How To Calculate & Improve Your SaaS Activation Rate
When you’re running a SaaS business, delivering value to your users is the key to success. If you manage to do that, not only will it improve the effectiveness of your customer acquisition efforts. It can also make your customer retention rate soar.
However, “value” can be such a subjective word. It can mean different things from one SaaS product to another and from one customer to another.
So how can you track whether or not your users are experiencing the value your SaaS solution offers?
This is where the activation rate SaaS metric comes in. It is one of the best ways to measure how successful you are at delivering value to your users.
In this article, we will define the activation rate in SaaS and explain why it’s important to track. And of course, we will also discuss how to calculate your activation rate and how to improve it.
What Is Activation Rate?
To fully understand activation rate as a metric, we first need to know what the word “activation” means in the world of SaaS.
Simply put, activation — also sometimes called user activation or customer activation — is when a user performs an action that indicates that they have experienced the value of your SaaS product.
Does that sound vague? Well, that’s because activation is different across varying SaaS platforms.
For a customer relationship management (CRM) solution, activation could mean that a user has added their first contact or created their first lead. For an eCommerce SaaS product, user activation could mean setting up their store page or adding products to their catalog.
If you want to be more thorough about your definition of customer activation for your SaaS product, you may even define it as a combination of multiple user actions.
For example, if you are offering a CRM solution, activation could mean that your user has: 1) added their first contact, 2) created a custom sales pipeline, and 3) moved a contact halfway through the sales pipeline.
Having thorough and stringent criteria for activation such as these will help you measure your SaaS product’s value delivery more accurately and realistically.
Activation Rate VS Sign-Up Rate
Many people mistakenly use the user activation rate and sign-up rate interchangeably. But they are two different metrics.
The sign-up rate measures the percentage of visitors who created an account on your SaaS platform.
It is a good measure of your marketing efforts in getting leads to create their accounts on your SaaS product. But it doesn’t really tell you anything about whether or not these users are actually experiencing value from your product.
On the other hand, the activation rate measures the percentage of users who have gone beyond simply creating an account. They have taken action that indicates that they have experienced value from the product — activation.
Activation Rate VS Conversion Rate
Another SaaS metric that may be confused with the activation rate is the conversion rate. Although some forms of the conversion rate may be related to the activation rate, they are still distinct from each other.
Conversion rate measures the percentage of users who have taken a specific action that takes them from one stage of the SaaS customer journey to another. This can include actions like downloading an eBook from your website, reaching out to your sales team, or finally purchasing your SaaS product.
On the other hand, the activation rate measures the percentage of users who may have experienced the value of your SaaS product. You can still measure this metric even beyond the customer acquisition process.
During the free trial or the use of the free plan, activation events often lead to conversions. Since the freemium or free trial user has experienced the value that your SaaS product offers, they are more likely to purchase a paid subscription to it.
Why You Should Track Your Activation Rate
The activation rate is an important metric that you should track. Here are some of the reasons why:
It Improves Customer Acquisition
As we mentioned earlier, your activation rate can be a good indicator of your freemium or free trial marketing performance.
It will give you insights into how well your free plan or trial period is delivering value to your customers. If the user activation rate is low, it could indicate that you need to improve the onboarding experience or add more features to your free plan.
It’s A Good Indicator Of User Engagement
The activation rate can be considered as a SaaS user engagement metric. That means it measures how many users are actively using your SaaS product and how deeply they are engaging with it.
The activation rate also gives you a better understanding of the user experience, allowing you to identify what parts of your SaaS product need improvement.
It Improves Customer Retention
The activation rate can also help you improve customer retention. By tracking customer activation events, you can get a good idea of which users are getting value from your product and stick around longer.
You can use this information to identify high-value customers who need extra attention and nurture them with personalized experiences. This will help ensure that they remain loyal to your SaaS product for a long time.
It Informs Your Product Development
By tracking activation events, you can get an idea of which features are being used most and prioritize those when it comes to feature development.
This will help ensure that you are developing the right features for your users and adding even more value to them in the long run.
How To Calculate Your Activation Rate
Calculating your activation rate is relatively simple. First, you’ll need to monitor user behavior using tools like Google Analytics or Mixpanel. This is how you can detect whether or not a user has performed an activation event.
Then all you need to do is divide the number of users who have activated by the total number of users in a given period.
For example, if you had 500 activation events out of 1,000 users in the past month, your activation rate would be 50%.
Once you have calculated your activation rate, it’s important to track this metric over time as well. That way, you can understand how successful any changes or improvements that you make are and measure their impact on activation rates.
For SaaS products, the average activation rate is around 36%. However, this may still vary depending on your industry, product type, and target market.
How To Improve Your Activation Rate
The activation rate is an important metric that you should track and strive to improve. Here are some of the ways that you can do this:
1) Enhance Your Onboarding Experience
Whether your SaaS product involves a free trial, a freemium model, or going straight to a paid subscription, your onboarding processes play an important role in delivering value to your new users.
