At High Alpha, we’re in the business of building SaaS businesses. As you may predict, that requires a lot of product horsepower. The companies we launch from our venture studio have increasingly taken a product-led growth (PLG) approach, and new trends have emerged in relation to product development, product-led growth metrics, acquisition and retention, and more.
OpenView’s new Product Benchmarks report covers all of that and more. Their inaugural report includes advice and insights for product leaders, gathered from more than 150 SaaS companies. The report allows SaaS operators to see how their growth rates and other product data stacks up against other SaaS companies. Access it here.
Product-Led Businesses Scale Faster
A product-led company is likely to scale faster — the data proves it. Although it can take longer for these companies to get the product-led growth flywheel turning, once it’s going, it’s really going. The PLG playbook enables companies to avoid the hiring crunch that can occur when scaling.
Product-led growth companies tend to scale faster and have lower CAC than their non-PLG counterparts because they have a wider top of funnel. They’re also less limited by the geographical boundaries put in place by sales teams, meaning your product can be truly global without hiring new sales reps to manage a territory.
Big names like Slack, Calendly, and Dropbox have at least partially attributed their growth to following a product-led strategy as they scaled. They built products that were easy to use from the start, shareable, and that could quickly provide value. Many of the most successful product-led companies share a similar set of characteristics.
More Companies Are Focused on Product Qualified Leads…
In a previous survey, OpenView found that just over a quarter of SaaS companies were tracking product qualified leads (PQLs). Today, that number has doubled — with half of SaaS companies tracking activation or qualifying leads via their product.
OpenView has also found that leads who qualified themselves in the product convert at a 5x higher rate than the overall conversion rate.
It’s important to note that sales still matters in the product-led growth playbook. While the product draws in leads and gets them to convert, sales plays a big role in transitioning free accounts to paid ones. The vast majority of companies (90 percent) are reaching out to free accounts via either sales, support, or customer success teams. As a whole, conversion rates increase as sales touch points increase during freemium product use or a free trial. Interestingly, freemium-to-paid accounts have a lower conversion rate than free trial-to-paid accounts — by more than five percent. This is an important factor to keep in mind as companies plan their product-led GTM approach.
…But Product Metrics Are Varied
While PQLs are used to measure performance at some companies, others are leaning into activation rate, natural rate of growth, and product usage metrics, like daily, weekly, or monthly active users. It’s no secret that measurement matters, but what’s worth measuring is up for debate. Data can help companies understand what needs to be fixed in a product, or to predict future needs.
OpenView’s Product Benchmarks report found that:
- 42 percent of companies with a free trial or product track activation; companies who use free trials as their GTM motion see higher activation rates
- 25 percent of companies surveyed currently track PQLs
- Companies with freemium product offerings experience a higher natural rate of growth (NRG) than those taking sales or free trial go-to-market approaches
- 38 percent of SaaS companies are tracking monthly active users, but another 28 percent aren’t tracking active users at all
Ultimately, the types of product metrics a company chooses to focus on will vary as hypotheses are proven or broken, and as more and more testing is done. Your metrics should be guiding you to make decisions about your product, your product-led growth marketing strategy, and more.