By Todd Olson, CEO and Co-founder of Pendo, shortlistee of Best SaaS Product for Product Analytics at The 2022 SaaS Awards
A shift in the way software companies think about their product has occurred in recent years. Companies have realized that putting their product at the center of their go-to-market strategy can unlock an amazing amount of value for the company and the customers alike. Freemium models, self-guided tours, in-app education and support, and other tactics have revolutionized the customer experience for the better.
The evidence is clear: the future of the software as a service (SaaS) industry is product led. By simply looking at the astonishing rise in market cap for product-led growth-oriented organizations over the past decade to see this is the case. But how do companies know if they’re improving customer experience? What are the key product-led growth metrics to track, and how do you balance them against one another? There are five important KPIs to answer these questions.
You can have an amazing product, but your impact will only be as large as the amount of users who engage with it. That’s why it’s essential for product-led companies to track adoption. There are two kinds of adoption metrics to track:
- For the product as a whole;
- For features within it.
Usually, the product adoption metric takes the form of active users over a set period of time. This period of time can be monthly, weekly, or daily. Companies can track feature adoption in a similar way, or as a percentage of engagement (usually in the form of clicks) within the product as a whole.
Adoption is especially important in the context of SaaS products. With subscriptions for software products now the dominant model, customers need an incentive to stay engaged, otherwise they risk churning when the renewal time comes. Getting a good sense of how well customers are taking up your product and its features lets companies know whether they’re finding value in the product, which in turn correlates to:
- Potential expansion.
Just as important as bringing in new users to your product is ensuring that current users stick around and stay engaged. Stickiness is a metric that tracks how many users are going back to a product on a regular basis. Companies usually gauge it by looking at the ratio of users over a longer period of time versus a shorter one. Depending on the nature of the product and what the ideal engagement with it looks like, organizations might, for example, compare the number of monthly users who return weekly, weekly users to return daily, etc.
Through looking at stickiness and using product analytics to understand what differentiates more frequently engaged users from less, product managers can glean insights that will help boost overall engagement and make sure customers are getting the maximum possible value from the product.
As your product grows in features and functionality, so should the number of users who are engaging with it. In that sense, product-led growth has to show evidence of, well, growth. Think of growth as the combined result of adoption and stickiness, of your user acquisition and retention results. Like adoption, growth can be measured both in terms of the greater product and features within it.
A simple way to calculate growth is through the percentage of change in users within a product or feature over a given time period. But companies can also measure it in other ways–for example, in terms of the ratio of new and retained users to churned ones. At the end of the day, growth is an important metric for your team to ground their assessments in. They can be developing and improving a product in countless wonderful ways, but if more people aren’t showing up to take advantage of it, that doesn’t count for much.
4. Time to value
You may be turning out new product features and updates on a regular basis, but your efforts will be in vain if customers don’t see the benefits from these new offerings quickly. Growth ultimately rests on the value you provide to customers, and the faster they start realizing value of your product, the better. Hence the importance of time to value, which measures how long it takes for customers to get to that “aha” moment after first taking up the product or feature in question.
In order to measure time to value, companies can leverage product analytics around those features they consider the most important in their product. By looking at the minimum, maximum, and average times it takes new users to interact with one of those key features, they can get a baseline sense of what the time to value is and start taking steps to improve it.
5. Top feature requests
A great way to ensure better adoption, stickiness, growth, and time to value is to prioritize the updates and features in your roadmap that customers are requesting the most. What can be tricky is how to measure what your top feature requests are. After all, feedback can come from many sources, from in-person conversations, to emails, to in-app surveys. The important thing for companies to do is collect and manage feedback in a centralized location, where one can get a sense of what the requests are, who’s making them, and why.
With comprehensive and centralized feedback management, companies can get a sense, not only of which kinds of features are requested most often, but the kinds of companies making them. Having the ability to segment requests by company type (industry, etc.) and size gives one the ability to focus on what matters most to the kinds of businesses they’re looking to grow within their customer base and expand engagement with.
The future is product led
There are plenty of other important metrics for product leaders to keep a pulse on–think net revenue retention, Net Promoter Score (NPS), or various dimensions of product virality–but these five are a good place for product teams to start. Product-led growth may be the growth of the future, but companies won’t know they’re doing it right without the data and stats to back it up. The future is product led–now’s the time for businesses to embrace it.