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Every B2B SaaS Metric You Need, and How to Calculate Them

Learn why product metrics matter, which ones to track, and how to track them.

Written in partnership with:

Written in partnership with:

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Signal logo

Start. Improve. Iterate.

Start. Improve. Iterate.

Start. Improve. Iterate.

A no-nonsense guide to product-led growth at every company stage.

A no-nonsense guide to product-led growth at every company stage.

03. Team roles in PLG

03. Team roles in PLG

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Every article in this guide is written in partnership with the best of the best of product-led growth. Learn directly from the vanguard of industry leadership. Are you an expert who wants to write about product-led growth? Let us know.

Authors of this article

Manav Dalmiya
Manav Dalmiya

Manav Dalmiya

Manav Dalmiya

Lead Data Analyst

Lead Data Analyst

Atlassian logo
Atlassian logo

Manav is a lead data analysts at Atlassian, credited with discovering important product insights that have led to singificant additional revenue for Atlassian.

Mikhiel Tareen
Mikhiel Tareen

Mikhiel Tareen

Mikhiel Tareen

COO

COO

Signal Logo

Mikhiel is the COO of Signal, a product that creates data-powered territory plans for sales reps. He and the Signal team work with large enterprises on their product analytics tracking plans.

Chase Wilson
Chase Wilson

Chase Wilson

Chase Wilson

CEO

CEO

Flywheel Logo
Flywheel Logo

Chase founded Flywheel after creating and launching Jira Work Management at Atlassian. He has executed product-led growth across multiple verticals and companies, ranging from SaaS to e-commerce.

Product metrics image
Product metrics image
Product metrics image
Product metrics image

What are product metrics? What is their purpose?

In B2B SaaS, Product metrics are the quantitative measurements used to analyze a product or service. These metrics help product managers, GTM leaders, and other stakeholders understand product adoption, user growth, and retention. Moreover, product metrics help product teams identify patterns in user behavior, helping inform the feature roadmap.

Product metrics can also used as a proxy for user interviews and other non-scalable, non-real-time ways of gathering information. They act as a great source of information for product-led growth (PLG) companies, which rely on the product itself as the primary driver of customer acquisition, expansion, and retention. Choosing the right product metrics to track is often the deciding factor between a successful or average product.

How to identify which key product metrics to track

To start, pinpoint the Key Performance Indicators (KPIs) that are most relevant to your product's success and strategic goals. For example, if your goal is to increase user retention, prioritize metrics like churn rate, user engagement, and customer lifetime value.

On the other hand, if your goal is to acquire new users, focus on metrics like acquisition cost, conversion rate, and organic growth. This should involve input from different departments within your organization, such as:

  • Product Management — To identify features which drive user satisfaction and retention.

  • Sales and Marketing — To determine which marketing channels are most effective in attracting new users and converting leads.

  • Customer Success — To understand the factors that contribute to user satisfaction and long-term customer loyalty.

  • Engineering — To identify areas for improvement in performance, stability, and reliability.

You'll also want to make sure your company is tracking at least one KPI from each stage of the user lifecycle. Focusing only on growth metrics might result in a higher churn rate than expected. Here are some examples within each category of Acquisition, Activation, Retention, and Referrals.


Acquisition Metrics

Track the effectiveness of your marketing efforts by monitoring metrics like cost per acquisition (CPA), organic vs. paid users, and conversion rates.


Activation Metrics

Gauge how well your product is resonating with new users by tracking metrics like time to first value, feature adoption, and onboarding completion rates.


Retention Metrics

Assess how well you're retaining customers by monitoring metrics like churn rate, user engagement, and customer lifetime value (CLTV).


Expansion Metrics

Measure the long-term health of your product by tracking metrics such as upgrade rates and expansion MRR.


Tools and approaches to tracking product metrics

There are two common approaches to data-tracking systems: CDPs (Customer Data Platforms) and analytics point-solutions (Flywheel, Amplitude, Pendo, etc).

