Why Activation Rate Matters: How to Calculate and Optimize It

Learn everything about activation rate, why the metric matters, and 10 ways to improve it.

Do you want to avoid your SaaS product feeling like a ghost town, with users blowing through but not converting or sticking around?

Then it’s time to talk about activation rate – a measure of value realization – 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?
Who Needs to Track Activation Rate?
Why Does Activation Rate Matter?
How to Calculate Activation Rate
When to Measure 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
Achievement Unlocked: Activation Excellence

Let’s get started.

What Is Activation Rate?

Activation rate is the percentage of new users who complete a specific action that’s tied to 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 result in conversion and retention – E.g., turn free trial users into paying customers, or new users into long-term users.

The activation point is when a new user says, “Aha! I get it!”

Now, 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 a specific 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.

Here’s the thing:
Tracking activation rate might benefit some types of companies more than others. 

Let’s explore that next.

Who Needs to Track Activation Rate?

Any SaaS company can track activation rate and use it to measure customer satisfaction and retention potential.

However, this metric is of the greatest importance for SaaS companies taking a product-led growth (PLG) approach.

Product-led growth is a business strategy where the product itself is the primary driver of customer acquisition, conversion, and retention. Sales and marketing activities take a back seat.

Often, PLG entails offering a free trial or freemium version that allows users to test the product. The activation rate helps you track value realization and predicts conversion and retention based on user behavior in the free version.

Clearly, SaaS activation rate is a vital metric. Let’s find out what makes it 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.

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.

Here’s how the activation calculation process might look:

Activation Rate Calculation Example

Let’s say your activation point is based on completing an action in the app (for example, completing 10 tasks) and then sharing that on a social media platform.

You decide to measure your activation rate at the end of January. In the month, you had 1,000 new users, and 50 of them shared the completion milestone on social media. This means you had an activation rate of 5%.

In February, you decide to implement in-app nudges and email reminders to prompt users to share on social media. This month, you had 1,000 new users and 100 social media shares, so your activation rate doubled to 10%.

So, should activation only be tracked monthly?

When to Measure Activation Rate

Activation rate hinges on users completing in-app actions. The timing and frequency for measuring activation rate depends on your chosen activation event.

Every SaaS company should measure activation rate at least monthly, so you can compare the data month-to-month.

However, if your company chooses an activation point that users can reach very quickly, you can measure activation weekly or bi-weekly.

Additionally, if you roll out changes to your product, website, or onboarding flow, you can measure activation soon after to gauge the effectiveness. Again, if your activation event takes longer to reach, you should wait a bit longer to allow your users to catch up.

Next, let’s explore the acceptable range for activation rate.

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 in that range, but it’s best to benchmark yourself against companies of a similar:

  • Size
  • 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 SaaS 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.

What’s that?
Pirate metrics are five classes of metrics to study customer success throughout the customer journey. 

They are:

  • 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

Ready to turn your ghost town into a boomtown?

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.

If you need assistance with user acquisition, contact Startup Voyager today to leverage the insight of a team of SEO specialists. 

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