How do you know if your product-led expansion strategy is working? Learn how to apply product acquisition, adoption, retention, and expansion metrics in PLG.

1. 1/11
August 2, 2021
4 Customer Success Metrics to Inform Your Product-Led
(Expansion) Growth Strategy
process.st/product-led-customer-success-metrics
Jane Courtnell
August 2, 2021
Reports indicate steady growth in CS functionality since 2013. And since the COVID-19
pandemic, this growth has substantially increased. In 2021, 76% of surveyed CS professionals
said they had a team consisting of more than 10 people. With this expansion comes the
development of CS as a discipline.
Welcome to the customer success era.
In this CS era, business focus is on customer experience. And when it comes to your product,
this means to show and let your customer try your offering. That is, be product-oriented to
drive product-led expansion.
In this Process Street article, we identify the 4 key customer success metrics you need to
develop your CS functionality. These metrics will inform your product-led growth strategy by
measuring acquisition, adoption, retention, and expansion. This article is structured as
follows:

2. 2/11
Let’s jump to it!
Understanding product-led growth and its benefits
Product-led growth (PLG) is a business methodology where user acquisition, expansion,
conversion, and retention are driven primarily by the product. The product provides the most
sustainable and scalable source of business growth.
Achieving product-led growth requires multi-departmental coordination. This means
aligning efforts delivered by teams in engineering, sales, marketing…you name it. The
product is central and brings teams together.
A PLG aims to provide easy product access to the customer. This could be by providing
freemium or free trial versions when possible, to get the prospects using the product quickly.
“[PLG]…is a capital-efficient model through which companies can scale quickly. – OpenView,
The Product Led Growth Playbook
The benefits of product-led growth
Being product-led brings the following benefits (as outlined by productled.org):

3. 3/11
Faster growth 🚀: PLG gives a customer easy and free access to the product right
away, lowering barriers to entry.
Cost reduction 💸: The product is the driving force behind acquisition, engagement,
retention, and expansion. Hence organizations can save huge sums traditionally spent
on scaling sales, marketing, and service efforts.
High-revenue diversity 💰: The PLG approach offers smaller deal sizes, giving a
higher revenue diversity, minimizing the impact of losing accounts.
A better product 💎: Consumer-grade products are designed requiring additional
forethought, empathy, and resources. This gives consumers a product they enjoy. In
turn, you get happier customers, higher customer satisfaction and NPS scores, and
improved customer lifetime values.
In case you’re still not convinced, analysis by OpenView reported PLG company value was
>30% than the public-market SaaS index fund.
“Product-Led Growth means that every team in your business influences the product. Your
marketing team will ask, “how can our product generate a demand flywheel?” Your sales team
will ask, “how can we use the product to qualify our prospects for us?” Your customer success
team asks, “how can we create a product that helps customers become successful beyond our
dreams?” By having every team focused on the product, you create a culture that is built
around enduring customer value.” – Allan Wille, Co-founder and CEO at Klipfolio
4 key product-led customer success metrics
As the saying goes…
“You can’t manage what you can’t measure.” – Peter Drucker, Management Consultant
To measure in business involves using key metrics. And there’s a seemingly endless list of
metrics marketing teams should track. Each metric has varying levels of accuracy. Common
metrics include lead volume, conversion, and engagement.
When thinking about metrics for PLG-focused businesses, what sets these businesses apart is
that they aren’t solely focused on the top of the funnel, but also the end customer experience.
It’s all about customer advocacy and whether the customer is successful in their use and
adoption of the product.
“I tell my team members that their gold standard is not whether customers bought a product,
but did they recommend us? It’s a higher bar and a different standard. We also don’t see
marketing’s role as getting customers in the door and then wiping our hands and going on to
the next one. Marketing’s role is about driving recommendations, so we spend a lot of time
building up playbooks and putting together hints and tips on how to get the most out of Slack.”
– Bill Macaitis, Growth Advisor at Slack

4. 4/11
Selecting the right customer success metrics and aligning teams around them is crucial to the
PLG process. And to do that, you’ve come to the right place. The four metrics presented in
this article can be reported on by cross-functional teams. The idea is to leverage data and
make coordinated, informed decisions and changes across your business.
Metric #1: Calculating the cost of acquisition (CAC)
This metric is pretty straightforward – what is the total expense incurred by your business in
acquiring a new customer?
The Cost of Acquisition (CAC) is calculated by dividing the total cost (this could be total
media spend, or specific channel/campaign costs), by the number of new customers acquired
from the same channel/campaign.
In a PLG strategy, the product is used to do the talking. The aim is to reduce acquisition costs
by removing the need for expensive marketing campaigns. Teams can hone in on one Call to
Action (CTA), such as a free trial or freemium product version.
You need to create a single landing page with this CTA to optimize conversions.
Freemium/free trials will capture a significant chunk of your addressable market. To be
profitable, you’ll only have to convert ~10% of users to your paid version, and get this – there
is no additional expense on your end. Think about how this will reduce your CAC?
The next step is to measure product usage. What features are being used?

