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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:
Let’s start with a definition.
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.
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:
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%.
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:
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 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.
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.
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.
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.
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:
Your activation event needs a strong invitation. Here's how to get it right:
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:
Let's dive into a few examples to see how different companies leverage this metric to understand and improve their user journeys:
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.
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.
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.
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:
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.
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.
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.
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:
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Master the metric that drives SaaS success. Learn how to define, calculate, and optimize your activation rate for greater user engagement and growth.