MRR (monthly recurring revenue) divided by the total number of customer accounts.

LTV helps product-led teams forecast how valuable customers will be to the business over time, compared to metrics like MRR and ARR (annual recurring revenue) that only represent revenue as it stands today. Product-led LTV is expected to be high as effort is made to offer consistent value to users, making them less likely to churn and more likely to bring revenue to the business over time.

3. Revenue per employee (RPE)

Revenue per employee is a company’s ARR divided by the number of full-time employees. 

Product-led companies can achieve higher RPE because PLG marketing and development requires less staff than traditional sales teams. For example, Buffer is a primarily product-led company that brings in over $220,000 in annual RPE, far exceeding industry benchmarks.

Note: revenue per employee doesn’t take into account contractors, agencies, or freelancers, so if those are a large part of your business model, RPE may not be a good indicator of product-led success. 

4. Free trial conversion rate

Free trial conversion rate measures the number of users who become paying customers during a free trial period. 

Free trial conversion rate is calculated by dividing the number of successful trial-to-paid users by the total number of free trial users in any period. 

Since following a product-led growth strategy builds a positive product and user experience, the free trial conversion rate for PLG companies should be high because users can quickly receive value from the product (see TTV below) and understand how they can use it to succeed.

5. Expansion MRR

Expansion MRR (also known as expansion revenue or negative churn) is the additional monthly revenue generated when existing customers upgrade plans or purchase extra products or services.

Calculate expansion MRR by totaling revenue from customer upgrades and additional purchases in a month. 

Expansion revenue is more cost-effective than attracting new customers (see CAC above) and demonstrates product value for existing customers, making it a key indicator of product-led success. 

PLG customer and product experience metrics

Delighting customers is the most important part of a product-led growth strategy: when customers achieve success with a product, they're likely to keep using it, expand their business, and recommend it to others—all essential ways PLG companies grow.

The next five product metrics will help you measure how important your product is to users, and what’s keeping them engaged. 

6. Time to value (TTV)

Time to value (TTV) is how long it takes users to get value from your product. Time to first value (TTFV) measures the length of time between a user signing up and completing the onboarding process. 

For a product-led strategy to work, TTV needs to be short because users must quickly derive value from a product (often while on a free plan or trial) before they subscribe, upgrade, or share their positive experience with others (part of the product-led growth flywheel). 

Optimizing for quicker TTV is a two-step process:

1. Understand customers’ JTBD, i.e. what they need from the product

2. Onboard customers so they can get value ASAP

7. Churn rate

Churn (or customer attrition) is the rate at which customers leave, either by unsubscribing or not renewing subscriptions. 

Calculate churn rate by dividing the number of customers lost in a month by the number of customers you had at the start of the month, and multiply by 100.

High churn—and its counterpart, low retention—is a problem for SaaS companies, as it can mean customers no longer see value in a product. With a product-led approach, churn should be low, because delivering consistent user value is a business priority. For example, user churn at Buffer was around 3.2% when they used to publicly report the metric, which is lower than the SaaS average of around 5%.

 8. User feedback

User feedback is any information collected directly from users or customers about their reactions to a product, service, or website experience. 

Measure user feedback using quantitative survey metrics like:

• Net Promoter Score® (NPS): how likely users are to recommend your product on a scale of 0–10

• Customer Satisfaction Score (CSAT): a yes/no measure of user satisfaction with a product or feature

• Customer Effort Score (CES): how much effort it took users to complete an action, e.g. signing up

Collect qualitative feedback using open-ended survey questions, for example:

• Point-of-conversion survey: to find what almost stopped people converting

• Retention survey: to find out why customers are downgrading

• Churn survey: to ask why users are leaving

• Live feedback: to give users the chance to leave feedback any time they need to

9. Product qualified leads (PQL)

A PQL is a trial or free plan user who matches your ideal criteria for converting into a paid customer. For example:

• The user fits your ICP (ideal customer profile)

• The user reaches a value threshold (e.g. collecting 100 survey responses)

• The user shows purchase intent (e.g. visiting the pricing page)

To find out what a PQL is for your product, look at existing paying customers and see what they have in common and what actions they took before converting (pro tip: look at session recordings to see what paying customers did just before they converted).  

PQLs are valuable to product-led teams because they’re closer to conversion than marketing and sales qualified leads (MQLs and SQLs). Instead of guessing their needs, you can already see how they’re using your product with tools like heatmaps and session recordings. 

PQLs are also great candidates for surveys: try triggering a survey when PQLs exit a pricing page to ask them what’s stopping them from continuing.

 2 ways to use tools to track and improve PLG metrics

Now you know which product-led-growth metrics to track, start tracking them using product-led growth tools: 

1. Use product tracking tools like Mixpanel, ChartMogul, and Baremetrics to automatically monitor PLG metrics like churn and expansion revenue, and identify cohorts for further investigation.

2. Use product experience insights platforms like Hotjar to see the user behavior behind the metrics—how users navigate your product, what annoys them, and what’s giving them joy—so you can optimize their product experience. 

We know it works: the product team at Hotjar uses Mixpanel, Tableau, and Hotjar (of course!) to ensure we deliver user value and fuel product-led growth.