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Knowing what percentage of users are truly finding value in your SaaS product is like the holy grail of customer insights.
Fortunately, there’s a key business metric you can track and calculate that can help you find out just that. We’re talking about your activation rate.
In this guide, we’ll teach you why it’s so important, how to track it, and what to do with the information you gather from it to boost your customer engagement and consequently grow your profit margins.
We’ll go over:
- A quick definition of activation rate
- The formula you should use to calculate it
- Reasons why your activation rate matters
- A snapshot of what a good user rate looks like
- Tips for boosting your activation rate
- Some real-world implementation example scenarios
- Common pitfalls to avoid and solutions
Let’s start with a definition.
What is activation rate?
Activation rate is a critical metric that measures the percentage of new users who take a specified valuable action within a product or service. This action indicates successful initial engagement and suggests a higher likelihood of them becoming long-term, paying customers.
You can think of it as the health check of your onboarding process — it reveals how effectively you’re turning new signups into genuinely interested users.
Let's break it down further. The specific action that defines activation (known as the "milestone") will differ from company to company. It all depends on what demonstrates genuine user interest and strongly links to future success with your product.
For instance, a social media platform might track the percentage of users who add a friend, while a music app might look at playlists created. The key is to choose a milestone that truly signals commitment and value discovery for your users.
What’s the formula for calculating activation rate?
The calculation itself is simple:
Activation Rate (%) = (Number of Users Who Reach the Milestone / Total Number of New Users) x 100
Let's unpack each part to make sure it's crystal clear:
- Number of users who reach the milestone: This refers to how many new users actually completed your defined activation milestone within a specific period.
- Total number of new users: This covers all the individuals who signed up for your product or service during the timeframe you're analyzing.
- Activation rate (%): This is your result. The percentage reveals the proportion of new users who successfully reached your activation milestone, giving you a clear snapshot of your onboarding effectiveness.
Example
Let's say your product is a task management tool, and your milestone is creating a first project. Over the past month, 1,000 people signed up, and 300 of them created a project. Your activation rate would be 30%.
Why tracking your activation rate matters
Activation rate isn't some vanity metric — it's a window into the core of your product's success. Here's why it matters so much:
The key to user engagement
Activation rate serves as a powerful indicator of how well your product or service grabs the attention and delivers value to new users. A low activation rate might signal a lack of clarity or friction during the initial user experience.
On the flip side, a strong activation rate suggests you're successfully guiding users to those initial "Aha!" moments where they discover your product's worth.
Your onboarding report card
Your onboarding process is what teaches users the ropes and gets them excited to use your product. Activation rate directly reflects whether your onboarding flow is intuitive, helpful, and ultimately effective in driving users toward that key milestone you've defined.
Keep in mind that if the numbers are low, it may be time to revisit your onboarding to pinpoint where users are getting lost or confused.
Growth and stickiness
Think of activation rate as an early predictor for long-term user retention and sustainable growth. Users who reach your milestone are far more likely to become engaged, paying customers down the line.
Conversely, if users aren't activating, they're also much more likely to churn. High activation rates lead to a stickier product with a growing, committed customer base.
Marketing alignment
A low activation rate could indicate that your marketing efforts might be attracting the wrong audience. Perhaps your messaging promises features or benefits that don't align with what new users experience upon signing up.
Tracking activation rates can help you refine your marketing to ensure you're finding and attracting users who are genuinely interested in what you offer.
Key activation metrics you should be tracking
First-week engagement
- Why it matters: This metric reveals how active users are during that early window. High engagement suggests immediate value discovery, while low engagement could signal friction or a lack of intuitive onboarding.
- How to measure it: Track the percentage of users who take at least one meaningful action within their first week after signup. Adjust the specific actions based on what demonstrates interest and value in your product.
- Formula: First-Week Engagement Rate (%) = (Number of users with at least one meaningful action in the first week / Total number of new signups in that week) * 100
Time to first action
- Why it matters: This measures how quickly users dive in and take a valuable action upon signing up. A short time to the first action is a great sign — it shows users are eager to explore. Delays might indicate a confusing interface or a need for better guidance within your onboarding.
