What is User Activation and How to Optimize it for SaaS?
Have you created your very own customer base that is growing with every passing day, but feels like you have hit a glass ceiling in the sense that the proportion of your customers that actively interact with your product is stuck at a certain point?
In this article, I will talk about what “User Activation” is and how you- as a SaaS product marketing leader- can better utilize the means you have through increasing the interaction you have with your already existing customer base.
What is User Activation?
User activation is the second step in the Pirate Metrics list (AARRR):
Users are “activated” when they understand the real value your product provides by using a feature of your product, which makes them want to subscribe to a monthly plan. What makes a user activated depends on the SaaS and historical data.
However, do not mistake this for “Aha Moment” where customers realize that your product might be useful for them. Aha moment is just knowing that your product might help them in their daily lives while activation is them deciding your content is worth subscribing to.
Last but not least; please note that “Aha Moment” and User Activation are almost intertwined with each other. “Aha moment” has more in common with the acquisition phase where customers try to understand the purpose of your product and how it relates to them.
It is the first point you start the reap the benefits of having an acquisition phase. The Activation phase is not only a phase where you get customers but also a milestone for your company. An important portion of your revenue will be made depending on how many user activations you have. This step is hard due to the fact that you have to create a certain community beforehand. If you are interested in the process customers go through from being acquainted with your work to becoming full-time members, you can check out An Ultimate Guide To SaaS Marketing Funnel. Steps suggested there might help you to make your brand known to the wider public.
Now, let’s look at the potential benefits of User Activation.
1- Greater Potential of Income.
Ceren Atalar states in our “What is Saas Marketing?” article that 20% of your retaining customers have the potential of taking up 80% of your profit. This is a gigantic number and I think there is a lot of potential here. Familiarity is something that has great importance in our daily lives. Everyone has a favorite cafe, football team, car… and even an app or a website. **** Becoming a group’s favorite is quite important for both your brand awareness and income.
2- Reduction in Expenses
We all know that reaching new audiences can be expensive. Using multiple forms of advertisements only for people to ignore or forget it. It is easier and more effective for one to motivate the people that they know. I am pretty sure that you have heard the famous Steve Jobs quote:
“One home run is much better than two doubles.”
3-Possibility of Long-Term Commitment
Considering the apps and probabilities that come with it, it is possible that an individual might not be interested in the product you try to present them. However, you can be pretty sure that an individual who has become acquainted with your product has a higher percentage of becoming a long-term subscriber. This is quite important for brand awareness, since a customer that likes your product will be inclined to share it, and brand loyalty which directly correlates to higher subscription rates for the service you provide for your customers.
However, long-term commitments do not only go one way. A customer that is coming back means also a customer that does not leave you for your competitors. This is quite important in the competitive market of the 21st century. Even if you do not have a competitor today, you can be pretty sure that you will have one in the near future.
4-Sign of Growth
As you probably know clicks on a website do not matter a lot in a pay-to-use model. Big companies are not valued by how many clicks day get in a week but by how many new subscriptions they get in a quarter. I will put some of the statistics for websites that you might know:
- [Netflix has roughly 209 million subscribers as of the second quarter of 2021](https://www.insiderintelligence.com/insights/netflix-subscribers/#:~:text=As of Q2 2021%2C Netflix,same time period last year.)
- Amazon Prime had around 200 million subscribers in 2019
- [Disney+ had 116 million subscribers in the third quarter of 2021](https://www.statista.com/statistics/1095372/disney-plus-number-of-subscribers-us/#:~:text=The Walt Disney Company reported,the fiscal year of 2020.)
As you can see this has become sort of a race between websites that belong to the same sector and the one with the highest user activation rate is the face of the industry. The way any sector is structured for oligopolies or monopolies. If you are not playing to win, you are basically playing to lose. You have to utilize professional companies like HockeyStack if you wish to gain an edge over your existing or potential competitors. I am sure that with our help, you can exceed your competitors.
What is the Average User Activation Rate for SaaS?
Are you wondering about the average user activation rate? Let me be clear, by the Average User activation rate we mean the percentage of the people that go on and sign on to your product and then proceed to take certain actions by utilizing the options you present them. The problem with this is that this rate changes according to the milestone, meaning that while two companies of a similar kind might have similar activation rates for subscriptions for a month, one might calculate their activation rate through how many user activations that they have for 3 months. For this reason, it is almost impossible to calculate the average user activation rate for SaaS. However, that is not to say you can not calculate your own average user activation rates and compare them to the ones you had before. This will help you to monitor the gradual development of your company over time.
How To Increase User Activation Rate for SaaS?
It is arduous progress to get someone to click on your website. However, by improving the elements that affect your acquisition phase you can assure that the possible customer can be more inclined to create a long-term relationship with the service you provide for them. Nothing beats the first impression.
