How to define and track SaaS Activation Rate
Metric Stack 31: Activation Rate and more!
If you’re no stranger to SaaS, you’ve heard about activation and why it’s one of the most important “Pirate Metrics”.
But have you ever stopped to think why? Or how to start tracking activation?
In this edition of Metric Stack, we'll learn all about Activation Rate, look at benchmarks, and discover some ways to start effectively defining and measuring activation.
What is Activation Rate?
Activation Rate measures the percentage of ‘activated’ users using your product. These users perform certain key actions in a fixed period of time indicating they have found true value within your product. Here’s the formula:
Activation Rate = Users That Performed a Key Action / All Users
Remember when you heard me mention pirate metrics? The pirate metrics - AARRR - describe the typical SaaS customer journey:
Acquisition: here’s where you capture new trials, freemium users, and paying customers; acquisition is crucial for success and is considered the startup killer
Activation: the stage where a light bulb goes off in the user’s head and they realize the true value of your product
Retention: growing customer loyalty through excellent product experience and customer support
Revenue: trial to paid, freemium to paid, up-sells, cross-sells, this stage is where users pay to use your product
Referral: users bring in new users through word of mouth or direct referrals, completing the customer journey with the start of a new cycle
But today, we're focusing on activation. Why?
Because it's the bridge between acquisition and the rest of the customer journey. Low activation leaves very little revenue, retention, or referrals to speak about.
What’s a good Activation Rate benchmark?
According to Mixpanel’s 2019 Product Benchmarks Report, the median first week activation rate for SaaS is 17%, while the 90th percentile scores a whopping 65% activation rate.
While benchmarks are super useful as guidance on what your metrics should look like, it’s important to know how to move in the right direction.
How do I define activation for my product?
Unfortunately, there are no right answers here. You cannot reliably measure activation 100%.
But you can be confident, if not completely certain, that you’ve accurately measured activation with the following strategies:
Learn from churn: what are your less-than-ideal users or churned customers not doing? Forgive the cliche, but silence is sometimes full of answers.
Follow the money: no-brainer, right? But there’s more depth to it. Not only should you identify the segment of paying customers, you should also define activation based on their patterns and behaviours.
Talk the talk: who knows better than about why your product works than your active users? Surveys, interviews, and even chats with your own customer success team are great ways to understand activation straight from the source.
If you want specific examples of what activation looks like, an active customer or user might: add team members, create a dashboard, create a user profile, add to cart, or leave a review.
You may need to map a combination of actions, or filter by the frequency of an action.
Regardless of the approach you follow, your key takeaways should be:
It is extremely important for you to track activation because it has a direct and massive impact on revenue.
You’ll likely need multiple revisions of how you define activation before it captures your best-fit customers perfectly.
Track Activation Rate and other key metrics with PowerMetrics
While it’s not easy defining activation, it can be much easier to start tracking your activation rate and other important PLG metrics. There are lots of great tools out there to help you start tracking the metrics that matter to you most.
But the first and only analytics tool you need is Klipfolio PowerMetrics.
Free forever, lightweight, no code, and with 100s of data connectors to analyze data from absolutely any data source you can dream of: