What is User Activation Rate?
Published August 12, 2022, updated August 12, 2022
Summary - User Activation Rate: an important metric for any SaaS company who is embarking on a product-led growth strategy. We had a chance to speak with Ramli John, author of Product-Led Onboarding and Director of Content at Appcues about this metric on the Metric Stack podcast.
User Activation Rate is top of mind for any company following a product-led growth model. Onboarding is a critical component of PLG and activation rate being a key metric to track. Before we dive into the episode, let’s look at the basics.
What is User Activation Rate?
User Activation Rate measures the speed and efficiency that new users reach perceived value. It’s a critical metric for the first impression of your product and is a key metric to track during your onboarding process.
The activation moment differs per company, but the common thread across all companies is that activation is tied back to a specific action the user takes in your product. The activation moment should indicate that they’ve experienced value in your product.
What is Product-Led Onboarding?
If product-led growth is ‘an end-user focused growth model that relies on the product as the primary driver of customer acquisition, conversion, and expansion’ (a strategy) then product-led onboarding is the process of welcoming new users to your product and driving your users towards an 'aha moment' to find value right away (a tactic).
In this week’s episode of the Metric Stack podcast, Ramli John, author of Product-Led Onboarding and Director of Content at Appcues, joins Allan to talk about user activation rate, product-led onboarding, and the importance of talking to your customers.
If you’re short on time, here are a few takeaways:
- Activation is a critical first impression metric
- Activation and the ‘aha!’ moment varies between companies. What worked for Slack may not work for your business. Look at your data to understand the moments of perceived value.
- Activation is about building a habit: Your users want to keep coming back to your product because there is value for them and their team when they use it
- Talk to your customers! Know who your best-fit users are. Your activation moment can shift, the market can shift, the product or competitive landscape can shift, but you won’t know this if you’re not talking to your customers who are using your product everyday.
Listen to the full episode here:
Allan: Welcome back to the Metric Stack podcast. I am thrilled today to be joined by Ramli John. Ramli is the #1 Amazon best selling author of Product-Led Onboarding. He's also Director of Content at Appcues. Ramli is also a creator, producer and host of Growth Marketing Today, a weekly marketing podcast and a product-led growth coach with Product-Led, the leading community for PLG professionals.
My name is Allan Wille, co-founder and CEO at Klipfolio. Lauren Thibodeau, my trustee co-host, is on vacation this week so we're flying solo. Ramli, so glad to have you on the show.
Ramli: Thanks for having me Allan. I really do appreciate it.
Allan: So today we're talking about user activation rate. So Ramli, before we get into some of the nitty gritty can you sort of set the stage? What kind of business objectives should we be thinking about as we dive into this metric?
Ramli: I would say it's probably one of the most important metrics in the pirate metrics.
We'll talk about it a little bit more, but it impacts retention. It impacts referrals, impacts revenue, but it sets the stage for the first impression that people have for a product. And we all know first impressions really matter. You know, first impression with your boss, first impression with your spouse, your partner.
Allan: Activation is such a critical metric for that first impression with your product. So how would you define it? I think activation is one of those nebulous metrics, right? You can count very easily. How many leads you’ve got in the funnel and you can count exactly how many wins you have in the funnel. And it's similar across every company. What is, what does activation mean? How would you define it best for our audience?
Ramli: That's where the tricky part of this metric is, what is that? The term really depends on how a company defines it within, but activation really needs to be tied back to a really critical user action within the product.
It shows that they've experienced value with the product. And I can give you a few examples. Like those classic ones with Uber when you book that first car ride or with Airbnb, but it gets really harder with B2B products, let's say likeHubSpot or Salesforce, where you can do a thousand things with it.
You really have to define that within your team and try to dig into the data and the numbers and talk to your customers. For us at Appcues, it is also a similar issue: what is activation for us? And we've kind of struggled with it to try to really figure this out.
We defined and through user interviews and through the data we found there's this one key moment when people realize, they get the aha moment. The activation moment for us is when people actually start designing an onboarding flow, whether that’s a product tour or some kind of checklist within their app. So people have to install this plug and when they start seeing how easy it is to actually design like a flow it's like, oh, I don't have to bother my engineering or design team with this. That's how we define activation.
And now that we know what activation is for us, that moment when people start realizing and seeing the value of the product, it's when we can really dig into the activation.