Make sure that your onboarding process is easy to understand, highlights the features and benefits of your product, and encourages activation.
What’s more, you may also want to personalize the onboarding experience for each new user. That way, you can ensure that your users are getting the most out of their experience with your product.
2) Add More Features To Your Free Plan
If you’re using a freemium model and you’re seeing a decline in your user activation rate over time, it may be because it doesn’t offer enough features for them to be able to have a full experience of your SaaS product.
Think about adding more features or inclusions to your free plan. Not only will this help your free users get the value your SaaS solution offers. It may also entice more potential customers to sign up for your free plan.
However, don’t give away too much for free either. You don’t want your free plan to be so comprehensive that it replaces the need for a paid version.
To do this right, make sure your free plan delivers significant value that makes the user want more — which they can get by upgrading to a paid plan.
3) Provide A Thorough & Intuitive Knowledge Base
A knowledge base is a great way to provide users with the information and resources they need to get the most out of your SaaS product.
Make sure that you make it as comprehensive, intuitive, and easily navigable as possible. That way, users can find all the answers they need quickly and start activation with confidence.
4) Use Interactive Tutorials
You can also use interactive tutorials to provide users with a more engaging and effective onboarding experience.
Interactive tutorials help potential customers understand your product quickly and know the specific steps they need to take in order to fully utilize your SaaS platform.
The more they know how to operate your product, the faster they can experience the value it offers.
5) Make Sure Customer Support Is Easy To Reach
Having a great customer support team on hand is essential in boosting activation rates. Customers should be able to easily reach your support team if they need help.
Consider adding live chat and phone support to your customer service arsenal. This will ensure that customers have an easy way to get in touch with a real person if they run into any activation issues.
If and when you add live chat as a customer support channel, make sure that it is easily accessible on your SaaS platform itself. This will enable users to ask questions or seek help while the onboarding process is still fresh in their minds.
6) Monitor Other SaaS User Engagement Metrics
The activation rate is only one of the SaaS metrics you need to keep an eye on when it comes to user engagement.
If your customer activation rates are down, take a look at other engagement metrics such as the following:
Customer Effort Score
The Customer Effort Score is a metric that measures how much effort customers have to put in to use your SaaS product or get help from your customer service team.
To measure it, you need to launch a survey that asks customers to rate their experience on a scale. Unfavorable customer effort scores may indicate that your SaaS solution is not user-friendly.
Another important metric to track is feature usage. This will tell you if users are taking advantage of all the features your SaaS product offers.
If feature usage is low, it may be because users don’t understand how a certain feature works or how it can be beneficial for them. That’s why providing tutorials and other educational content related to each feature is essential in boosting activation rates.
7) Gather User Feedback
Collecting user feedback can also help you identify activation issues or areas for improvement. That way, you can quickly address any activation rate-related problems and ensure that your users are having a great experience with your product.
If you’re launching a survey to measure your Customer Effort Score, you may also include follow-up questions to help you understand which particular features or tools your users are having trouble with.
What’s more, you can automatically send them a feedback form right after they complete the activation events. This will give you a better understanding of their user experience and can help you iron out any kinks that might be causing activation issues in the future.
You may also set up these automated feedback forms to be sent sometime after they sign up for your SaaS product (perhaps a month or two after sign-up).
This way, you can also hear from users who are having trouble experiencing the value of your SaaS product. Moreover, it’s a great way to reconnect with potentially frustrated users who have given up on activation due to a lack of support or guidance.
8) Track User Behavior
It’s also essential to track how your new users interact with your SaaS product.
Analyzing user behavior can give you valuable insight into activation rates. For example, tracking a user’s page views and time on the page can help you figure out if they’re significantly engaging with your product or drifting away from it.
What’s more, monitoring user actions related to activation events will also provide insight into potential barriers that keep them from experiencing the value of your SaaS product.
For instance, tracking the number of users who abandon the onboarding process halfway through can alert you that something is off in the onboarding process.
All in all, tracking user behavior gives you a better understanding of what helps users reach the activation events and provides actionable insights into potential issues related to activation.
9) Make User Activation A Priority For Your Customer Success Team
As customer activation rate is such an important step in the SaaS customer journey, it’s essential to make it a priority for your customer success team.
They should be actively engaging with users and helping them reach their goals with your SaaS product and complete activation events successfully.
Your customer success team can even personalize these efforts with the help of user behavior data. That way, they can easily pinpoint which features they need most and provide tailored assistance to users in need.
Final Thoughts: Track Your Activation Rate To Improve User Experience
The activation rate is one of the most important metrics for any SaaS company to track when it comes to user engagement. It measures how effective your onboarding process is and whether new users are able to experience the value of your product.
By continuously tracking user activation rates and analyzing customer feedback, you can identify potential issues and quickly solve them.
This will improve user experience and boost your customer retention rate (and recurring revenue) in the long run.
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