5. 5/11
Take Heap as an example. Heap is a platform that helps businesses track user behavior on a
given website for later analytical analysis. As a product-led business, the Heap Inc team is
intentional with every move they make. As founder and chairman Matin Movassate says…
“When we’re thinking about adding or building out a certain feature, we first try to get a clear
sense of the problem we’re trying to solve. We make sure we can identify which part of the
funnel we’re addressing and the impact the feature will have on our business. If there is no
compelling story there — no data to suggest that the effort is a high-leverage use of our time —
we won’t do it.
Essentially, the question to ask is not, ‘can we make this change,’ but ‘should we make this
change?’ It’s about prioritization based on impact… when a new feature is fully launched, we
are disciplined about measuring the success metrics to determine if people are using it, whether
it’s affecting retention or activation, and whether it’s something that’s coming up in sales
conversations. All this data informs us how we should refine and build that and future features.”
– Matin Movassate, Product-led Growth Playbook
Feature use and free-trial/freemium sign-up tell you the extent of product acquisition.
Looking at feature use guides you towards creating a more useful product for your target
market. With a more useful product, customers are more likely to adopt the product from
their own back without energy, effort, and expense from your end.
In summary, provide a free trial/freemium version when possible, and optimize feature
availability to drive down CAC.
Metric #2: Calculating time to value

6. 6/11
The time to value is how long it takes you to see value from a customer action (e.g. a
purchase). You’ll see customer value once your customer has adopted and realized product
value.
Product adoption on the customer’s end happens when the customer has learned how to use
your product. Once adopted, the customer can make an informed cost-benefit evaluation.
You want this adoption process to be fast. You don’t want prospects to have to sit through
hours and hours of product onboarding or training videos to get started. Instead, guide your
users to complete key functions that will allow them to achieve what they set out to achieve.
For instance, the instant messenger application Slack stays away from traditional email
onboarding. Instead, users are given in-app notifications guiding them through the product
adoption process.
Be strategic about what features to include in which plan. You want to reduce the time it
takes for a user to move from a free trial/freemium/basic version to a paid/advanced plan.
And from a paid/advanced plan to an upsell/cross-sell position. Reducing this time means
reducing the time to value.
Time to value is an example of a customer success vector. That is, you have the customer’s
goal which defines their direction. This customer goal will have a business value attached.
You aim to move your customer through one goal post to the next, in the shortest amount of
time, until you can extract business value from them.
We’ve spoken about customer success vectors before. For more information, read our post 5
Tips to Make Your Customer Success Vectors Actual Vectors (KSIs Not KPIs).

7. 7/11
You can represent customer movement from one goal (milestone 1) to the next (milestone 2),
in a vector chart as given above. You aim to steepen the vector’s gradient in the positive
direction. This is a win-win situation – your customers will achieve their goals quickly and
you’ll reduce the time it takes you to extract value from them.
Metric #3: Using an account health scorecard

8. 8/11
You want your customers to receive value and benefit from your offering. If they don’t, then
you can’t expect to retain them.
Retaining customers is all about keeping your customers happy and your accounts healthy.
Healthy accounts will continue to extract value from you. Unhealthy accounts will eventually
churn.
Here an accounts health scorecard is your holistic metric to determine customer retention.
To help you, Process Street has created an Account Health Scorecard Checklist Workflow to
measure the health of your accounts. Again, this has been mentioned in a few of our
customer success posts already. That’s because the account health scorecard is a vital tool in
the customer success world. A tool that will:
Accurately capture the customer’s target objectives, target outcomes, and progress
along their value realization path.
Provide an advanced visual aid for users to understand product performance based on
usage and business value creation.
Track potential and emerging areas of concern and red-flag these as issues.
By red-flagging areas of concern, you can take appropriate action to continuously keep your
accounts healthy.
Click here to access our Account Health Scorecard Checklist Workflow!
Key checklist features:
Stop Tasks: Stop Tasks ensure the required steps for creating an accurate scorecard are
completed in the correct order.
File Upload and Approvals: You’ll be asked to upload the account scorecard you produce
using our File Upload feature. Your manager is then notified that your scorecard is ready
for assessment, and can jump in and accept/reject (with comments) as required using our
Approvals feature. This gives an extra layer of quality control.
Role Assignments: Use our Role Assignments feature to assign your supervisor to the
approval task. Your supervisor will be automatically notified of the upcoming approval
action required.
Metric #4: Measuring the difference between CLV and CAC

