CAC LTV Payback Ratio Heatmap [Download Template]

Launching a Product-Led Growth (PLG) Strategy: Our Journey to a Self-Sustainable Motion

When we launched our PLG strategy 🚀, we had a clear vision: to build a self-sustainable product led growth motion that would drive our business forward 🔁.

As the Head of PLG, I found an invaluable tool in a simple Excel Heatmap 🔥 that allowed me to effectively showcase our Customer Acquisition Cost (CAC) and Lifetime Value (LTV) metrics to the organization. This visual representation became crucial in demonstrating how our PLG efforts were lighting up our business 🏮.

»»» Download the Excel CAC LTV Heatmap template here: https://docs.google.com/spreadsheets/d/1qt16CEzHTyCgcg-VFM0uQCWHWIsZk5mzMBPI6gd5Vpk/edit?usp=drive_link

How We Utilize the Heatmap

➡️ Defining CAC
We define our Customer Acquisition Cost (CAC) as the sum of our marketing spend (including LinkedIn Ads and tools) plus the salaries of our PLG team. However, for demonstration purposes in this post, I'll focus solely on marketing spend as our CAC.

➡️ Monthly CAC Investment
Each month, we allocate a specific CAC to acquire and onboard our free customers. This consistent investment is crucial for maintaining a steady flow of potential premium users.

➡️ Tracking LTV Revenue
Our PLG journey began in January 2023, and fortune smiled upon us early. Within the first week, we successfully upsold a customer to our premium plan, recording our initial LTV revenue. This early win was a positive home run 🔥, giving us a boost of confidence right out of the gate 🙌🏼.

Navigating Challenges and Turning the Tide

Despite our initial success, the subsequent months proved challenging 😰. We faced hurdles in converting free users to premium customers. However, we didn't lose focus and implemented several strategies to improve our conversion rates:

1. Experimented with pricing and packaging

2. Refined our upsell messages

3. Created enablement content to reassure customers

These efforts gradually began to pay off, and we started to see a positive trend in our conversions.

Understanding the PLG Customer Journey

It's important to recognize that the PLG customer journey often requires patience ⏳. Here are some key insights we gained:

• Not all customers upgrade 😣, and those who do may take a considerable amount of time.

• Many customers would raise their hands 🙋🏻‍♂️ for advanced features or seek assistance after being onboarded and activated.

• A significant portion of PLG customers are in the research phase, testing tools and learning how to extract value. 🔍

• It typically takes X months before customers fully realize the value or when their organization begins adopting new processes. ⏲️

Measuring Success: CAC LTV Ratio

To gauge the effectiveness of our PLG strategy, we closely monitor our total CAC LTV ratio. This metric helps us understand which cohorts are performing well and provides insights into our CAC LTV payback period.An advanced concept worth exploring is the velocity of your CAC LTV payback model 💨💨💨. For those interested in diving deeper into this topic, I highly recommend checking out Paul Levchuk's brilliant posts on the subject.

The Sustainable PLG Flywheel

By consistently tracking and optimizing our CAC LTV ratio, we've been able to create a sustainable PLG flywheel motion 🔁🔁🔁. This approach has allowed us to continuously improve our product, attract new users, and convert them into paying customers, all while maintaining a healthy balance between acquisition costs and customer lifetime value.

In conclusion, our journey to building a self-sustainable PLG motion has been both challenging and rewarding. The Excel Heatmap has proven to be an indispensable tool in visualizing our progress and communicating our success to the organization. As we continue to refine our strategy, we remain committed to the principles of Product-Led Growth and the power of data-driven decision-making.

(Note: The story shared here is true, but the numbers used in the heatmap are fictitious for demonstration purposes. If you have any questions about implementing a similar PLG strategy or using the heatmap tool, feel free to ask in the comments below.)

See what others comment on this LinkedIn post: https://www.linkedin.com/posts/garyyauchan_plg-cac-ltv-activity-7242307127946395649-C9pO

»»» Download the Excel CAC LTV Heatmap template here: https://docs.google.com/spreadsheets/d/1qt16CEzHTyCgcg-VFM0uQCWHWIsZk5mzMBPI6gd5Vpk/edit?usp=drive_link

Post-Sales and Product Led Growth

1. Get those G2 Reviews! 🤩

2. Find more upsells with this post-sales playbook 🤑

3. Understand reasons why customers churn: 5 Churn analysis and methods 😵‍💫

Retention and Product Led Growth

1. How we increased retention by activating +45% of our PLG customers? 📈

2. What is a good vs. great retention benchmark? 📊

3. Who owns retention? 🫵

4. Five ways to improve retention in PLG 🖐️

Roadmaps and Product-led Growth

1. How do I convince Product, Design, and Engineering to build PLG features? 😍

2. How do I know we are building the right things for PLG? And what are the success metrics? 🤔

3. How to use customer feedback in your PLG product roadmap? 🗣️

4. How to communicate product-led growth Roadmap to Stakeholders? 😰

5. How to handle stakeholder requests? 😅

I write daily*** about my learning on launching and leading PLG. Feel free to subscribe.

I am Gary Yau Chan. 3x Head of Growth. Product Growth specialist. 26x hackathon winner. I write about #PLG and #BuildInPublic. Please follow me on LinkedIn, or read about what you can hire me for on my Notion page.