Metrics that Measure Up

Product Led Growth Metrics and Benchmarks - with Sam Richard, OpenView Partners

May 19, 2021 Ray Rike
Metrics that Measure Up
Product Led Growth Metrics and Benchmarks - with Sam Richard, OpenView Partners
Chapters
Metrics that Measure Up
Product Led Growth Metrics and Benchmarks - with Sam Richard, OpenView Partners
May 19, 2021
Ray Rike

Sam Crowell Richard is responsible for growth across the OpenView Partners portfolio. OpenView Partners is a leader in advocating Product Led Growth strategies across their portfolio, which includes leading PLG companies including Calendly.

Sam has invested in her career preparing for a growth role in a PLG focused venture capital firm, including learning the secrets of digital marketing in a digital agency, and then for 5+ years at an early stage, PLG company, Dispatch, ultimately acquired by Vista Equity, a leading Private Equity firm in the B2B SaaS and Cloud industry.

Product Led Growth companies see 80% - 90% of their initial freemium/trial users acquired using digital marketing techniques such as SEO,  though conversion to paid customers only occur 50% - 60% of the time without the involvement of a human resource.  The type and complexity of the solution directly correlates' to the requirement for the engagement of a human resource to assist the user to become a paying customer.

The approach and skillset of the resource initially reaching out to the PLG acquired user is different than in a traditional sales-led environment.  Additional insights, including how they are using the product, possibly areas they have not yet experienced, and allows the vendor's initial outreach to be with a much warmer, engaged led.

Product usage, often derived from a Product Analytics platform is a critical foundational component for a PLG company.  One of the areas of focus is how product usage information is provided to the resources responsible for user outreach.  

A new consideration for revenue operations is how to provide product usage information within the construct of CRM environments.  Though not a primary topic today, the need for a different CRM for PLG  companies may be a new market opportunity.

Top Metrics for PLG companies:

1. Organic Search:  What % of traffic and new users come from SEO
2. User Journey Metrics:  
3. Activation Rate: where people are finding value in your product
4. CAC Payback Period:
    - must  be much quicker for PLG companies, with < 12 months being great and some even
       reaching < 6 months. Price point is a key factor in this benchmark

Activation rate is a nuanced metric, as it is different for every solution.
1. Does action correlate to positive business outcome
      a. 50% conversion rate to paid
2.  Activation point activity or task completed by > 50% of trial users
3. Activation point reached quickly
     a.  1 week - 1 month

40% - 60% of PLG free users represent "Zombie Users" which will never convert.  Activities by agents, robots, and poor fit users represent this category and should be identified as early as possible.

We also discussed "Product Qualified Leads" or PQL's.  This is a key metric that is calculated based upon product utilization by free/trial users.  It's interesting that only 35% of PLG companies are using PQL's.  This is an increase over the past year, but still not being used by a majority of PLG companies.  PQL's provide a unique opportunity to decrease the friction and resulting lack of alignment that MQL's have introduced between sales and marketing.

Natural Rate of Growth is a new "PLG" centric metric that OpenView Partners uses to understand the organic growth rate of PLG companies.

Lastly, if you are an early-stage professional considering a career in B2B SaaS,  Sam shares her advice that you create your own rotational program to gain a well-rounded understanding of how B2B SaaS companies operate across all functions in the company.

Sam provides a wealth of insights and advice for any B2B SaaS company considering or are in the early days of a PLG strategy.

Show Notes

Sam Crowell Richard is responsible for growth across the OpenView Partners portfolio. OpenView Partners is a leader in advocating Product Led Growth strategies across their portfolio, which includes leading PLG companies including Calendly.

Sam has invested in her career preparing for a growth role in a PLG focused venture capital firm, including learning the secrets of digital marketing in a digital agency, and then for 5+ years at an early stage, PLG company, Dispatch, ultimately acquired by Vista Equity, a leading Private Equity firm in the B2B SaaS and Cloud industry.

Product Led Growth companies see 80% - 90% of their initial freemium/trial users acquired using digital marketing techniques such as SEO,  though conversion to paid customers only occur 50% - 60% of the time without the involvement of a human resource.  The type and complexity of the solution directly correlates' to the requirement for the engagement of a human resource to assist the user to become a paying customer.

The approach and skillset of the resource initially reaching out to the PLG acquired user is different than in a traditional sales-led environment.  Additional insights, including how they are using the product, possibly areas they have not yet experienced, and allows the vendor's initial outreach to be with a much warmer, engaged led.

Product usage, often derived from a Product Analytics platform is a critical foundational component for a PLG company.  One of the areas of focus is how product usage information is provided to the resources responsible for user outreach.  

A new consideration for revenue operations is how to provide product usage information within the construct of CRM environments.  Though not a primary topic today, the need for a different CRM for PLG  companies may be a new market opportunity.

Top Metrics for PLG companies:

1. Organic Search:  What % of traffic and new users come from SEO
2. User Journey Metrics:  
3. Activation Rate: where people are finding value in your product
4. CAC Payback Period:
    - must  be much quicker for PLG companies, with < 12 months being great and some even
       reaching < 6 months. Price point is a key factor in this benchmark

Activation rate is a nuanced metric, as it is different for every solution.
1. Does action correlate to positive business outcome
      a. 50% conversion rate to paid
2.  Activation point activity or task completed by > 50% of trial users
3. Activation point reached quickly
     a.  1 week - 1 month

40% - 60% of PLG free users represent "Zombie Users" which will never convert.  Activities by agents, robots, and poor fit users represent this category and should be identified as early as possible.

We also discussed "Product Qualified Leads" or PQL's.  This is a key metric that is calculated based upon product utilization by free/trial users.  It's interesting that only 35% of PLG companies are using PQL's.  This is an increase over the past year, but still not being used by a majority of PLG companies.  PQL's provide a unique opportunity to decrease the friction and resulting lack of alignment that MQL's have introduced between sales and marketing.

Natural Rate of Growth is a new "PLG" centric metric that OpenView Partners uses to understand the organic growth rate of PLG companies.

Lastly, if you are an early-stage professional considering a career in B2B SaaS,  Sam shares her advice that you create your own rotational program to gain a well-rounded understanding of how B2B SaaS companies operate across all functions in the company.

Sam provides a wealth of insights and advice for any B2B SaaS company considering or are in the early days of a PLG strategy.