Interested in learning about activation rate and what it means for your SaaS company?
In this article, we’ll cover what activation rate is as well as how to calculate and benchmark it. Then we’ll explain its importance and provide 10 tips to boost your SaaS activation rate.
Lastly, we’ll show you what metrics to track alongside activation rate and answer some FAQs.
This Article Contains
- What Is Activation Rate?
- Why Does Activation Rate Matter?
- How to Calculate Activation Rate
- What’s a Good Activation Rate?
- 10 Best Ways to Improve Your Activation Rate
- 6+ Related Metrics to Track
- 2 Activation Rate FAQs
Let’s get started.
What Is Activation Rate?
Activation rate is the percentage of new users who complete a specific action that’s tied into realizing the value of your SaaS product.
How do you determine this?
First, decide on an activation point.
These are key actions that are highly likely to turn free trial users into paying customers, or turn new users into long-term users. The activation point is when a new user says, “Aha! I get it!”
Unfortunately, choosing an activation action is the trickiest part.
It could be something like:
- Number of features used or number of times using a specific feature.
- Completing every step of your onboarding flow.
- Number of teammates added to the software.
- Submitting a positive survey response.
Once you’ve selected your “Aha moment,” the activation rate is the percentage of users that reach it.
Now let’s find out what makes SaaS activation rate so important.
Why Does Activation Rate Matter?
There are three main reasons why you should optimize your activation process:
1. Measure the Success of Your Onboarding
If your activation rate is low, you may have friction points in your onboarding process. These friction areas are preventing your users from reaching their “Aha” moment easily.
Make changes to your customer onboarding flow and check your activation rate to judge the effectiveness of these tweaks.
2. Boost your MRR and ARR
Your activation rate is closely correlated with user retention and conversion.
To better understand how, let’s take a brief look at a typical SaaS customer journey:
- Attract: Prospects become aware of your product and consider whether it might meet their needs. They may purchase it or try it for free.
- Activate: New users who find value in your product become activated users.
- Convert/Retain: An activated trial user is more likely to become a paying customer. Customers who have purchased your product and found continued value may become daily active users (DAUs) and monthly active users (MAUs).
- Renew: High user engagement creates loyal customers who repurchase or upgrade.
As you can see by the user journey, activation is the gateway between user acquisition, user retention, and user growth.
Having many loyal customers contributes towards your MRR (Monthly Recurring Revenue) – your predictable monthly income from active subscribers. MRR also flows into ARR (Annual Recurring Revenue), a powerful indicator of your business’s performance and growth.
3. Improve Your Marketing ROI
When you have a higher activation rate, you should see more conversions and higher retention.
The more people who convert, the higher your ROI (Return on Investment) on your marketing efforts will be.
Additionally, as your recurring revenue increases, you have more resources to spend on marketing and other business processes. Nifty!
But how is activation rate calculated?
How to Calculate Activation Rate
Here’s the formula for calculating activation rate:
Activation rate = (Number of users that reach the activation milestone / Total number of users) * 100
Tip: Some website and product analytics tools (like Google Analytics and Mixpanel) have features for tracking your activated user count based on your activation strategy.
Next, let’s explore what activation rate you should aim for.
What’s a Good Activation Rate?
Activation rates tend to vary for businesses of different sizes and in different industries.
A 2022 report by OpenView found activation rates between 14% and 33% for companies with different ARRs.
Looking at these findings, a good activation rate may be between 20%-40%, but it’s best to benchmark yourself against companies of a similar:
- Founding stage
- Business type (e.g., B2B or B2C)
- Product strategy (e.g., free trial, freemium, sales-led, product-led)
Not hitting the benchmark?
Let’s find out how to improve the activation flow of your SaaS product.
10 Best Ways to Improve Your Activation Rate
Here are our 10 best tips to increase the total number of new users who reach the activation moment:
1. Research Customer Pain Points
There are two main ways to gain insight into friction points in the user journey:
- Quantitative data: Analytics apps like Mixpanel and Amplitude can show you vital user behavior data and reveal drop-off points.
- Qualitative research: Conduct interviews and surveys with customers to understand what friction points they encountered in their user experience.
2. Simplify Sign Up and Onboarding
If your customer behavior data indicates that prospects aren’t completing the signup process, you can consider key actions like:
- Allowing users to sign up with email or social accounts rather than a username and password.
- Removing unnecessary steps and form fields.
- Delaying account verification to allow immediate sign-in.
- Offering single sign-on (SSO).
For customer onboarding, you should:
- Present an uncluttered UI (user interface).
- Break down steps to make them easy to accomplish.
- Remove unnecessary steps.
- Offer pop-up hints to guide new users.
- Send tutorial emails that show them how to use your app.
3. Improve In-App Copy
Users respond best to simple, direct language rather than complicated paragraphs.