9. 9/11
It’s the job of CS teams to influence and empower customers to expand their account’s value.
We’re talking about account renewal, an increase in product usage, upselling, cross-selling,
and product advocacy. And we have a bunch of metrics that will allow you to measure this
expansion, namely:
1. Renewal rate: Divide the number of users who renewed their subscription by the
number of users up for renewal.
2. Product usage: Track and record meaningful in-product user interactions.
3. Upsell percentage: Divide the number of customers that purchased more in a cohort
by the total number of customers in that cohort. Multiply value by 100 to get a
percentage.
4. Cross-sell ratio: Divide the number of products/services sold by the number of
customers.
5. Product advocacy: There’s no single metric that measures product advocacy.
Commonly used tools include social listening, tracking referrals, customer engagement
measures, and influencer revenue.
Ultimately, product expansion is about growing the profitability of a given account. Whether
that’s through upselling, cross-selling, or advocacy – the above-listed actions add up and
boost an account’s revenue. A more holistic approach would be to measure expansion directly
by comparing CLV and CAC, as I’ll explain.
Calculate the CLV for an account: Multiply the average number of purchases in a
year by the average retention time in years.
Calculate the CAC for an account: Divide the number of new customers acquired
by the total sales and marketing costs it took to acquire these customers.

10. 10/11
By comparing the CLV and CAC values for a given account over time, you can measure
whether the gap between these two measures is widening (account expansion) or not. You
aim to grow an account’s CLV and reduce an account’s CAC.
3 bonus tips to rocket your expansion revenue
Great customer success should boost account expansion all on its own – but sometimes you
need a bit of help.
Expansion revenue might be the chief concern for CS teams, but it also fundamentally
determines the success of the business, and everyone needs to be involved.
Before wrapping up this article, below I’ve listed 3 top tips to help you expand revenue way
beyond your current targets.
Tip #1: Work with the product to boost virality 🌍
Your users love your product and through your ‘Aha!’ moment, you know what path new
users need to take to get to that point. Any user-product interaction though it a massive win.
Many of the best and most successful SaaS companies have increased their virality and the
number of people who end up inside their product at any given moment is by adding free
collaborative features.
This might be a Guest user who’s invited into the product. This person then gains value from
the product at no extra cost, and maybe they’ll be a convert and choose to spread it to their
team.
You could also create freemium tiers to help new people inside your customer’s organization,
who’ll use your product regularly. The more people you can get inside your product from
companies who already get value from you and pay you money, the more impact you’ll see on
your bottom line.
Tip #2: Work with marketing to add conversion moments 🤝
One of my favorite examples of conversion moments in product collaboration is Calendly. If
you’re not already a Calendly user, then once you’ve booked a slot on someone’s calendar it
immediately takes you to a success page where it tries to get you to sign up.
After all, they already have your email so it’s presented as a one-click process.
Adding these sales pages in key conversion moments for people who might find themselves
collaborating inside your product is a huge way to draw people in.
Many people who use you probably would want to use you again. Make it as easy as possible
to do so!

11. 11/11
Be wary, of course, of going too far with this! You don’t want to create a bad experience for
your existing customers by constantly trying to sell to their clients or partners who they’ve
brought into your product to collaborate with.
Tip #3: Work with your Community team to create evangelists 🤳
Maybe you run the Community team, maybe it’s under Marketing, or maybe it’s its own
department?
I don’t know the structure of your org. Sorry.
But building community is one of the best ways to engage your customers, make them
happier, and tailor a product around their needs. It’s also the best way to create super users
who evangelize your product to everyone they meet.
Try to get your customers to be active in your help forums, invite them to conferences, ask
them to show off a cool use case in a post for your blog, work with them to make a testimonial
video, and more and more and more.
Any opportunity you have to lift your customers will be repaid. Champion your customers
and they will champion you. That will turn into expansion revenue.
And that’s why we call it customer success!