Metrics, Steady Growth, What’s Next for PLG: Product Benchmarks 2022
We are back with our third annual Product Benchmarks report.
I found OpenView because of its annual SaaS Benchmarks report. I used this tool continuously to build fundraising documents for various startups and to level-set with executive teams on our performance.
As I began to manage go-to-market and (what I now know as) product-led growth (PLG), I found myself struggling to understand what was “good” and what was “great” when it came to product conversion. The numbers I was producing felt incredibly low compared to sales-led rates and it led to a crisis of confidence. When I came to OpenView, I wanted to make sure no one else building a PLG product felt that way, and so the Product Benchmarks report was born.
While I hate to be all doom-and-gloom, there is no technology company that isn’t feeling the changing tides of the markets right now. It’s safe to say that it is going to be a tough year for many software companies that were previously investing in hypergrowth. For emerging SaaS businesses to survive and thrive, they need to understand the levers to pull to grow efficiently and responsibly–and this report can help them do that.
I’m excited to share the 2022 Product Benchmarks Report. Here are some of the key highlights:
Product-led growth continues to rise
One of the strongest findings is that product-led growth (PLG) has continued to become more and more prevalent amongst the respondents. Since our initial report in 2019, PLG adoption has grown from 45% to 55%. Now, 61% of companies in the Cloud 100—including Calendly, Amplitude, and GitLab—leverage a PLG model. Now we can show what growth looks like at mature organizations with more than a single growth leader. We’ve learned what PLG looks like at complex organizations resourcing a sophisticated self-service motion.
This year’s report revealed product-led companies–especially those with a freemium model–are 2x more likely to grow revenue 100% year over year as compared to sales-led models.
For the first time, we segmented respondents into four product experience categories: freemium, free trial, standout PLG, and sales-led. This enables companies reviewing the data to understand the differences in growth of each go-to-market motion. More importantly, they can develop their own strategies and models based on where they see the most success.
According to this year’s survey, more than half of respondents identify as a product-led organization. The number of respondents with more than $10 million in annual recurring revenue (ARR) has nearly doubled year over year, illustrating that PLG is more than just a trend: it’s the new normal.
The New User Journey is here to stay
Since PLG products enable users to discover, try, and buy on a self-service basis, the standard “sales funnel” focused playbook is no longer relevant. Based on interviews with B2B SaaS experts who have built and scaled successful product-led businesses, we’ve seen the creation of a New User Journey, which includes the following stages:
- Discover. Top freemium businesses generate most of their users through organic search (53%) and product-driven referrals (13%).
- Start. Freemium businesses have a median visit-to-signup rate of 6%, making website conversion optimization a huge opportunity.
- Activate. 87% of standout PLG companies identify and track activation, the moment when products deliver value to users.
- Convert. Only 5% of all freemium signups convert from free to paid customers.
- Scale. Retention matters more than ever; companies that performed outreach to users retained them 2-3x better than those who didn’t.
Looking to the future
There’s no silver bullet framework, org chart, or market that will help you build a product that drives its own acquisition, retention, and engagement. It is something that requires constant upkeep, maintenance, and optimization.
The broader community of growth leaders and practitioners can look to this report and know they are not alone–that some of the most profitable and fastest growing companies in the world are recording these metrics. Their numbers and metrics might look different–and significantly lower– than a software company that leads with sales, but that doesn’t mean they are bad.
We appreciate the folks who’ve been here since 2020 when we launched our inaugural report. Hopefully you’re just as excited as we are to see how prevalent product-led growth has become. The metrics that make up a product funnel are now becoming common knowledge and no longer needing to be defined. We’re moving to an era where we now have enough data to cut and analyze PLG in all different ways–and that is exciting to me.
I do hope that you’ll reach out with any questions or critiques of the report. We work hard to make it better each year, and your feedback is what makes that possible. Thank you!