CDPs overview

CDPs track events and specialize in sending that event data to other tools. For example, incorporating event-based triggers in an email automation software is best done by connecting a CDP to the email provider. The downside of a CDP is that the tool itself offers little few analytics capabilities, so they're really just a way to pass data back and forth. Additionally, they're quite expensive. If your company uses many tools that rely on event data, a CDP is likely a good option — but might cost more than your other software subscriptions combined.

Some of the top CDPs are Segment, mParticle, and Lytics.

Analytics solutions overview

If you're looking to analyze product metrics (or, in Flywheel's case, both marketing and product metrics), we recommend starting with an analytics solution that offers a tracking script. There are two types of tracking scripts: Auto-track and Manual tracking.

We discuss these two approaches in more depth in our product analytics guide. In short, however:

Auto-tracking: Also called autocapture, simply installing the script onto your website or in your product will automatically track all page views, click events, and other interactions. This approach is best for companies that want to collect as much data as possible. It's a very fast process to get started — usually less than 3-5 minutes. Learn more about installing our version, Flywheel.js, as an example.

Here are some companies that offer auto-tracking:

  • Flywheel (can choose between auto-track or manual tracking, or use both)

  • Pendo

  • Heap

  • PostHog


Manual tracking:
After installing the script, someone (generally an engineer) will add a few lines of code for every event that you want to track. This approach is best for companies that want consistent, very clean data. It's a slower process that will need constant maintenance as the product evolves, but manual tracking is highly reliable and consistent. We estimate planning which events to track will take ~3-4 hours and implementation ~1-2 hours.

Companies that offer manual tracking scripts:

  • Flywheel

  • Amplitude

  • Mixpanel

  • Google Analytics


10 basic B2B SaaS events to track

Originally defined as part of the Segment B2B SaaS spec, we recommend every company implement these events — even if you're auto-tracking the rest of your events. For Flywheel.js, install the tracking script to track event automatically, then layer these events on top.

These events are such an industry standard that a number of Flywheel features use these events to complete calculations. The best practice is to fire these events directly from your backend. This gets a bit technical, so work with an engineer to get started.

  • Account Created: This event should be sent when a new account is created.

  • Account Deleted: This event should be sent when an account is deleted.

  • Signed Up: This event should be sent when a user signs up for your product.

  • Signed In: This event should be sent when a user signs in to your product.

  • Signed Out: This event should be sent when a user signs out of your product.

  • Invite Sent: This event should be sent when a user invites another user.

  • Account Added User: This event should be sent when a user is added to an existing instance of your product.

  • Account Removed User: This event should be sent when a user is removed from an existing instance of your product.

  • Trial Started: This event should be sent when a trial is started. Freemium products can disregard.

  • Trial Ended: This event should be sent when a trial has ended. Freemium products can disregard.


29 key product metrics and how to track them

We've split these metrics into the four categories of Adoption, Activation, Retention, and Expansion. While some may need to be modified for your exact use case, this is a great place to start thinking about which metrics are most relevant for your product.


Adoption metrics

  1. Active User Count:

Active User Count measures the number of people actually engaging with your product or platform over a certain period, like daily, weekly, or monthly. These users are more than just sign-ups; they're the ones actively logging in, completing tasks, or interacting with key features. Tracking this count gives you a clear insight into your actual user engagement, helps you identify trends, and assesses how well your product fits with the market.

Monitoring changes in your Active User Count is also quite valuable. It can highlight areas for potential improvement, guide product development, and assist in adjusting your marketing strategies. It's important to note that the definition of an "active user" might vary depending on the product. Therefore, it's crucial for businesses to establish a clear and relevant definition that aligns with their specific offerings.

Calculation: Count of users who performed a specific action or multiple actions within a given period

Department: Product Management

  1. Feature Adoption Rate:

Feature Adoption Rate measures the percentage of users who adopt and use a newly introduced feature or functionality in your software product. It's calculated by dividing the number of users actively using the new feature by the total user base. After creating a Feature in Flywheel, this number is automatically calculated for you.