- How to measure it: Calculate the average time (in hours or days) it takes for a new user to reach your activation milestone or a similar meaningful action.
Conversion rate to key features
- Why it matters: This metric tracks how many new users actually start using features that are core to your product's value. Low adoption rates could mean those features need better discoverability or clearer instructions during onboarding.
- How to measure it: For each key feature, divide the number of users who engage with it by your total new users in a period. Multiply by 100 to get a percentage.
- Formula: Feature Conversion Rate (%) = (Number of users who engage with a key feature / Total Number of new users in a period) * 100
Visitor-to-signup rate
- Why it matters: This metric shows how effective your website and marketing are at attracting visitors and converting them into signups. Analyzing this alongside your activation rate can provide insights into the quality of leads you're generating.
- How to measure it: Divide the number of signups in a period by the number of website visitors in the same period. Multiply by 100 for a percentage.
- Formula: Visitor-to-Signup Rate (%) = (Number of signups in a period / Number of website visitors in the same period) * 100
Ratio of DAU (daily active users) to MAU (monthly active users)
- Why it matters: Also known as "product stickiness," this metric tracks how frequently users return to your product. High stickiness indicates that your product provides ongoing value. Track it in tandem with activation rate to get a sense of user behavior after their initial engagement.
- How to measure it: Divide the number of daily active users by the number of monthly active users.
- Formula: Product Stickiness Ratio = Daily Active Users (DAU) / Monthly Active Users (MAU)
What is a good user activation rate?
Generally, in the world of product-led growth (PLG) companies (where success hinges on users self-discovering value), an activation rate between 20-40% is considered strong.
For freemium models, aim for the lower end of that range, while those offering free trials often see rates closer to 40%.
Ultimately, the best activation rate is the one that keeps improving for your specific product and your specific target audience.
Three strategies for improving your activation rate
1. Optimize your onboarding process
Think of onboarding as your user's roadmap to success. If it's confusing or cluttered with too many steps, new users are likely to lose their way before reaching your activation milestone. Here's how to make it work:
- Keep it simple: Resist the urge to explain everything upfront. Guide new users through the essential steps needed to take that first valuable action and experience a quick win with your product.
- Make it interactive: Don't overload users with information; provide bite-sized guidance. Tools like interactive walkthroughs or progress checklists allow users to learn by doing.
2. Use clear calls-to-action (CTAs)
Your activation event needs a strong invitation. Here's how to get it right:
- Use smart placement: Make sure your CTA is highly visible — don't make users hunt for it.
- Use compelling language: Use action-oriented words that convey the value the user will gain by taking that next step. For instance, instead of "Create Your Profile," consider "Start Connecting and Networking."
3. Do not underestimate the power of feedback
Your users are an invaluable source of insights. Set up feedback loops to understand where they're getting stuck or what might motivate them to take that key action. Consider the following strategies:
- In-app surveys: Ask short, targeted questions at specific points in the onboarding journey to gather insights.
- Customer support data: Analyze support tickets for common onboarding-related questions or roadblocks.
- Direct user feedback: Provide easy ways for users to offer suggestions or report any difficulties they encounter.
Real-world example scenarios
Let's dive into a few examples to see how different companies leverage this metric to understand and improve their user journeys:
First example: A SaaS product
Imagine a project management software company. Their ideal activation milestone? New users integrate the software with their existing systems, like calendars or email.
This action represents a significant step — the user is actively investing time to connect the software with their current workflow, hinting at long-term adoption. Tracking the percentage of users who complete this integration within the first week provides valuable insights.
A high rate suggests new signups are quickly finding value and transitioning into committed users. Conversely, a low rate might indicate the integration process is confusing or requires additional guidance within the onboarding flow.
Second example: An e-commerce platform
E-commerce platforms also benefit from activation rate insights. Take an online clothing retailer, for instance. Their activation milestone might be a customer placing their first order within three days of registering. Here, the focus is on converting website visitors into buyers.