You probably know that many of the companies that make their revenue through the subscription model offer certain incentives to their users for them to be full-time subscribers. Free trials are a great way for newcomers to get familiar with the service you provide for them. This is also helpful to break the money barrier which a might be hesitant to break by giving their card information.
Although this is less of a problem for bigger companies, we must take into account that you have to create reliability for your customers. Trust is only achieved by making them believe that your services can provide something others can not.
Even the simplest form of a personal relationship with the customer can go long way. I am pretty sure that we have all seen little pop-up messages that say “Good Morning Mr. X” when we log in to a website that we have already created an account for. Using personal messages through Email Marketing for these strategies is also a good option. Your aim should be to reach as many customers through as many mediums. This will make a great difference in your market reach. You will see the results of these in both user activation rate and your appeal to the new customers.
4- Use an analytics tool to track your users’ behavior
Utilizing tools aimed at analyzing the patterns of your potential and already existing customers is a great way to increase user activation and find out about your shortcomings. Many companies like Netflix not only offer personalized suggestions but they also transform themselves for the whole community with the feedback they receive from their subscribers. This interactive relation also underlines how your brand will be perceived by the wider public.
5- Make your onboarding flawless
Your interface should be easy to access and functional. This will make sure that a user who is in between joining and not joining could get better information. This also means that your entire subscription process must be simple. If you check any one of the Top SaaS Marketing Agencies you would see that all of the companies mentioned either suggest or have a piece of simple contact information that potential customers can easily get in contact with through.
6-Provide excellent customer service
An important way to create brand awareness is to increase the quality of your customer service. Since the people interact with will be mainly those working in customer service. Increasing the efficiency of your customer service will undoubtedly lead to customers being more interested in the service you provide for them.
Of course, that is not to mean an improvement in customer service is only limited to the people customers interact with. Improvement in customer service also includes the improvement of the artificial intelligence and design changes in Q&A sections. All of these should be considered to increase the efficiency of your business.
7-Schedule 1-1 Video Demos
Creating demo videos and explaining the purpose of your project through it can prove useful since video demos have a lot of potential regarding how interactive they can become. You must understand that it is important for your potential customers to think the product you will present to them will be tailor-made. This goes a long way in creating brand loyalty in your customer base. Small steps like these that are aimed at increasing your user activation rate can also result in a rise in your marketing reach.
I would argue that in the growing online marketing sphere, marketing goes hand in hand with brand awareness. This must be supplemented by the number of active subscribers you have for your website. The recent rise of companies like Netflix, in my opinion, is not solely because of the services they provide but also because they also create a cultural value through their customer base.
We can see this trend in the surge of cryptocurrencies in the last few years as well. The fact that the owners of certain cryptocurrencies not only had their currency but also went on to talk about their newfound cultural value helped a brand image to form in people’s heads. I mean, if you can have someone to become a free representative of your product, this is basically a free advertisement, and you know what they say about the advertisements: There is no such thing as bad advertising.
User activation is an important milestone in this process of brand recognition since it creates the basis for one’s customer base. Reaching out to the audiences you know and making them become active members is a must and fundamental for any internet-based company.
Calculating the activation rate is easy so long as you have decided what your milestone is. This can range from the number of customers that applied for a subscription for the first time, to the number of customers that applied for a subscription for the 5th time. The calculation is like this:
[Number of users who complete the set milestone/ Total number of users who signed up]= Activation rate (in percentage)
Again, I must emphasize that this number changes from milestone to milestone. Take this into account while you are making your calculations. Also, recording these numbers and utilizing your statistics accordingly may prove useful in the long run.
Although increasing your activation rate is always an important factor and has its benefits over reaching to new audiences. It must be noted that in some cases reaching to new audiences over the ones you already have may prove useful. This is especially important with a platform you created not too long ago, since your following would not be too big. This might also be the case for companies that experience a seasonal increase in their subscriptions due to temporary reasons. However, I will emphasize one more time that an increase in your activation rate can also be followed by a general rise in the acquisition, however, in most cases the vice-versa is true.
Let’s put the formula we have mentioned above into action by calculating some activation rates:
Although it is hard to point out the exact reasons why your activation rate is low, I will go on to point out some reasons that might be why your activation rate is low:
– Complicated interface
– Visual friction
– Unnecessary forms to fill
– Complicated/Technical Language
For higher activation rates I would suggest eliminating these problems that might exist in your website. I would also like you to remember that almost all of the milestones you decide on are prone to interpretation. What you deem to be a low rate might be considered high in a different company or sector. You have to use the data you have so as to better understand which statistics better suit your needs. Just like your customers, your needs and aims should be personalized as well so as to satisfy your needs.
Activation in product management usually refers to the process that happens in the launch and the time period after that. Modification to the system can be made so as to increase the activation rate you already have with the potential customers that have already become acquainted with your company.