The best metrics reveal exactly how users engage, stay, and spend, helping product teams see where to fine-tune features or enhance the user experience for greater returns.
But what do we mean by best metrics and what should you do with them?
Read further to find out.
Core Revenue Metrics for PLG
(1) Monthly Recurring Revenue (MRR)
Monthly Recurring Revenue (MRR) is a critical metric that represents the predictable revenue generated every month. MRR provides a clear snapshot of the company’s financial health, helping teams understand revenue trends and track progress. In PLG, MRR growth reflects not only new customer acquisition but also retention and expansion within existing accounts. Monitoring MRR over time reveals how well the product satisfies user needs, keeping them engaged and willing to pay for ongoing access.
MRR also serves as a basis for forecasting and budgeting, giving insights into how steady the revenue stream is month-to-month. A growing MRR often indicates that the product delivers consistent value, supporting customer retention and creating opportunities for upsells and cross-sells.
(2) Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV) measures the total revenue a customer is expected to generate over their relationship with the product. In a PLG model, LTV is a powerful indicator of the long-term value users find in the product. A high LTV suggests that users remain loyal and engaged, providing steady revenue over time. Optimizing LTV involves improving the product’s functionality and usability, which enhances the overall user experience and encourages long-term retention.
LTV is especially valuable when compared to acquisition costs, as it helps evaluate the cost-effectiveness of customer acquisition efforts. For PLG-focused companies, a balanced or high LTV-to-CAC (Customer Acquisition Cost) ratio shows that the product’s growth engine is working efficiently, contributing to sustainable revenue growth.
(3) Net Revenue Retention (NRR)
Net Revenue Retention (NRR) measures the revenue retained from existing customers after accounting for churn, expansions, and downgrades. This metric is essential for understanding how well the product retains and grows its existing customer base. High NRR, typically above 100%, indicates that expansions and upsells within existing accounts outweigh any losses from customer churn or downgrades. In PLG, NRR reflects the product’s ability to evolve with customer needs, showcasing its value over time.
Tracking NRR helps identify which features or improvements encourage users to increase spending. By focusing on product updates that enhance user experience and address customer feedback, companies can boost NRR and drive ongoing revenue growth through existing customers.
(4) Gross Revenue Retention (GRR)
Gross Revenue Retention (GRR) focuses purely on retention, showing the percentage of revenue retained without considering upsells or expansions. GRR offers insight into baseline retention success, making it particularly useful for understanding product stickiness. If GRR is low, it may suggest issues with user engagement, usability, or satisfaction that could lead to churn. In PLG, where product loyalty is paramount, maintaining a high GRR is crucial for establishing a reliable revenue base.
By monitoring GRR, product teams can proactively address factors leading to churn and make product adjustments that foster higher retention. Improving GRR ensures a stable revenue foundation, upon which expansion opportunities can further enhance growth.
(5) Average Revenue Per User (ARPU)
Average Revenue Per User (ARPU) reflects the average revenue generated from each active user. ARPU is a valuable metric in PLG, as it reveals how effectively the product monetizes users. Tracking ARPU over time shows whether new features, pricing adjustments, or targeted promotions are successfully increasing per-user revenue. Higher ARPU often indicates that users are adopting premium features or subscriptions, driving incremental revenue growth.
ARPU also helps identify opportunities to introduce additional features or upgrades that users find valuable. By continuously improving ARPU, PLG companies can create more profitable user experiences that contribute to sustained revenue.
Expansion-Focused Metrics in PLG
(1) Expansion Revenue
Expansion revenue measures growth within the existing customer base, capturing revenue generated from upsells, cross-sells, or additional services. In PLG, expansion revenue is a vital indicator of product adoption depth. When users see ongoing value and new applications for the product, they’re more likely to increase their spending.
By focusing on expansion revenue, product teams can prioritize enhancements and premium offerings that appeal to current customers. Maximizing expansion revenue helps PLG companies grow without relying solely on new customer acquisition, making growth more cost-effective and sustainable.
(2) Product Qualified Leads (PQLs) Conversion Rate
The PQL conversion rate tracks how many PQLs convert into paying customers, making it a valuable metric for B2B PLG companies. PQLs are users who have demonstrated significant engagement with the product, such as reaching a usage threshold or completing key actions. A high PQL conversion rate indicates that the onboarding flow and product experience effectively demonstrate value, encouraging users to upgrade or purchase.
Monitoring PQL conversion rates allows teams to assess how well the product communicates value and identify opportunities for improvement. For PLG, high PQL conversion rates mean that the product successfully drives its own growth by turning engaged users into revenue-generating customers.
(3) Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the cost associated with acquiring each new customer. In PLG, where the focus is on organic growth and efficient acquisition, keeping CAC low is essential. When paired with LTV, CAC provides insight into the return on acquisition investment, helping determine the profitability of growth strategies.
To balance CAC with revenue goals, PLG companies should focus on creating a self-serve onboarding process and using product-driven marketing channels, such as referrals or freemium models. By optimizing CAC, PLG companies can maximize revenue while maintaining cost-effective acquisition.
Tracking and Optimizing Revenue Metrics in PLG
Using Cohort Analysis to Track Retention and Growth
Cohort analysis helps product teams track user retention and growth over time by examining how specific groups of users behave. By breaking users into cohorts—based on signup date, usage, or feature adoption—teams can identify trends that affect revenue metrics. For example, cohort analysis can reveal if users who activate a particular feature have higher LTV, helping teams refine the onboarding flow or product updates to boost engagement and revenue.
Leveraging A/B Testing for Revenue Optimization
A/B testing allows product teams to experiment with different elements of the user experience—such as pricing, feature placement, or messaging—to see what optimizes revenue metrics like ARPU, LTV, and MRR. Testing helps teams refine product changes based on real user behavior, making it easier to drive growth. By continually experimenting, PLG companies can fine-tune their product and monetization strategies, maximizing their impact on revenue.
Feedback Loops and Revenue Metrics
User feedback plays an important role in improving revenue metrics by informing product updates and addressing pain points. Feedback loops, created through surveys, reviews, and user interviews, offer insights into what features or changes would add the most value. By implementing these suggestions, product teams can enhance NRR and LTV, as users who see their needs met are more likely to stay engaged, spend more, and advocate for the product.
Conclusion
Tracking revenue metrics is a cornerstone of Product-Led Growth, offering valuable insights into user behavior, engagement, and financial outcomes. By focusing on core metrics like MRR, LTV, NRR, and ARPU, product teams can make data-driven decisions that align with revenue goals. Expansion-focused metrics like PQL conversion rates and expansion revenue reveal opportunities to drive growth within the existing customer base, making PLG more sustainable and cost-effective. Regularly evaluating these metrics ensures that the product not only meets user needs but also contributes to long-term profitability, forming a solid foundation for growth.
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