Tag: saas

Product engagement is the measure of how much the users interact with your product. Product-led and software-as-a-service (SAAS) products can have thousands to millions of users using the product. The quantified data of how many users and how often they use the product is the product engagement.

What is the importance of product engagement?

Simply put, you cannot improve what you cannot track. Product engagement tells the intensity of how users are using it in a quantified way. Based on the engagement, one can perform actions to optimize the usage.

How is product engagement measured?

There are multiple methods by which engagement can be tracked. A business has to decide its primary engagement metrics on which it can focus. Naturally, there is no use in going behind each and every possible metric as it can lead to distractions and a lack of results. A business decides what engagement metrics have to be tracked based on the nature of the product, pricing, number of customers, their needs, etc. The primary set of engagement metrics defines the north star metrics of the product.

Some common product engagement metrics –

1. Usage metrics – This is used to track how many users are returning to a product at a particular frequency. This metric has significance as it tells if is there a good motivation and value added to the user so that he or she can return to the product again. Daily active users or weekly active users are examples of usage-based engagement metrics. Eg; for Instagram, the number of users coming to view stories on a daily basis tells the engagement of the product.
2. Transaction metrics – For high volume and high transaction-based products, how many transactions have been made is a good measure of engagement. Consider the example of Amazon. It sells thousands of products online daily. It makes sense to measure the transaction completion for them, as it directly adds to their revenue.
3. Value delivery metrics – For businesses like Adobe selling a suite of products as a package, measuring the number of actual value delivered to the users can be a good sign of engagement. For eg; a user completing editing a photo in Photoshop or completing the scanning of an image is a sign of value delivery. How many such events occur tells the level of engagement of users with the product.

Characteristics of product metrics

Product engagement metrics are defined by the company. Good product metrics always put the customers in the center. It takes care of the value delivered to the customer rather than any benefit to the company. For example, revenue earned can be a bad choice of engagement metrics. This is because it focuses on the benefit of the company and not the value delivery to the customers. Customers pay only when they find value. Rather, in the above example of Adobe, the value completion is a better choice as it focuses on the customers.

Product engagement metrics should always be a leading indicator of revenue, but not the revenue itself. As we saw in Adobe’s example, when a customer has been delivered with the value and is satisfied, it increases the chances of him or her coming back to the product and eventually paying for it, or if paid continuing to pay.

To summarize, good product engagement metrics are those who
1. Bring value to the customer
2. Are leading indicators to the revenue

Customers might pay for your product at first. But often it is the case for product-led companies that they do not use the product at all or might use a minimal part of the product. These customers are at the risk of churn. This is more serious for the products who charge annual subscription charges. Customers might not understand the value but if they have paid for an annual plan it would lead to a great frustration and eventually a negative image of your product in the mind of the customer.

This can be because customers might not have activated your product. Customer activation is the time when a user realizes the value of a product. It is when a customer learns the benefits of the product and goes ahead in the process to actively engage in it.

The goal of customer activation is to move customers from a passive state to an engaged state.

How to define customer activation?

Activation is different for different products. Companies define activation based upon their product use case as every product provides a different value to customers. Here’s how you can define customer activation:

Define Key Activation Metrics

Identify the core actions that represent activation for your product. This might include creating an account, completing a profile, initiating a trial, or reaching a certain level of product usage. Establish measurable metrics that indicate successful activation. For example, you might track the percentage of trial users who convert to paying customers within a specific timeframe.

Understand user journey

Define the onboarding process for new users. Consider the essential steps users need to take to experience the full value of your SaaS product. Measure the completion rates of key onboarding steps. A successful onboarding process increases the likelihood of user activation.

Establish funnel

Understand the funnel towards the completion of the activation. Analyze the step wise performance for the activation funnel. Act upon the steps which have the highest drop in the funnel.

Examples of customer activation

Activations will be different for different types of product.
1. For a messenger app, like whatsapp, it can be when a user sends first message
2. For a CRM, like Salesforce, it can be when a user adds their first lead
3. For a payment software, it can be when a user completes their first payment
4. For an ecommerce product, it can be when a customer makes their first purchase

Common strategies implemented to increase customer activation

Onboarding

Providing a frictionless and most obvious user onboarding process helps realize the value to customers easily. Once the value has been realized quickly it is highly probable that the customer can stick to the product.

Promotions

By promoting or by offering discounts or added incentives can motivate the user to sign up to the product and explore.

Education

By educating the users about the product and the value it offers helps understand the user clearly about the product. This helps build a smooth frictionless experience for the user. Guides or education materials when kept at the right places inside the product also helps the user, as they get to know about the feature when they are actually trying to do it.

Personalization

With personalized user experience, a user better understands how to use the product based upon their preferences. For example, an onboarding process designed for a particular industry.

Support

Customer support is one of the most important touchpoints in a product. When a customer is stuck at a point and does not know what to do, it is a highly probable thing that he or she might contact support.