Looking to unlock the secrets of successful SaaS growth?
Well, you need to “act” to activate that growth!
Your SaaS company can assess user engagement and identify opportunities to accelerate product adoption by measuring customer activation.
Your activation rate is one of the most critical metrics to track and optimize, impacting customer satisfaction, retention, and revenue.
But there are other activation and growth metrics you must track to check if your activation strategy is working.
So, how can your SaaS business get the most out of tracking activation metrics?
This article will uncover what activation rate is and how to calculate it. We’ll also provide six essential activation metrics to track and seven effective strategies to increase activation.
- Check out 4 SaaS Referral Metrics that your team should be tracking ASAP.
- Explore 7 awesome ways to reduce your CAC Payback period and bring in more profits!
- Learn everything about CMRR (and how to measure this metric!).
This Article Contains
- What Is Activation Rate?
- Why Does Activation Rate Matter?
- How to Calculate Activation Rate
- What’s a Good Activation Rate?
- The 6 Most Important Activation Metrics to Track
- 7 Powerful Strategies to Boost Your Activation Rate
So, without further ado…
What Is Activation Rate?
Activation rate (or user activation rate) is the percentage of new users who realize the value of your SaaS product or service.
How do you measure this?
First things first, you need to decide on an appropriate activation point.
An activation point is a specific user action that accurately predicts the likelihood of user conversion and retention based on data analysis.
The activation point occurs when new users have an “Aha!” moment and understand the product’s value.
Here’s the thing:
Selecting a customer activation point tailored to your SaaS business can be a real head-scratcher.
The activation action could include factors like:
- Completing the onboarding process.
- Number of features utilized or feature-use frequency.
- Reaching a usage milestone, like completing a certain number of tasks.
- Providing favorable feedback through a survey.
After determining your product’s ‘Aha moment,’ the user activation rate is the proportion of users who reach it.
And before we get to the calculation, it’s important to know…
Who Should Track Activation Rate?
Companies that want to improve their customer retention rates should track activation rates. Product-led companies, in particular, should measure this metrics.
As they rely on the product selling itself and need users to realize product value to drive sales!
By tracking activation rates, companies can identify areas to improve their onboarding process and user value discovery journey. This, in turn, increases the number of activated users and ultimately improves retention.
How Often Should You Measure It?
A good rule of thumb is to measure activation rates at least once a month.
This will allow you to track its progress over time and identify any areas where you can improve.
Additionally, you should track activation after implementing any major changes to your product features or onboarding process. Doing so helps you measure the effectiveness of your updated activation strategy.
Now, you may be wondering…
How to Calculate Activation Rate
The formula to calculate user activation rate is as follows:
|Activation rate = (Number of activated users / Total number of users) * 100|
For example, if 500 users signed up for a service and 100 reached the activation milestone, the activation rate would be 20%.
So, what should you aim for?
What’s a Good Activation Rate?
Activation rates differ by business size and industry.
A survey revealed that the average activation rates of the top Product led Growth (PLG) companies range between:
- 20% for freemium products
- 33.5% for B2C
- 40% for free trial products
So, depending on your business model, a good activation rate can be between 20% and 40%.
But which SaaS activation metrics should you track alongside activation rate?
Let’s find out.
The 6 Most Important Activation Metrics To Track
Activated users bring significant benefits, from customer success to increased revenue.
But just measuring the activation rate doesn’t provide much insight into why prospects are activating or not.
Here are the six key metrics that help you understand where your customer activation strategy needs improving to optimize the activation rate:
1. Visitor-to-Signup Rate
- What is it?: This SaaS metric tracks the percentage of website visitors who sign up in a given period.
- Who should track it?: Any business that relies on converting website visitors into sign-ups can benefit from tracking the visitor-to-sign-up rate.
- Why it matters: This metric quantifies how effectively a website converts visitors into sign-ups. This can highlight the effectiveness of your marketing efforts, user experience, and website design in attracting and persuading visitors to take the desired action.
