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ProfitWell MetricsWhat is user engagement and why is it important for your SaaS business? Find out how to track, measure & improve user engagement.
Many SaaS business owners know that you need to track information regarding churn and acquisition. These metrics give you valuable information about whether your business is trending in the right direction or not. But churn and acquisition only cover the bookends of a user's journey. In between those actions is user engagement, and it's just as important to track that as the other two. In this post, we'll break down what user engagement is and why you should track it.
What is user engagement?
User engagement (sometimes called product engagement) measures the activity of customer interaction with a product over time. User engagement is a very important metric for businesses to better understand user behavior and gauge the value that a product delivers to customers over time.
For example, when a television show or novel is engaging, it means the viewer or reader is actively consuming the media in question and receiving value from it. The same principle applies when measuring user engagement with a SaaS product. Between the time they sign up and the time they churn, your customers will hopefully be using your product and gaining value from it.
Why it's critical to understand your user engagement
A new customer will almost certainly use your product shortly after signing up for it. If they continue to use the product, then they are gaining something positive from the experience. However, if they decide not to use the product, they've likely decided it isn't worth their time. This is not good, as customers who don't find your product worth their time will eventually stop paying you for it. Therefore, how frequently your users engage with your product is a prime indicator of the product's health.
Also, more engaged users can bring more profits and are more likely to be active and provide feedback that can help users and improve the customer experience for everyone. Further analysis of your user engagement can provide additional benefits such as:
- Prioritizing sales efforts
- Improving go-to-market strategy
- Refining your targeting and marketing strategy
- Forecasting and future planning
- Improving customer loyalty
How to calculate your engagement rate
Tracking your engagement rate is important because that's the only way you can be sure that your efforts at improving it are actually working. Thankfully, your engagement rate is straightforward to track. For each customer cohort you want to calculate the user engagement for, simply divide the number of active users in a given time period by the number of total users.
number of active users in a given time period / the number of total users = engagement rate
Other important engagement metrics to track (and how to track them)
You can't track your user engagement unless you're also tracking the other engagement metrics that are used to calculate it. Given that engagement is active users divided by total users for a given cohort over a given time period, you'll at least need to track those two metrics. However, there are a few more metrics that are worth tracking as well. Let's look at some of them.
Total active users
Measuring active users requires you to define what an active user is. You should pick a metric that translates well to user engagement. This will be unique to each product, but there should be some minimal activity that shows a user is actively, rather than passively, making use of your product.
DAU, WAU & MAU
User engagement is calculated over a given period of time. It's good to track engagement over each of these time periods—daily active users, weekly active users, and monthly active users—to better see what patterns develop.
Churn rate
If users are churning at a high rate, they probably aren't finding your product very engaging. To make this metric more useful, compare churn rates to engagement rates. This will give you a heads up on customers in danger of churning and give you an engagement threshold to target.
Retention rate
Retention rate is the flip side of churn and can be used similarly. How engaged are the customers that are sticking around the longest, and what can you do to bring other users up to that engagement rate?
Net promoter score (NPS)
Ultimately, the goal of measuring user engagement is to see the value that users are getting from your product. Net promoter score is another such metric. Improving this metric should help with your engagement as well.
Bonus: Track engagement through unique product features
Measuring engagement for each product feature is a great way to see which features are popular, which may need more promotion, and which ones users are just not connecting with.
6 user engagement strategies to help minimize churn rate
Now that you know an increase in user engagement can help reduce churn, you need to learn what you can do to increase engagement. Many of the concrete steps you'll need to take will be product specific, and clues to what those steps are can be gleaned from the metrics you've been tracking. A general user engagement strategy, however, can be applied to every SaaS business.
1. Educate users about the product
Old and new users need to fully understand the features of your product. If it's difficult for them to use a feature, or they simply don't know that it exists, then it cannot provide value to them. Some ways to help users have a smooth start of their customer journey include an omnichannel approach to customer education. This involves walkthroughs, in-app messaging and notifications, FAQs, and social media engagement. The more avenues that customers have to connect with your team, the better.
2. Optimize the user onboarding workflow & overall user experience
A smooth and clear onboarding process is extremely crucial to ensure the success of your customers. Be sure that your customers are well equipped to starting using your product easily. Additionally, make other methods of assistance (content, tutorials, links, etc.) readily available and easy to find. Minimizing the friction of learning and maximizing value, is key.
3. Employ a customer success team
Employing a customer success team may sound expensive, but keeping users satisfied with the appropriate level of customer support is the lifeblood of your business. If you're able to retain more customers, you'll spend less on acquisitions, positively affecting your bottom line.
4. Streamline the engagement loop with gamification
Mobile app developers learned early on that gamification features are a good way to keep customers coming back. Think of ways to implement them into your product and they'll do the same for you.
5. Collect user feedback
Many users are more than willing to tell you what does and doesn't work about your product. All you have to do is ask. By collecting feedback, you'll be able to address any issues that have a negative impact on engagement.
6. Improve product usability
What seems intuitive and easy to use for the designer of a new feature isn't always easy to use for everyone else. Always be looking for ways to improve your product's usability. Your feedback loop is extremely important for this.
Track, measure & improve user engagement for your SaaS product with ProfitWell Metrics, by Paddle
In order to track these important metrics related to user engagement, you'll need some type of analytics tool. ProfitWell Metrics is that kind of tool. It was designed expressly for the purpose of helping SaaS businesses track the metrics that are important to the industry. Best of all, it's completely free. Putting this free tool to work for you will help you reduce churn in many ways, including by giving you the ability to track and improve user engagement. Some other ways ProfitWell Metrics can aid your SaaS business include:
- Segment users to uncover growth and opportunities - Your customer base likely consists of multiple segments. Understanding who these segments are and how they behave will allow you to identify behavioral patterns more easily and accurately, improving your target marketing.
- Track your user through the entire customer lifecycle - From the first interaction with your site, to the moment they churn (or about to churn), you can learn a lot about your customers by how they behave during their lifecycle.
- Improve retention by tracking churn - Tracking churn will allow you to gauge the results of your efforts to curb it. It will also let you gauge whether you're gaining customers faster than you're losing them and what the lifetime value of a customer is.
- Detect patterns of usage to prevent future churn - By tracking churn and comparing it to other metrics, you can find patterns that will provide the intel as to why customers leave in the first place, so you can take steps to remove those obstacles from the customer lifecycle.
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User engagement FAQs
What is the difference between user engagement and customer engagement?
User engagement and customer engagement sound like the same thing, but there's actually a semantic difference between them, because users aren't necessarily customers. Focusing only on customers can prevent other users from converting. User engagement, in contrast to customer engagement, looks at the entire process, including before the user becomes a customer and after they leave.
What are the five levels of user engagement?
As we've already determined, the term 'user' applies to a much broader group of people than 'customer' does. There are five levels of user engagement, only the last few of which involve the user being a customer. Those levels are:
- Discover - The user has first learned of your product.
- Shop - Having discovered the product and decided they want it, the user is now exploring their options.
- Buy - At this level, you've won over the customer and they have made a purchase of your product.
- Own - This level covers most of the user's experience as a customer.
- Advocate - If you've done your job correctly, your customers will also become vocal advocates for your product.
What are the 4 stages in an engagement lifecycle?
The four stages of an engagement lifecycle are point of engagement, engagement, disengagement, and re-engagement. They are described below.
- Point of engagement - This is when the user first interacts with the application.
- Engagement - During this stage, the user is actively engaged with the product.
- Disengagement - Engagement for the current session has stopped.
- Re-engagement - The user returns to the product for another session.