Allan: And once you have that defined, once somebody gets to an activation aha moment, do you then have line of sight towards how many people are gonna convert into paying customers? Do you have that sort of sense of security that previously, if you didn't, if you weren't defining activation, you just have this huge blob of users, you don't really know who's going to convert? So as soon as you have activation is it a more secure path to those people that convert or is that not part of the journey?
Ramli: That is definitely part of the journey. Once people have done that moment, you're seeing more conversions, a higher conversion rate with people who've done that, but a higher retention rate as well. And an example I can think of is with Slack. For them, they've set the line for their activation.
It's actually super interesting. It's when a team has sent 500 messages or something like that, but it's definitely not one message. And the reason why they've set it at that is, Stewart Butterfield, the CEO of Slack, said in an interview with First Round that they found that 93% of their accounts actually stick around and become lifelong customers once they've reached that specific threshold.
So it does, like I mentioned earlier, getting more people to that activation moment increases their likelihood of becoming a paying customer, but not just a paying customer. A long term paying customer.
Allan: And I mean, I think that is what we, what we all want to get to, we don't want just have somebody convert and then churn.
We want to have enduring long-term growing value out of these folks. I think you're right. With your example, it's not just one message that they send. Somebody may say, oh, that's cool with Slack. But they haven't built the habit yet. They haven't fully activated.
And I think with Slack, obviously, it requires a team as well. There's a certain sort of motion and momentum that is required to have an account activate. Actually I just said an “account activate”. Do you think of users or do you think of it as accounts activating?
Ramli: Such a good question. For B2B you need people to start thinking about it as an account. Especially if it's a multiplayer product where it requires you working with other teams. For example, for Appcues, I'm sure it's similar at Klipfolio where you have like this end user, that's a super user and you’ve got some users who are there within the same account.
That is the one with a credit card. So they don't activate us often and that's okay. Because within that account, they have this main power user that's actually using it day to day versus the one.
Allan: Yes. I was saying to you earlier, and for everybody listening, we're reading through Ramli’s book right now, and I think you can actually probably read through the book at least once every six months or once a year and get new ideas and refine the process, but you're right.
We think of it as a bit of a team sport. We have people that are consuming the data in Klipfolio. We have people that are building the dashboards and the metrics, and we have, you're right. somebody that's going to pay for the product.
And they all come in and play a pretty vital role. But do you think that each individual is going to have a different activation path as well?
Ramli: I would say that to your point, probably not. I think the person who is there to just put in their credit card, they might not be the one to design the dashboards and the graphs and plug in the data.
So I think I would find more value, and this is where the whole product led growth movement is, the value really comes in with the end user. The people are not going to plug in their data, they're not going to pay the credit card. If they're not, somebody who is not the one using [the product] is not getting a ton of value.
And we've seen the whole funnel flip upside down where the end user is now the one who we need to show them the value. So that they can go and pitch it up to the decision makers to really be like, “Hey, we want this, we're using this over and over.” And this is the same path that Slack saw where a lot of people sign up for it and then they pitch it up to their managers. “Hey, we're getting a ton of value. Why don't we get our whole company on it?”
Allan: Yeah, a hundred percent. We love that go-to market motion. We're huge fans. Product-led growth is the way it's baked into our DNA. So for us working through the activation flow is just so incredibly important.
One of the earlier books that we read as well was Obviously Awesome. And it talks about making sure that you get your best fit cohort into the funnel. So I'm sure that impacts activation rate immeasurably. So how do you have to think about getting the right people in or even before they've started the product experience, where does activation start in that whole journey?
Ramli: You hit the nail on the head there. I think people often think about activation because the way the pirate metrics are structured: acquisition, activation, referral, retention, revenue, and think it's sequential. The real problem is acquisition, activation, and retention are so closely linked together that when it comes to activation, you need to be thinking about what, to your point, like the positioning that April Dunford has talked about as well as the channels that you go to.
An example I can think of is one of the clients that I've worked with in the past, you run a bunch of Facebook ads and sure, we got a bunch of signups. Those signs up, they left right away, they're probably on their mobile phone or something like that. So that channel, particularly that tactic, we're we're great at acquiring, but they're not activating it and they're not coming back to become paid customers.
Allan: Ramli, you're like, you're like driving a knife into my chest. We have done that exact thing and we were celebrating how many Facebook leads we were getting. Lots and lots of leads and signups, but they weren't the right fit, you know?
So I think the expectation that they had and how much time they actually spent diving into the value was just not a fit for what we were looking for.