Understanding the Feature Adoption Rate is key to seeing how well a new feature lines up with what your customers need and the value it promises to bring. A high adoption rate means the new improvements are hitting the mark, really tackling the issues users face. But if the adoption rate is low, it's a signal to dig deeper. Maybe the feature's missing something crucial, it's too complicated to use, or the word about it isn't getting out right.

This insight gives SaaS companies a roadmap for what to do next. They can tweak the features to make them better, create in-app engagements that are more on target, or improve how they introduce users to these new aspects of the product.

Calculation: (Number of users who adopted the feature / Total users) * 100.

Department: Product Management

  1. Feature Retention Rate:

Feature Retention Rate is a close relative to Feature Adoption Rate. It keeps an eye on how many users keep using a particular feature over time. You work it out by dividing the number of users who keep using the feature by the number of users who first started using it.

This metric is really about understanding the long-term usefulness and appeal of your features. It shows whether these features are still valuable and meeting users' needs as time goes on. If you're maintaining a high Feature Retention Rate, it's a good sign that your features are staying relevant. But if that rate starts to drop, it could mean users are finding less value in the feature, and that's a cue for your product teams to take a closer look and figure out how to make improvements.

Calculation: (Number of users still using the feature after a specific period / Total users who initially adopted the feature) * 100

Department: Product Management

  1. User Stickiness:

User Stickiness is all about how good your product is at becoming a must-have part of your users' daily lives. Usually, it's measured by looking at the relationship between Daily Active Users (DAU) and Monthly Active Users (MAU). You figure it out by dividing DAU by MAU, which shows how often users come back to your platform.

When you've got high User Stickiness, it means your customers really value your product and have woven it into their everyday routine. For SaaS companies, having a product that users can't do without means there's less chance they'll jump ship to a competitor. To create a product that's this sticky, it's crucial to really understand what your customers need, what problems they're facing, and what their entire experience with your product is like from start to finish.

Calculation: (Daily active users / Monthly active users) * 100

Department: Product Management



Activation metrics

  1. Time to First Value (TTFV):

Time to First Value (TTFV) is a crucial, yet often overlooked metric. It's all about how long it takes for a user to get real value from your product after they start using it. This could be as quick as a successful first login or as involved as integrating a feature into their daily workflow.

A speedy TTFV is great – it makes users happy, and it's likely to boost both conversions and how long they stick with your product. On the flip side, if TTFV is dragging out, it could be a sign of a tough learning curve, a not-so-great onboarding process, or a value proposition that isn't hitting the mark. This is a wake-up call to polish up the user experience, streamline the onboarding, and make sure your product development is really in tune with what users need.

Calculation: Time from the user's sign-up to their first meaningful action

Department: Product Management

  1. Product-Qualified Leads (PQLs):

Product-Qualified Leads (PQLs) take things a step beyond the usual marketing and sales qualified leads (MQLs and SQLs). PQLs are users who've really gotten a taste of what your product can do, usually through a free trial or a freemium model. They're the ones showing clear signs that they're ready to buy – things like high engagement, using key features, or hitting important milestones that show they're getting real value from your product.

The whole idea behind PQLs is simple: users who genuinely understand and benefit from your product are more likely to make a purchase and stick around as long-term customers. For sales teams, PQLs are gold – they point out the prospects who are most promising, making

Calculation: Count of users who meet specific product usage and engagement criteria

Department: Sales and Marketing

  1. Activation Rate:

Your product's Activation Rate is a great way to measure the first impression it makes. It's all about the percentage of users who hit those key early milestones or 'aha moments' that show they're getting into your product. What counts as an 'aha moment' can vary - it might be signing up, using a particular feature, starting a project, or anything else that shows a user is really engaging.

A high Activation Rate is a good sign; it means users are getting through the initial phase smoothly, which usually leads to them sticking around longer. If the Activation Rate is dropping, it's a heads-up to maybe tweak the onboarding process, make the product easier to use, or set clearer expectations for new users.

Calculation: (Number of users who reached the success milestone / Total new users) * 100

Department: Product Management

  1. Reactivation Rate:

Reactivation Rate is a metric that measures the proportion of users who, after a period of inactivity, come back and start actively engaging with your product again. There are many reasons why users might drift away in the first place – maybe they had a less-than-ideal user experience, found an alternative product, or didn’t connect with a new feature. By keeping an eye on the Reactivation Rate, you get a sense of how many of these inactive users you’re able to bring back into the fold.