Ensure the language in your product tour is direct and benefit-focused.
Illustrating how your features can address their needs helps motivate prospects to explore the product further.
4. Personalize the Process
New users will respond best to an onboarding process that’s tailored to them.
Here are a few ways to achieve this:
- Display a personalized welcome screen by allowing them to choose a user persona, job role, or set of goals.
- Set up targeted onboarding flows for the various personas and goals.
- Create adaptive walkthroughs that use context to recommend next steps.
5. Use Checklists and Gamification
Checklists are a great way to guide users toward the “aha moment” and indicate progress.
However, instead of one universal checklist, you should create several with specific customer segments in mind.
For example, a casual user might benefit from a basic tour, but a B2B user should be directed to business-oriented features.
Checklists are one form of gamification, but there are many others, such as:
- Achievements and badges.
- Points to use for cosmetic upgrades.
- Leaderboards among team members.
- Goal completion progress bars.
6. Offer Self-Service Support
Users want to find quick resolutions for obstacles, not wait around for a support rep.
That’s why you should offer comprehensive self-service support options, such as:
- A knowledge base (resource center) of how-to guides, FAQs, blog posts, etc.
- Thorough documentation about the product.
- A searchable forum for user queries.
- A chatbot that shares appropriate resources.
As a bonus, these also minimize the burden on your customer support team.
7. Send Nudges
Having a self-service activation flow doesn’t mean you can’t be hands-on. You can still nudge users with communications via email, push notifications, or text messages.
For example, you can send content and reminders like:
- Welcome emails.
- How-to articles and videos.
- General information and updates about new features.
8. Re-Engage Inactive Users
Lifecycle messaging is also a great way to bring inactive users (e.g., a trial user who didn’t purchase) back into the fold.
For example, you can:
- Offer additional support to users who show churn signs.
- Remind users about the product’s benefits through retargeting.
- Send social proof testimonials.
9. Offer VIP One-on-One Onboarding
Some products have a steeper learning curve than others.
For example, a SaaS product aimed at large healthcare enterprises carries high stakes for getting off on the right foot.
In such cases, offering a fully guided one-on-one onboarding experience may be best. This way, your onboarding team can address every enterprise customer’s precise needs and ensure customer success.
10. Restrategize Your Sales and Marketing Process
Have you tried everything to improve your activation strategy but seen mediocre results?
You could be targeting the wrong prospects in your marketing and sales processes. If your users aren’t a good fit for your product, there’s a good chance they’ll never activate.
You may need to rethink your ideal buyer personas and how to attract them to your product effectively.
Now that you know how to optimize user activation, let’s find out what other metrics you should be tracking.
6+ Related Metrics to Track
Activation metrics are valuable for measuring your users’ first impressions but don’t provide a complete picture.
Every product manager should consider tracking their pirate metrics alongside activation rate.
Pirate metrics are five classes of metrics to study customer success throughout the customer journey.
- Acquisition metrics (e.g., Acquisition rate, acquisition costs)
- Activation metrics (e.g., Activation rate, time to activation)
- Retention metrics (e.g., Retention rate, monthly active users to daily active users ratio)
- Revenue metrics (e.g., MRR, ARR, CLV)
- Referral metrics (e.g., Referral rate, referral revenue)
AARRR (pirate metrics – Get it? 🏴☠️)
Boosting each of the pirate metrics allows you to improve the next. For example, customer activation helps you unlock retention, and so on.
2 Activation Rate FAQs
These are the two most common questions about user activation rate:
1. What mistakes do companies make when calculating activation rates?
The number one mistake a product manager can make is choosing the wrong activation milestone.
Companies generally do this in five ways:
- Setting it too early: Avoid milestones that are too easily achieved and don’t predict conversion or retention.
- Setting it too late: Don’t assume purchasing is the only activation indicator. This doesn’t tell you how or why users convert.
- Not choosing a predictive event: If the activation event has a weak correlation with conversion and retention, you won’t get the insight you need to improve.
- Not making the event actionable: Don’t choose a milestone you have little data on or control over.
- Selecting an overly complex event: Steer clear of activation events with numerous steps.
2. How do you choose an activation moment?
A good activation milestone should:
- Be easy for the user to achieve.
- Be something you can measure and influence.
- Happen early in the onboarding process (e.g., within the first week of use)
- Predict activated user retention and conversion (e.g., “Users who perform X action are Y times more likely to convert.”)
Achievement Unlocked: Activation Excellence
Tracking user activation rate could be the key to unlocking higher conversion and retention rates, and improving the user experience.
If you’re looking to supercharge your activation process for your SaaS company, you can use our hot tips to help you do it.
You should be set up for success by simply selecting the right milestone, reducing onboarding friction, and improving user engagement.
But you can’t optimize activation without attracting prospects to try your product.
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