User Activation: A Metric That Can Change The Fate of A SaaS Company
Are you getting lots of traffic but only a small percentage of them actually turn out to be your customers? Let me introduce you with the term user activation.
Almost every newly-established and growing SaaS companies spend their effort mostly on acquiring new users and getting them into the sales funnel. Then, attracting users to be loyal or long-term customers becomes involved as a second important phase. That is normally how it is supposed to be.
Turning new users into long-term customers should be achieved by helping them reach their “aha moment”. Furthermore, users demand to make sure of receiving an advantage with your product. It exerts huge positive effects in return.
However, most companies are failing to pay adequate attention to user activation. The main claim here is that activation plays a major role in user acquisition and sales itself. In this article, we are going to evaluate how accurate this claim is.
What is User Activation?
We can define activation with important milestones that your visitors go through their journey to become your customers. Depending on your business, user activation steps may include the number of clicks, time on your website, pages viewed, creating the first Kanban board, inviting a teammate or creating the first product tour.
Activation is the second stage of the famous AARRR metrics. After the acquisition at which users find you, they experience your product for the first time and then decide whether it is worth coming back. Briefly, visitors achieve the value you promised in the activation step. It states the percentage of activated users out of acquired ones.
The Activation Rate is the numerical measurement of how many visitors are engaging with your website.
Why Does User Activation Matter That Much?
Let’s think about a scenario that you and your rivals can spare a $15 budget for advertising on Google Ads to get one user signup, and that you make $30 for every user becomes a customer. Let’s also assume that only 50% of your user who sign up for a trial will upgrade their account to be a customer.
From end to end, the break-even point of your marketing expense: $30 x 50% activation = the $15 you spent on Google. If you can succesfully increase the activation from 50% to 60%, your marketing channel will undoubtedly become profitable: $30 x 60% = $18.
And because of the nature of SaaS companies, you’ll get paid every month from every activated customer. With a low churn rate and high user activation rate, you can keep increasing your marketing budget, stay profitable and become the next unicorn 🦄
Consequently, it is highly crucial to do a proper approach and to make a detailed evaluation of the activation stage. It allows us to track numerical data of user action. Furthermore, it truly helps us determine the marketing budget and analyze the problems until this stage.