Ramli: Totally. I think that's a really good point. The channel matters. And then positioning is super critical. There's a whole emotional side to the front end.
Before people come into your product, if you can get them excited, like super excited, it's like getting into a party and getting it hyped up before you get into the party. Of course your expectations are going to be high, but you're looking forward to it and you're more motivated to actually have fun and try out the product. Versus positioning that's very unclear. It's like, what is this saying? What are your products? They're more skeptical. And so they might turn off when they experience friction or some kind of a roadblock versus somebody super motivated might actually go through.
So I really do believe when people are looking at activation, people jump into: let's fix the product, the in app experience, where often the issue I see is more on the upper side of the funnel where positioning isn't clear or the copy or messaging isn't super clear that the value of the product is not being shared very succinctly or clearly to the users before they even get it.
Allan: Yeah, the right market, the right user. We have to tell the users the right things before they even sign up for the trial or the free account. And then we have to do the right things in app. Now, what, what about the other side of the equation?
What about once a customer signs in? Does activation play a role on that side as well, or is activation really focused more on the pre and the early few days of the product experience? How far does it extend?
Ramli: Yeah, I would say once they're quote unquote, they reach an activation moment. The teams who are working on this really need to continue showing value.
And you said something earlier that really struck, that's the whole gist of this. The end goal of all of this. You said habit forming. Allan, what's a recent habit that you formed? Is there any habit that you recently formed?
Allan: You’re putting me on the spot! But what is a recent habit that I have formed? Let's say, let's say I formed a habit every night. I have a drink with dinner.
Ramli: So drinking water, the first time it's like, okay, this is all right.
But the habit doesn't form after two or three times. For me, it was writing. Like writing the first time is hard. And then you keep going at it and then eventually it becomes a consistent pattern of your behavior. And you don't have to think about it anymore. It just happens.
I think that's really the end goal of all of this. How do we get our users to form habit with a product?
Allan: It's interesting. So this past weekend I watched The Social Dilemma, right? This is the super scary Netflix movie for all parents about how incredibly habit building the social networks have become.
So if you want to know how to form habits, watch The Social Dilemma as well. They have got it nailed down.
Ramli: I have seen that as well. There is a dark side to that habit for forming stuff.
Allan: There definitely is. But we're talking about making sure that the user who comes in has obviously raised their hand and they've said there's something here that I need to do from a business point of view. We're talking about B2B software and we want to help them be successful. And it's a waste of our time and it's a waste of their time if they're the wrong user.
And if we're not communicating the value early on, we could have the best product in the world, but at the end of the day, a massive amount of customers or users don't go on to day two.
So how do we, how do we communicate that properly? I think that's the kind of habit that we're, that we're really talking about here.
Ramli: I'm totally with you there. You're not just thinking about day one. You're thinking about day two and day, day 30, particularly. I think I've read some stats that most SaaS products lose their users within the first two to three days.
And I think that's just making sure that that first mile, uh, as Scott Belsky, the chief product officer at Adobe said, you’ve really got to nail that first mile. Like that first few minutes or a few hours that you have with the user.
Allan: So does that mean that if we are talking about activation rate that, should SaaS product companies and product teams and the marketing teams, is the biggest opportunity for those that have never really looked at activation, is the biggest opportunity in the first few days?
What is the biggest lever to focus on? Should they be looking at activation over seven days, 30 days, 90 days, or is it really sort of, figure out the first couple of minutes and figure out the first, couple of days, what is your advice there?
Ramli: I'm a little bit biased. The data and the data that I've seen. And I'm sure your team has seen that as well, is like that first, at least first, let's get the first day correct. Like that moment, the first time that they sign up. We can never get that back.
Like I said, the fresh impression is super, super critical. I think once you know it’s really figured out, that’'s when you start looking at the future. Interestingly enough, some companies like I've talked to like Deputy, I chatted with the head of growth there. They really try to button down within the first seven minutes a user needs to activate or we're going to lose them forever.
It's like, what, how did you get seven minutes? It’s like, oh we looked at the data, we talked to our customers. That's really, really specific, the way that they are super intentional. The way that their product, customer success, and growth team are really working together.
Allan: So Ramli, you may be onto something there because a couple of years ago I was in California and I visited with Intuit, the makers of QuickBooks. I was blown away because they actually have, a team that focuses on the first 10 minutes. QuickBooks is used by hundreds of millions of small mid-size businesses. Think about how many people that they're onboarding and looking to activate and show the value to.