By keeping the timeframe short, the emphasis is on initial engagement. Successfully guiding users toward a first purchase indicates a user-friendly website, enticing product selection, and a smooth checkout process.
If the activation rate falls short, it's a signal to revisit these areas. Perhaps the product images aren't clear, the checkout process is cumbersome, or the return policy needs clarification.
Third example: A mobile app
Consider a fitness app offering workout programs. Their activation milestone might be a user completing their first workout session after downloading the app. For this app, user action is paramount — browsing isn't enough.
Encouraging users to take the plunge and embark on their first workout is crucial for habit formation and experiencing the app's promised benefits. Tracking activation rate here helps the company understand the effectiveness of their onboarding in motivating users and how quickly individuals are diving into their fitness goals with the app.
A low activation rate might prompt them to revisit their onboarding flow to ensure it's clear, engaging, and inspires users to take that first step towards their fitness journey.
Common challenges of tracking activation rate and their solutions
While activation rate is a powerful tool, tracking it effectively isn't without its hurdles. Let's dive into some common challenges and how to tackle them for the most accurate insights:
Challenge 1: Defining the right milestone
One tricky aspect is deciding on the action that truly signals a user is on the path to success. Choose a milestone that is too broad, and your numbers might look good but not really mean much.
For example, merely logging into an account after signup isn't enough to demonstrate genuine interest. Choose too niche of a milestone, and you risk overlooking a large number of users who are on the right track but haven't taken that very specific step yet.
- Solution: Find the sweet spot! Your milestone should be meaningful enough to indicate the user is discovering value but not so difficult to achieve that it excludes a majority. Consider user feedback and analyze behavioral trends to understand what actions demonstrate significant progress.
Challenge 2: One size doesn’t fit all
Lumping together all your users can lead to misleading data. Different customer segments often have distinct needs and motivations. A student exploring your educational software likely behaves differently than a corporate team leader.
- Solution: Segment your users. Break them down based on their roles, goals, or how they found your product. Tracking activation rates for each segment separately gives a far clearer picture of who's thriving and where specific groups might be struggling.
Challenge 3: Making sense of the numbers
Understanding the "why" behind your activation rate can be tricky. A drop in the numbers could signal several things — a technical glitch, poor onboarding, and even changes to your marketing that are attracting the wrong kind of users.
- Solution: A/B testing and continuous analysis are your friends. Experiment with different onboarding flows, messaging, and calls to action, carefully tracking how each variation affects your activation rate. Coupling this with user feedback reveals insights beyond the raw percentage.
Next steps
Now that you grasp the concept of activation rate and why it's a critical metric for product success, the next challenge lies in transforming those numbers into actionable insights that drive growth.
This is where using Eppo makes all the difference.
Eppo is a powerful experimentation and feature management platform designed to improve your product's activation journey. By combining A/B testing capabilities with robust feature flagging, Eppo helps you pinpoint the changes that drive genuine user engagement and long-term success.
Here's how Eppo transforms your activation rate tracking:
- Streamlined activation analysis workflow: Eppo unifies the process. Define your activation milestone, deploy experiments (easily integrate feature flags for testing), and analyze results — all within a single platform.
- Quicker insights with CUPED++: Eppo's advanced statistical engine, including CUPED++, shortens experiment runtimes. Identify winning variations faster and iterate on your activation strategies with greater speed.
- Better data integrity: Eppo's data warehouse-native architecture leverages your existing trusted data source, integrating with your data warehouse for accurate activation metrics. Avoid the risks of external data silos.
- Truly actionable insights: Detailed reports and deep-dive capabilities (coupled with diagnostic alerts to address any data quality issues) reveal how users interact with your product during activation. Delight users with your onboarding experience and maximize engagement.
- Data-driven experimentation: Eppo's intuitive tools and real-time metric monitoring make experimentation accessible to everyone. Empower your team to test activation strategies, continuously improve your onboarding, and drive long-term growth.
Ready to see Eppo in action? Book a Demo and Explore Eppo.
Master the metric that drives SaaS success. Learn how to define, calculate, and optimize your activation rate for greater user engagement and growth.
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