Understanding why users left and what brought them back is key. It gives businesses a clearer picture of how well they’re maintaining their user base and whether the steps they’re taking to improve their product and re-engage users are hitting the mark

Calculation: (Number of users reactivated / Total inactive or churned users) * 100

Department: Sales and Marketing

  1. Onboarding Completion Rate:

The Onboarding Completion Rate is a key metric that shows the percentage of new users who successfully go through the onboarding process. This process is crucial; it's a carefully crafted guide that helps users get familiar with the main features and functionalities of your product. It plays a big role in getting users comfortable and engaged right from the start.

When you have a high Onboarding Completion Rate, it's a good sign that your onboarding experience is effective and user-friendly, often leading to better retention down the line. On the other hand, a low rate could point to an onboarding process that might be too complex, confusing, or just too long. This is a signal that it might be time to streamline and improve this initial user experience.

Calculation: (Number of users who completed onboarding / Total new users) * 100

Department: Product Management

  1. Monthly Recurring Revenue (MRR):

Monthly Recurring Revenue, or MRR, is a vital metric in the SaaS world, providing a clear picture of the steady revenue your business can expect to earn each month. It's focused on the income from ongoing subscriptions, leaving out any one-off charges or fees that vary based on usage. MRR isn't just about tracking income; it's a cornerstone for planning budgets and forecasting the future. It also serves as a key indicator of your company's financial well-being.

Keeping a close eye on the growth rate of your MRR can tell you a lot about how well your product fits the market, your cash flow situation, and the overall efficiency of your operations. When you roll out new features that lead to more expensive plans, you should ideally see an upward trend in MRR. On the flip side, if MRR is on the decline, it might be a warning sign of increasing customer churn or a prompt to reevaluate your sales strategies.

Calculation: Sum of all monthly subscription fees

Department: Finance

  1. Annual Recurring Revenue (ARR):

Annual Recurring Revenue (ARR) is essentially a broader version of Monthly Recurring Revenue (MRR), giving a long-term perspective on your business's revenue across a year. It's straightforward to calculate: simply multiply your MRR by 12. This metric is particularly relevant for businesses that operate with longer sales cycles or those that focus on annual contracts. ARR provides a wider lens, capturing the overall financial trajectory without getting bogged down by short-term fluctuations.

It's important to note, though, that a significant drop in ARR is a more serious indicator than in MRR. Such a decline can signal deeper, systemic issues within your business, requiring quick and strategic corrective measures. Keeping an eye on ARR helps in making informed decisions for long-term financial planning and understanding the health and stability of your revenue streams.

Calculation: MRR * 12

Department: Finance

  1. Customer Acquisition Cost (CAC):

Customer Acquisition Cost (CAC) represents the total of all marketing and sales expenses over a set period, divided by the number of new customers acquired during that period. Essentially, it measures the cost your company incurs to gain a new customer. But it's important to remember that these costs aren't always direct or straightforward to calculate. They can include a range of expenses, from advertising spend and marketing team salaries to the costs of creating pitch content and maintaining CRM systems.

CAC is a crucial metric for understanding the efficiency of your marketing efforts. By comparing CAC with the Customer Lifetime Value (LTV), you get a clear picture of how much profit each customer brings in relation to the cost of acquiring them. This comparison is important for assessing the overall profitability and sustainability of your customer acquisition. It helps in determining whether your current tactics are financially reasonable or if they need to be adjusted to balance between acquisition cost and customer value.

Calculation: Total sales and marketing expenses / New customers acquired

Department: Marketing


Retention metrics

  1. Customer Satisfaction Score (CSAT):

CSAT, standing for Customer Satisfaction, is a straightforward and adaptable metric that sits at the heart of measuring customer happiness. It involves asking customers to rate their satisfaction with your product, support, or a particular experience using a set scale, often ranging from 1-5 or 1-10. A high CSAT score clearly indicates that your customers are happy, which is a vital step towards building customer loyalty. On the other hand, if your CSAT is dropping, it might be alerting you to a dip in the quality of your product or service. This early warning gives you the chance to identify and address any issues before they become more significant problems.