- How to measure it:
|Visitor to signup Rate = (Number of signups / Number of website visitors) × 100|
- How often should you measure it: This depends on factors such as the nature of the business, the volume of website traffic, and the rate of user sign-ups. Once a month should work for most companies.
- Benchmark: The benchmark for SaaS companies ranges from 2% – 5%. However, the top 25% of high-converting websites convert over 11% of visitors to sign up.
- Application: If you’re struggling to get signups, optimize your sign-up forms by incorporating clear and compelling call-to-action buttons on your landing page,
2. Trial-to-Paid Conversion Rate
- What is it: The trial-to-paid conversion rate measures the percentage of users subscribing to a paid account after the trial period.
- Who should track it: Companies that offer free trials should track and measure the Trial-to-Paid Conversion Rate to assess how effectively their trial programs convert users into paying customers.
- Why it matters: This metric provides valuable insights into revenue generation and determines if your trial version effectively guides users to value realization.
- How to measure it:
|Trial-to-paid conversion rate = (Number of free trials converted in a given period / Number of all free trial users within that period) × 100|
- How often should you measure it: Most SaaS companies measure this metric based on the length of the trial period. For example, if 10 users signed up for a 2-week trial on Jan 1st, track their conversion rate 2 weeks later.
- Benchmark: This depends on the trial offered and the type of business.
- Opt-in trials:18,2%
- Opt-out trials: 48,8%
- Business-to-Business (B2B): 14-25%
- Business-to-Consumer (B2C): 57%
- Application: If this rate is low, you should work on your onboarding process to ensure it guides users to activation.
Alternatively, it could indicate a need to add value to your paid product to convince users towards product adoption. Another possibility is your trial version is too feature-rich, so users don’t have any incentive to upgrade.
3. Feature Adoption Rate
- What is it: The feature adoption rate measures how many users have used each of your product’s features.
- Who should track it: Feature adoption rate applies to any business that offers a product or digital service with multiple features. This is especially relevant for SaaS companies that rely on feature adoption to demonstrate the value of their offerings and drive customer retention and expansion.
- Why it matters: By tracking feature adoption, you can assess how extensively customers embrace and utilize different features of your product. It also drives your product development by highlighting which features are most sought-after.
- How to measure it:
|Feature adoption rate = Number of monthly active users of a specific feature / Total number of user logins × 100|
- How often should you measure it: Measure this rate on a monthly/quarterly basis and after releasing new features or making changes to the product tour.
- Benchmark: A good feature adoption rate in B2B SaaS is 28%.
- Application: To get more people to use your features, you can use pop-ups, in-app messages, or emails to notify them of feature benefits and new features.
This ensures users aren’t missing out on crucial aspects of your product’s value and helps you promote underutilized features.
4. Time to Activate
- What is it: This SaaS metric refers to the time it takes for a new user to reach the activation point. You can measure the time starting from their first visit or signup.
- Who should track it: Time to activate can be valuable for any business that wants to track the time it takes for customers to find value in its product.
- Why it matters: A shorter activation time minimizes barriers to customer success, leading to higher satisfaction and a positive first impression. In turn, faster activation leads to improved retention and cash flow.
- How to measure it:
|Average time to activate = Total time to activate / Total number of customers|
- How often should you measure it: It’s recommended to establish a regular cadence (monthly or quarterly) for monitoring and improvement. Many businesses measure this metric at significant product or service lifecycle milestones.
- Benchmark: The industry benchmark can vary depending on the type of product, the implementation process’s complexity, and the target market’s expectations.
- Application: To optimize the time to activation, focus on designing a seamless and personalized customer onboarding process. It should be intuitive, convey the product’s benefits, and guide users to the activation point.
5. Ratio of Daily Active Users to Monthly Active Users
- What is it: The daily active users (DAU) to monthly active users (MAU) ratio measures how often customers return to your app. Also referred to as product stickiness, it indicates the value customers get from continued use of your product.
