PLG Flywheel: 5 Stages of Self-Sustaining Growth

The PLG flywheel is a self-reinforcing growth model where each customer stage accelerates the next, and satisfied customers create more customers.¹ Unlike funnels where users exit after purchase, flywheels retain momentum: SaaS companies with strong flywheels see 50%+ of new revenue from existing customers.² The 5 stages are Evaluate, Activate, Adopt, Expand, and Advocate.

Dimension	Funnel	Flywheel
Motion	Linear, one-way	Circular, self-reinforcing
Leakage	Customers leak out at each stage	Customers feed back into acquisition
Endpoint	Customer exits after purchase	Customer becomes growth engine
Revenue	Requires new customers	Expands from existing customers

The 5 Flywheel Stages

Each stage transforms users from strangers to advocates. The goal isn’t just to move users forward, it’s to make each stage accelerate the next. Each stage has one metric with healthy/warning/critical thresholds. When a metric drops into warning or critical, that stage is your constraint.

1. Evaluate

Get people to sign up and try your product.

Key Metric: Signup rate — percentage of visitors who create an account

Healthy >5% Warning 2-5% Critical <2%
User Segment: Strangers — visitors researching solutions, not yet committed
If broken: Value prop isn't landing. Simplify signup, clarify what users get, and reduce friction to first value.
Improve with: Co-Experience, UGC Loop, Product-Led SEO, Embedded Virality, Open Source, Waitlist

2. Activate

Help them experience the 'aha moment' and see why your product matters.

Key Metric: Activation rate — percentage of signups who reach the aha moment

Healthy >40% Warning 20-40% Critical <20%
User Segment: Explorers — new signups testing if the product fits their needs
If broken: Users aren't finding value fast enough. Reduce time to value, improve onboarding, and make the aha moment unmissable.
Improve with: Personalized Onboarding, Empty State Design, Quick Win Architecture, Familiar Interface, Interactive Sandbox, API-First

3. Adopt

Make your product part of their daily or weekly routine.

Key Metric: DAU/MAU ratio — daily active users divided by monthly active users

Healthy >40% Warning 20-40% Critical <20%
User Segment: Beginners — activated users forming habits and integrating into workflows
If broken: Spiky usage means your product is a vitamin, not a painkiller. Find habit triggers, add integrations, and embed into daily workflows.
Improve with: Habit Loops, Workflow Embedding, Data Lock-In, Progressive Disclosure, Network Effects, Marketplace Ecosystem

4. Expand

Get them to upgrade, add teammates, or increase usage.

Key Metric: Net Revenue Retention — revenue from existing customers compared to last period

Healthy >120% Warning 100-120% Critical <100%
User Segment: Regulars — frequent users who've mastered core functionality
If broken: Pricing or packaging isn't capturing value. Adjust usage limits, add team features, and align upgrades with moments of delight.
Improve with: Freemium, Reverse Trial, Smart Upgrade Triggers, Land and Expand, Bottom-Up Adoption

5. Advocate

Turn happy users into promoters who bring in new users.

Key Metric: Referral rate — percentage of users who refer others

Healthy >10% Warning 5-10% Critical <5%
User Segment: Champions — power users who actively promote and evangelize the product
If broken: Users aren't excited enough to share. Build sharing into the product, add referral incentives, and make outputs visible to non-users.
Improve with: Two-Sided Referrals, Achievement Sharing, Community-Led

Measuring Flywheel Health

Each stage has its own metric (shown above). But NRR is the one number that tells you if your flywheel is actually spinning forward. NRR is both Expand’s stage metric and your flywheel’s master health indicator, because expansion revenue is where the flywheel pays off.

Why? Because NRR answers: “If we stopped acquiring new customers today, would we grow or shrink?” A flywheel that spins forward means existing customers stick around (Adopt), spend more over time (Expand), and bring others (Advocate). NRR captures all three. Snowflake’s 158% NRR means they grow 58% annually from existing customers alone, before signing anyone new.³

NRR = (Starting MRR + Expansion - Contraction - Churn) / Starting MRR × 100

NRR	What It Means
<90%	Flywheel is spinning backwards. You’re shrinking even if you add customers.
90-100%	Treading water. New sales just replace churn.
100-120%	Growing from existing base. Healthy flywheel.
>120%	Flywheel is accelerating. Expansion outpaces churn significantly.⁴³

Fix the Weakest Stage First

Your flywheel spins at the speed of its weakest stage. Pouring resources into a strong Advocate program while Activation is broken just means more referrals who also churn immediately. Find the constraint. Fix it. Then move to the next one. This is the Theory of Constraints applied to growth.⁵

What Teams Do	What Actually Works
Optimize all stages equally	Find the constraint, fix it first
Scale acquisition when activation is broken	Fix activation so new users actually stick
Celebrate signup growth	Celebrate retention growth

The Takeaway

Most teams treat the flywheel as a funnel with extra steps. Actually, the flywheel only works when every stage feeds the next. A broken Activate stage doesn’t just lose users, it starves Adopt, Expand, and Advocate of momentum. NRR above 100% is the proof your flywheel spins forward. Below 100%, you’re running a leaky funnel with extra branding.

Action Items

Map stage-to-stage conversion: What % of signups activate? What % of activated users adopt? What % expand? Build a dashboard showing each transition. You can’t fix what you can’t see.
Find your constraint: Which transition loses the most users? Interview 3 users who dropped there. Ask: “What stopped you from continuing?” The answer is usually simpler than you expect.
Check your NRR: Below 100% means your flywheel spins backwards. Above 100% means expansion outpaces churn. That’s the difference between a leaky funnel and a growth engine.

Appcues PLG Flywheel Framework, adapted from Jim Collins, Good to Great, 2001. Each revolution makes the next easier. ↩
Appcues, “The Product-Led Growth Flywheel,” research on 100+ SaaS companies. Companies with strong flywheels see 50%+ of new revenue from existing customers. ↩
Benchmarkit, OpenView, Growth Unhinged, “NRR Benchmarks 2025.” Median NRR: 106%. Best-in-class: >130%. Companies with NRR >100% grow 2.5x faster. ↩ ↩² ↩³
OpenView, “2022-2023 Product Benchmarks Report.” Companies with expansion revenue >40% of new ARR grow 2x faster. ↩ ↩²
Theory of Constraints applied to growth funnels, via Reforge. Improving the wrong stage leaves opportunity on the table. ↩

Next: Co-Experience