Calculation: (Number of satisfied customers / Total survey respondents) * 100

Department: Customer Success

  1. Net Promoter Score (NPS):

NPS, or Net Promoter Score, is a key metric for assessing customer loyalty. It classifies users into three categories – Promoters, Passives, and Detractors – based on their response to one simple question: "How likely is it that you would recommend our product/service to a colleague or friend?" The insights from NPS are invaluable, as they shed light on your product's potential for word-of-mouth promotion, which is often the most genuine and influential type of advertising.

Maintaining a consistently high NPS indicates that you've cultivated a strong group of advocates for your brand. Conversely, a low NPS can reveal the presence of unhappy customers who might negatively impact your brand's reputation. Tracking NPS helps in understanding not just customer satisfaction, but also the likelihood of your customers actively promoting your product or service to others.

Based on their ratings, respondents are categorized into three groups:

  1. Promoters (score 9-10): Loyal enthusiasts who will keep buying and refer others, fueling growth.

  2. Passives (score 7-8): Satisfied but unenthusiastic customers who are vulnerable to competitive offerings.

  3. Detractors (score 0-6): Unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

Calculation: (% Promoters−% Detractors)×100

Department: Customer Success

  1. User Retention Rate:

User Retention Rate is a straightforward metric that shows the percentage of users who keep using your product over a certain time frame. This rate is crucial for understanding how well your product maintains its appeal to customers over the long term. A strong User Retention Rate is a clear indication that your product consistently delivers on its promises and remains valuable to your users. However, if you notice a decline in this rate, it might point to issues like emerging competition or the need for product improvements. This metric is essential for gauging customer loyalty and guiding strategic decisions to keep your product relevant and valued.

Calculation: (Number of users retained after a specific period / Total users at the beginning of the period) * 100

Department: Product Management

  1. Customer Retention Cost:

Customer Retention Cost (CRC) calculates the total expense incurred in keeping an existing customer. This includes the costs involved in customer support, success initiatives, retention marketing campaigns, and other related expenditures. To find the CRC, you divide these total costs by the number of customers you've managed to retain.

If you notice that your CRC is increasing, it might be a sign that your customers are requiring more support than usual, possibly due to dissatisfaction, or it could indicate that your customer success efforts are not as efficient as they could be. This metric underscores the value of having a robust product and fostering strong customer relationships. It's a crucial reminder, especially considering that attracting new customers can be up to five times more expensive than retaining the ones you already have. Keeping an eye on CRC helps in striking the right balance between cost and effectiveness in customer retention strategies.

Calculation: Total costs of retention efforts​ / Number of customers retained

The "Total Costs of Retention Efforts" include various expenses such as:

  1. Customer Support Costs: Expenses related to customer service and support teams.

  2. Customer Success Initiatives: Costs for activities aimed at ensuring customer success, such as training, onboarding programs, and success managers.

  3. Retention Marketing Campaigns: Expenses for marketing efforts specifically designed to keep existing customers, like loyalty programs, email campaigns, and customer engagement activities.

  4. Other Associated Expenses: Any other costs directly tied to retaining customers, which could include technology costs (like CRM systems), administrative expenses, and any indirect costs allocated to retention efforts.

Department: Customer Success

  1. Lifetime Value (LTV):

Lifetime Value (LTV) is a key metric that calculates the total revenue you can expect from a single customer for as long as they remain a customer. It's a powerful tool that highlights the importance of keeping customers over the long haul. By focusing on LTV, businesses are encouraged to deepen their engagement with existing customers, ensuring their ongoing success and loyalty. This approach shifts the focus from merely acquiring new customers to really capitalizing on the potential of those you already have. Understanding and maximizing LTV is about recognizing the enduring value of customer relationships, guiding strategies towards long-term profitability rather than just short-term gains.