- Who should track it: This metric is commonly tracked by businesses that rely on recurring user engagement. It’s especially relevant for the SaaS, social media, mobile apps, and online gaming industries.
- Why it matters: The ratio of DAU to MAU provides valuable insights into user engagement and the health of the product or service. By tracking this ratio, you can identify trends, patterns, and potential areas for improvement in user engagement strategies.
- How to measure it:
|Ratio of Daily Active Users to Monthly Active Users = Daily active users / Monthly active users|
- How often should you measure it: Measuring this ratio monthly allows you to gain a complete perspective of how active users are engaging with our product over time.
- Benchmark: The average industry benchmark for B2B and B2C is about 13%. However, B2C social apps have a higher ratio of around 20%-50%.
- Application: An active user is more likely to reach activation, convert, and not churn. You can encourage daily use through in-app and push notifications recommending actions or resources.
6. Customer Churn Rate and Retention Rate
- What is it: Churn rate (or customer churn) measures how many customers you lose over a certain period. Remember, customer churn also results in revenue churn (loss of revenue). Meanwhile, the retention rate measures how many customers you keep over a certain period.
- Who should track it: Measuring both the churn and retention rate can be beneficial for any company that assesses customer loyalty and the effectiveness of retention strategies.
- Why it matters: Customer churn directly impacts a company’s revenue and growth. By monitoring and reducing customer churn, businesses can protect their revenue streams and increase profitability.
High customer retention rates indicate satisfied and loyal customers. Monitoring churn and retention rates allows businesses to identify areas for improvement, address customer concerns, and enhance satisfaction levels.
- How to measure it: The formula to calculate churn rate is as follows:
|Churn rate = (Number of lost customers at end of a period / Number of total customers at start of a period) × 100|
Then, the formula to calculate retention rate is as follows:
|Retention rate = (Number of remaining customers at end of a period / Number of total customers at start of a period) × 100|
- How often should you measure it: Measuring churn rate quarterly can provide insights into broader customer trends, while analyzing annual churn allows for a more comprehensive evaluation of year-over-year performance. Regarding retention rates, most companies measure this on a monthly or annual basis.
- Benchmark: The general benchmark for customer churn is about 5.5%-8%. Whereas the benchmark for retention is typically above 90%.
- Application: If your customer churn rates exceed the benchmark and retention rates are lower than industry standards, you must work hard to reduce these rates. You can do so by:
- Ensuring a positive onboarding experience that provides clear guidance.
- Offering responsive and personalized customer support.
- Building strong relationships with customers by staying engaged, regularly communicating, and showing interest in their needs.
You might have noticed some recurring points on how to boost all those rates we mentioned.
Let’s get into them in detail:
7 Powerful Strategies to Boost Your Activation Rate
Use these 7 practical tips:
1. Provide Hassle-Free Self-Service Sign-Up
The goal of a hassle-free sign-up is to collect the data you need to set up an account without overwhelming or deterring users.
This can be achieved by:
- Minimizing the fields that need to be filled out.
- Allowing single sign-on (SSO)
- Letting users sign up with email or social accounts instead of a username and password.
Improving the sign-up process can boost activation because it increases the likelihood that users will get to use your product and experience its value.
2. Simplify The User Onboarding Process
Customer onboarding is about guiding a new user through your product’s key features with ease. The more seamless this process is, the easier it is for users to reach their activation point.
But what if you notice prospects dropping off during the onboarding process?
Try these tips:
- Engaging users during onboarding with an uncluttered UI.
- Providing easy-to-accomplish steps and pop-up hints related to the signing-up process.
- Creating interactive walkthroughs
- Addressing any pain points or barriers to entry (such as lack of training materials or limited integrations).
3. Provide Proactive Customer Support
You can guide your new customer to the Aha moment by offering comprehensive customer support.