So a team focused on the first 10 minutes. Now it probably varies tremendously from company to company. And again, I don't know that you can, because you can't specifically define activation for every company the same way. Maybe it's 10 minutes, maybe it's 30 minutes. Maybe it's seven days.
I don't know how long it took Slack to get to 500 or 2000 messages, but probably not within the first five minutes. So it probably does vary quite a bit.
Ramli: Totally. And I think going back to that Slack example. I really love that example. I need to talk to somebody from Intuit now. The first 10 minutes, they probably have a team dedicated to the first message and then the first hundred messages. And then Slack probably has one all the way to the 500 message. So I think it's more of a marathon where like, okay, we’ve got to get people the first mile. After that let's get them to the second mile and then let's get them to the whole marathon, 26 miles or whatever that is.
Allan: Yeah. And I mean everybody's seen those decay curves. You get a thousand people in on a daily or monthly basis, and then you look at day two and that is a scary cliff that shows you how many people never, ever come back.
So again, I think there's a huge lever, especially for companies that have never focused on early activation or onboarding. Like focus on the first, I would say a couple of days minimally and then sort of start learning, what else is happening?
So is there, I know the answer is no, but I want to hear it from you. Is there a benchmark for activation?
Ramli: It's really, really tough. I think you made the point, the activation event can be different for different companies. Your definition, your team's definition of activation could change, like for example, at Appcues we changed what our activation event is. First of all, before it was getting them to publish live on the site, like we realized that's way too far down the user journey.
And we want to see more of a leading indicator. We defined it earlier now to just installing a Chrome plug and seeing it. But I have seen in general, a good benchmark for activation rate is between like 20 to 40%, something like that, for users. But don't hold me to that! I would compare it from week to week within your product as well as really trying to hone in on what that activation event is.
Allan: 100%. I think companies need to compare how they are doing historically? All companies are of course different. Some products are much simpler for users to understand and see the value. And other products are much more complicated or maybe it's more of a team approach before they can truly activate.
But I think that's a good number to keep in mind. Aspire to be 20 to 40%. If you can get there and of that cohort, they should then be predictably converting into paid accounts. And I mean, that's a whole other kettle of fish: how do you put the right levers in place and pricing model. But from an activation point of view, I like that as sort of a very rough benchmark.
What are the other metrics that you typically look at or think about when you're looking at activation rate as well?
Ramli: In terms of activation rate, I think people can take a look once they've activated, you want to take a look at your cohort of weekly active users or monthly active accounts.
That could be something that people need to be looking at. The activation event isn't just for the first time onboarding experience, it's also a good way to see whether your users or accounts are healthy and active and which ones are churn risk. So I think those are some really important ones. That activation metric is super critical to not just activation rate for new users, but for regular users and power users that could potentially show how well your accounts and your business is doing.
Allan: Absolutely. And as your activation rate goes up as you just said, keep an eye on daily, weekly, monthly, active users, you know, that should be going up as well. You should be retaining those and growing that cohort.
And then clearly, you know, this has got massive downstream opportunities as well. So your conversion rate is going to go up.Your retention rate is going to go up. Hopefully your K factor or your virality will increase as well because people will say, “Hey, wow, this off this product is so cool!”
And hopefully they will tell their other best fit friends about it as well. So you sort of get that multiplier effect as well.
So Ramli, any last advice? So for somebody that is just starting to think about activation, you know, they've got a software application, they've got users coming in, maybe they haven't even looked at that green thread journey. Any advice that you would give somebody who's just starting to think about activation rate?
Ramli: You brought up the book Obviously Awesome. I would also suggest people take a look at that. I think really getting to know your best fit customers, like you mentioned, is super, super critical and I'm surprised how few say they know the customers and the users. I've seen only a handful of companies that really, really value talking to customers over and over again, to understand, you know, because of what we just talked about. That activation event could shift, the market could shift, the industry can shift, the product and competitors can shift and really like getting plugged in and having your people's ears to the ground is super, super important.
So that will be my piece of advice to folks: Start there. If you start there and you don't listen to anything else that we just chatted about, that should lead you to the customers who will lead you to the right path.
Allan: Ramli John, everybody. Ramli, thank you so much. I think that's awesome. Parting advice, always start with the customer, understand your customer. If you're listening, the customer will lead you to the right decisions. So again, Ramli thank you so much and make sure to check out Ramli’s book on activation, product led onboarding, and all the best Ramli. Thanks again for joining.
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