Calculation: Average revenue per customer * Customer lifetime

Department: Finance

  1. LTV:CAC Ratio:

The LTV:CAC Ratio is an essential metric that measures the balance between customer acquisition and retention. It compares the Lifetime Value (LTV) of a customer to the Cost of Acquiring a Customer (CAC). When this ratio is greater than 1, it indicates that each customer is generating more revenue for your business than what it costs to acquire them. On the other hand, a ratio less than 1 can be a warning sign that your company might be spending too much on acquisition, losing customers too quickly, or possibly both. This ratio provides a comprehensive view of how profitable and efficient your strategies are in acquiring new customers and retaining existing ones.

Calculation: Lifetime Value / Customer Acquisition Cost

Department: Finance

  1. Churn Rate:

Churn Rate is a crucial metric that serves as a reality check for any business. It indicates the percentage of customers who stop using your product over a specific period. A high churn rate is more than just a loss of revenue; it's a clear signal pointing to possible issues with your product, pricing, or the quality of service you're offering. When customer churn is high, it's a call to action for immediate reflection and strategic adjustments.

There are many ways to improve a high churn rate, which you can read more about in our churn prevention article.

Calculation: (Number of customers lost during a period / Total customers at the beginning of the period) * 100

Department: Customer Success

  1. Customer Renewal Rate:

For subscription-based businesses, the Customer Renewal Rate is particularly telling. It reveals the extent of customer loyalty by indicating how many customers renew their subscriptions once their initial contract period is up. If you're seeing a high renewal rate, that's a good sign your customers are happy and see ongoing value in your services. On the flip side, a lower renewal rate might point to shortcomings in your service, customer support, or the overall fit of your product with customer needs. This metric is a crucial barometer for understanding the strength of your customer relationships and the enduring appeal of your service or product.

Calculation: (Number of customers who renewed their subscription / Total customers with expiring subscriptions) * 100

Department: Customer Success

  1. Freemium Conversion Rate:

The Freemium Conversion Rate is a key indicator of how well your 'try before you buy' strategy resonates with users. This metric tracks the number of users who transition from the free version of your product to the paid one. A high conversion rate is a positive indicator, suggesting that your product successfully demonstrates its worth, encouraging users to invest in the additional features of the paid version. Conversely, a lower conversion rate could signal a need to enhance the perceived value of your paid offering, refine your product's features, or improve communication about the benefits of upgrading. This metric is essential for gauging the effectiveness of your freemium model in converting free users into paying customers.


Calculation: (Number of free users who converted to paying customers / Total free users) * 100

Department: Sales and Marketing


Expansion metrics

  1. Expansion MRR:

Expansion Monthly Recurring Revenue, or Expansion MRR, is all about capturing the growth in revenue you get from your current customers. It's the additional income you earn when customers decide to go for more expensive plans or buy extra services - minus any losses from downgrades or customers leaving. Seeing your Expansion MRR go up is a really good sign. It means your strategies for selling more to existing customers are working and that these customers are happy enough to spend more.

But if your Expansion MRR isn't budging, or worse, it's going down, it might be time to take a hard look at how you're trying to grow these customer accounts, or maybe even rethink the products and services you're offering. This figure is a key indicator of how well you're doing at boosting revenue from the people who already buy from you.


Calculation: (Revenue from upsells + Revenue from cross-sells + Revenue from upgrades) − (Revenue lost from downgrades + Revenue lost from churn)

Department: Finance

  1. Net Revenue Retention (NRR):

Net Revenue Retention (NRR) goes beyond basic retention metrics to offer a more comprehensive view of your recurring revenue's fluctuations. This includes both the negatives, like revenue lost through customer churn or downsizing of plans, and the positives, such as revenue gained through upselling or adding new services for existing customers. An NRR above 100% is a positive indicator, showing that revenue from your existing customer base is growing and surpassing any losses. This is a key factor for sustainable revenue growth, as it highlights less dependence on acquiring new customers. On the other hand, an NRR below 100% is a warning signal that losses are outweighing gains. In such cases, it's crucial to reassess the overall appeal of your product, the effectiveness of your customer success efforts, and the strategies you employ to expand customer accounts.