This should include self-service support options like:
- How-to articles and FAQs
- Community forums and discussion boards
- Video tutorials and product demos
Providing convenient and accessible support to customers can alleviate activation barriers.
You can also offer human customer support via phone calls, live chat, and email.
4. Fine Tune In-App Copy
Both design elements and copy are key players in making activation happen.
The words you choose can make all the difference in whether your users take action or not.
Luckily, these tried-and-tested tips can help you write copy that resonates with your audience:
- Emphasize the benefits of the product’s features
- Address your customer’s pain points and concerns head-on
- Keep things simple and easy to read
- Use social proof like testimonials, ratings, and comments to build trust
- Keep your copy relatable and avoid jargon that could turn people off
Here’s an example from email marketing tool, Moosend:
5. Use Checklists to Encourage User Activation
A checklist is an effective onboarding strategy that assists a new customer in learning how to use your SaaS product.
For example, an onboarding checklist for a social media scheduling application might include:
- Create an account
- Connect a social media account
- Schedule your first social media post
This guides users through the key actions needed to reach the activation point in the app. It also gives customers a sense of accomplishment as they go.
Postfity does a great job of this:
7. Send Gentle Reminders
Even with a self-service activation flow, you can still encourage customer success with personalized nudges through email, push notifications, or text messages.
For example, you can send reminders and content to your existing customer base like:
- Welcome emails.
- Push notifications to encourage usage
- General information and updates about new features.
Here’s a simple example from Gusto:
Why Does Activation Rate Matter?
There are multiple reasons why activation is significant in the SaaS industry.
Here are some of the most crucial ones:
1. Build Your Customer Base
Activation is the gateway to turning a potential customer or trial user into a loyal paying one. But, if you don’t do it successfully, your customer base won’t grow.
Once new customers experience the total value of your product and become activated, they’re more likely to:
- Upgrade their plan, generating expansion revenue
- Continue using your product regularly
- Spread the word to others
A strong activation rate can propel your business toward growth and success, building a loyal customer base.
2. Creates a Foundation for a Good User Experience
When it comes to user experience, it’s crucial to begin on the right note.
A subpar activation process can result from inadequate onboarding or a complicated purchasing experience. This can negatively impact the customer journey and decrease success rates.
3. Improve Your Monthly Recurring Revenue and Annual Recurring Revenue
The correlation between your activation rate and user retention and conversion is significant.
To delve deeper into this relationship, let’s briefly examine a common customer journey in SaaS.
- Attract: New customers become acquainted with your product and evaluate if it can fulfill their requirements. They may buy it or test it out at no cost.
- Activate: Users who reach the activation milestone, discover value in your product and become activated users.
- Convert/Retain: An activated trial user is more likely to become a paying customer because they have seen the product’s value.
- Renew: High user engagement creates loyal customers who repurchase or upgrade.
It’s clear from the user journey that activation serves as the gateway that connects customer acquisition, user retention, and user growth.
Loyal customers are a key factor in increasing your Monthly Recurring Revenue (MRR) – the predictable average revenue from your active subscribers. MRR also translates into Annual Recurring Revenue (ARR), a metric that gauges your business’s long-term progress and expansion.
Additionally, better retention rates and higher recurring revenue increase the customer lifetime value (CLV) – the average revenue a customer generates over the entire relationship.
Navigating the Journey to Activation Excellence
Keeping track of your user activation metrics can help you improve the user experience and unlock greater conversion and customer retention rates.
You can use our hot tips to supercharge your SaaS company’s activation process.
Set yourself up for success by selecting the right milestone, streamlining the onboarding process, and boosting user engagement.
However, to optimize your activation efforts, you need to attract prospects to try your product in the first place.
Need a way to attract customers organically?
Startup Voyager can aid you in achieving significant growth in organic traffic and conversions.
Get in touch with Startup Voyager today and watch your SaaS solution soar to new heights!