Product Adoption has a huge impact on any SaaS business. Raising your product adoption rates is important to increase the life time value of customers, referral rates and overall business growth. Given its importance, knowing how to measure product adoption is central to any product manager looking to scale their product adoption for SaaS. In this article we cover 7 metrics to help you better track and measure your product adoption success.
Monthly Active Users (MAUs)
A simple way that you can get started by measuring product adoption is by using your Monthly Active Users (MAUs). Alternative metrics that are also used are Daily Active Users (DAUs) or Weekly Active Users (WAUs). The definition of an active users is generally taken to by reference to logins. However, the activity to be tracked could change depending on what you are using it for.
MAUs are great to track product adoption over time and can be used to see when users are adopting your product or when users may be unhappy and are on their way to churning.
In contrast to logins, you may instead want to track a key activity being undertaken by users. This is also known as an activation event and in some instances an Ah-hah moment. Depending on your needs this may vary significantly. For example, in an ecommerce store, you may instead want to track the frequency of purchase instead of logins.
Activation rates inform you of the frequency of interaction with your product over time.
Time to Activation
Time to Activation is utilised primarily in a onboarding context. You are measuring the time taken from creation of account to the completion of a key activity/activities. The time to activation should generally be minimised as far as possible and length time to activations across the board may be an indicator that your onboarding process may require some rework.
Average Time spent using the product/feature
In some instances, the average time spent using a product or feature may be a relevant metric to track. This simply tracks the amount of time that a user spends within your system. You can than optimise accordingly.
Depending on your requirements a high or low average time spent may be ideal. For example, an ecommerce store is likely to want to see longer times spent browsing the webstore. On the other hand, an automated support helpdesk/chatbot is likely to want to see the shorter times to resolution of queries. This metric should be used carefully as it may lead to unintended results if success is wrongly defined.
Net Promoter Score (NPS)
The Net Promoter Score is a commonly used metric that takes the form of a survey question. It asks, how likely a user would be to recommend a company, product or service to a friend or colleague.
The NPS generally divides respondents into "promoters" who provide ratings of 9 or 10, "passives" who provide ratings of 7 or 8, and "detractors" who provide ratings of 6 or lower. Depending on your needs these may be adjusted. For example, in different countries the normal distribution for responses may vary and thus the default approach may not be suitable.
The NPS is calculated by deducting the detractors from the total number of promoters. Generally a score of above 0 is a good baseline as it indicates that the number of potential referrals from promoters matches the likely churn from detractors who are unsatisfied.
Customer Lifetime Value
The customer lifetime value is a great metric to determine per customer how much value the company is expected from their acquisition. Generally, it is calculated by the contract value multiplied by the average contract period. For example, if a typical SaaS subscription is $1000 per month and the average contract period is 15 months, the Customer Life Time Value is $15,000.
Customer lifetime value is important as it can help business owners keep an eye on overheads to ensure the expected profit per customer exceeds the cost of acquisition.
Closely related to customer lifetime value is the concept of churn. Churn is measured by dividing the number of customers that did not renew/dropped out (i.e. the churned customers) by the number of customers you had at the start of that period in percentage terms. For example if at the start of the year you had 500 customers and 10 churned at the end of the year, your churn rate would be 2%.
Keeping Churn Low is an important metric for business reasons and will be extremely important to ensure sustainable growth.
While there are a multitude of ways to measure product adoption, what is appropriate will differ in each case. Metrics like MAU and activation rates are useful for tracking the change in user experience (UX) or customer experience (CX) over time. On the other hand, churn and customer lifetime value are more suited for overall product management. Ultimately having a good handle on metrics will help you drive better returns for your business wherever you are.
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