Calculation: (Revenue at the end of a period - New customer revenue) / Revenue at the beginning of the period * 100

Department: Customer Success

  1. Cross-Sell Conversion Rate:

The Cross-Sell Conversion Rate is a crucial metric for B2B SaaS companies, as it measures how successful you are at selling additional features or services to your existing clients. Essentially, it calculates the percentage of your current client base that opts in for an additional service or feature you offer. For instance, Atlassian sells multiple variations of Jira (Jira Software, Jira Service Management, Jira Work Management) and cross-sell metrics look at the adoption of more than one Jira product.

This is often connected to the concept of "Land and expand", a strategy where a single product is sold to an organization with the hope that more products will make their way into the company over time.

Calculation: (Number of customers who purchased additional products or services / Total customers) * 100

Department: Sales and Marketing

  1. Upgrade Conversion Rate:

Upgrade Conversion Rate measures the proportion of users who shift from a basic or lower-tier offering to a higher-tier one that's more expensive. For example, here at Flywheel we offer multiple paid plans. An upgrade would be a customer who transitions from our Grow plan to our Expand plan — ideally in a self-serve format.

A strong Upgrade Conversion Rate shows your marketing and product experiences make the value of different plans obvious. It implies that customers recognize and are willing to pay for the enhanced value in the upgraded tier. On the other hand, a declining rate might point to issues with the perceived value of your higher-tier plans, or suggest that the advantages of these plans are not being communicated effectively. For help in creating pricing plans, you can learn from our guide on how to package your product.

The key difference from the Cross-Sell Conversion Rate is focus: while cross-selling involves convincing customers to buy additional, often different products or services, upgrading is about persuading them to switch to a more feature-rich version of what they're already using. Both are crucial, but they tap into different aspects of customer engagement and value perception.

Calculation: (Number of users who upgraded / Total users on lower-tier plans) * 100

Department: Sales and Marketing

  1. Downgrade Conversion Rate:

The Downgrade Conversion Rate uniquely gauges the trend of users moving from premium to basic plans in your service offerings. In product-led growth, this could be downgrading to a Free plan. In an ideal scenario, this figure should be on the lower side. If you're noticing a higher rate here, it might signal specific issues: perhaps your top-tier plans are overly complex, your customer support isn't hitting the mark, or your pricing is out of step with perceived value.

This metric is a prompt to scrutinize and possibly recalibrate your approach. It could mean fine-tuning your pricing to better align with what customers are willing to pay, or simplifying the features in your premium tiers to ensure they're user-friendly and not overwhelming. However, if your company offers a reverse trial, make sure you're not overcounting your downgrades.

Calculation: (Number of users who downgraded / Total users on higher-tier plans) * 100

Department: Sales and Marketing


  1. Referral Conversion Rate:

Referral Conversion Rate measures the percentage of potential customers referred by others who end up subscribing or purchasing. A strong rate here is a strong sign that your referral program is not only appealing, but also that there's a high level of trust in your product among your user base.

On the flip side, if this rate is lagging, it could point to a couple of key areas needing improvement. Perhaps your incentives for referrals aren't compelling enough to motivate your existing customers, or the process for nurturing these referred leads isn't as effective as it could be. In general, this metric is a good test for the effectiveness of your referral strategies and the organic appeal of your product in generating new customer interest.

Calculation: (Number of referred users who became paying customers / Total referred users) * 100

Department: Marketing

  1. Viral Coefficient:

The Viral Coefficient is a critical measure of your product's ability to naturally spread and attract new users. It calculates the average number of new users that each existing user introduces to your product. When this coefficient exceeds 1, it's a clear indication that your product has hit a viral stride, often driven by its inherent shareability and the genuine endorsements it receives from current users.

The Viral Coefficient is closely related to the concept of K-factor, often used in the context of viral marketing and growth hacking. Both metrics are used to assess the virality or the spread of a product, service, or idea among users. Here's how they connect:

  1. Viral Coefficient: This is a measure of how many new users, on average, an existing user is able to bring to your product. A Viral Coefficient greater than 1 indicates that each user, on average, is bringing in more than one additional user, leading to exponential growth.

  2. K-factor: The K-factor is a broader term and is often used interchangeably with the Viral Coefficient. It's a formula used in viral marketing to find the rate at which something (like an app, service, or piece of content) spreads. The K-factor takes into account not only how many new users each individual user brings in (similar to the Viral Coefficient) but can also consider the rate of sharing and the conversion rate of these shares into new users.

    The typical formula for K-factor is: K=i×c where 'i' is the number of invitations sent by each customer, and 'c' is the conversion rate of each invitation.

While the Viral Coefficient specifically measures the average number of new users brought in by each existing user, the K-factor can provide a more detailed view of virality by considering the rate of sharing and the conversion rate of these shares. Both are valuable for understanding and enhancing the viral growth of a product.

Calculation: Number of invites sent per user * Conversion rate of invites to new users

Department: Marketing

Topline metrics vs. product health metrics

Topline metrics, sometimes referred to as vanity metrics, provide a high-level overview of your product's performance. These metrics, such as the total number of users or page views, can provide a sense of scale but may not offer actionable insights for improving your product. They can sometimes be misleading and may not correlate with the actual success of your product.

On the other hand, product health metrics are more focused on the specific aspects of your product that contribute to its success. These metrics, such as user engagement, feature usage, and retention rates, provide deeper insights into how users interact with your product and can help identify areas for improvement. Product health metrics are more actionable and can guide your product development efforts to drive better results.


Examples of companies and the primary metrics they track

Successful product-led companies often focus on a few key product metrics that align with their business objectives. Here are some examples of companies and the primary metrics they track:

Slack: Slack, a popular team collaboration platform, tracks metrics such as daily active users (DAUs), the number of messages sent, and the number of active teams. These metrics help Slack understand user engagement and identify opportunities for product improvement.

Dropbox: Dropbox, a cloud storage and file-sharing service, focuses on metrics such as the number of active users, the amount of storage used, and the number of files shared. These metrics enable Dropbox to assess user engagement and drive growth.

Atlassian: Atlassian, the parent company of products like Jira and Trello, tracks product metrics specific to each product. When looking across products, though, they measure W2WAI (Week 2 Weekly Active Instances), organic traffic, free signups, and freemium conversion rate. These metrics help Atlassian understand product activation make data-driven decisions about their content strategy.


Keeping metrics accurate and reliable

Product metrics are useless if they're not accurate and reliable. Here are some tips to help ensure the accuracy and reliability of your metrics:

  1. Establish consistent measurement methodologies: Getting your company aligned on metric definitions is very important. We recommend having some single source of truth where anyone in the company can learn how each metric is calculated. Define the methodologies and data sources that will be used for each metric and ensure that they are consistently followed.

  2. Implement data validation processes: Implement processes and checks to validate the data used in your metrics. This may include data cleansing, data transformation, and data reconciliation processes. This is an advanced practice and likely isn't necessary until there are multiple analysts at a company.

  3. Use reliable data sources: Ensure that the data you use to calculate your metrics comes from reliable sources. Tools that track events directly, like Flywheel, provide metadata for every event to help with troubleshooting.

  4. Regularly audit your metrics: Perform regular audits of your metrics to identify any inconsistencies, errors, or gaps in your data. Address any issues identified during the audit to maintain the accuracy and reliability of your metrics. We recommend setting up event alerts to help recognize issues early.

  5. Monitor and maintain your data infrastructure: Ensure that your data infrastructure, such as databases and data pipelines, are properly maintained and monitored to prevent data loss or corruption.


Fin

At this point, you've learned the basics of product analytics and key product metrics for PLG and B2B SaaS. Next, we'll walk through how to visualize and monitor these metrics with product analytics dashboards.

Published on

May 9, 2023

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PRICING

Flywheel is free.

and the future of growth is here.

Track and activate up to 1,000 active contacts a month, for free.

PRICING

Flywheel is free.

and the future of growth is here.

Track and activate up to 1,000 active contacts a month, for free.