Customer Activation is one of the metrics that decides the fate of most SaaS companies in the long run.
While many startups claim product-market fit through high conversion rates and early customer adoption, in reality, these don’t function as indicators for the revenue that the business will make in the long run.
There are two key elements that influence any SaaS company’s success in terms of customer acquisition and which are relevant to most prominent investors: activation and retention.
Activation rate is the actual rate at which customers become active users, and retention rate is the actual rate of customers who keep on being your customers over time.
There’s a reason why the top 100 SaaS companies have a higher revenue than the next 250 falling behind them, and it’s not a matter of luck. The main difference is to be found in churn, and how they manage to curb it and keep customers hooked to the product.
Paying close attention to the design issues that hinder activation is immensely helpful when it comes to reducing churn rate. This, together with applying more sophisticated activation tactics, is what allows successful companies to immediately engage new users and to retain a large portion of their newly acquired customers from the moment they sign up.
Here’s a list of a few important elements implemented by the best SaaS businesses when developing their user experience.
Companies like Facebook provide external triggers to initiate the use of a product or service. This is called a hook.
As Nir Eyal described in his book ‘Hooked’: a hook can be anything from a checklist of task completion to the activation of new features.
Notice how companies like Slack have carefully adapted their user experience around these features? The action is then followed by a reward that the user gets for performing that action and this cycle is repeated.
Habits aren’t exactly known for being easy to break, so the closer you can get using building predictable expectations for users, the longer they’ll stick around.
The strategy is clearly interconnected with gamification strategies and derives from successful onboarding strategies of game apps.
I remember downloading a car racing app. The game would include several models of cars, which obviously had to be acquired with experience points and cash. But to get the first upgrade (moving from a lousy compact car to an actual sports car) the only thing I was requested to do was racing once a day for at least five days.
The game presented a desirable upgrade and simply offered it in exchange for engagement. This was enough for me to return back to the game every day and to finally turn this experience into a habit.
Add Feedback Loops
Feedback loops represent an important factor in why we do what we do. This includes our interactions with applications.
Humans (yes, your users) intrinsically seek gratification within their actions. When you create a product that focuses on rewarding users’ actions with feelings such as accomplishment, recognition or success, you’ve set a step in the right direction.
Drivers of such feelings are curiosity, purpose or mystery. Making sure to include these loops is an inherent component of retention that allows you to create a product users keep being interested in.
Rewards can be actual benefits, such as unlocked features or discounts. But these rewards can also be purely emotional and go from a simple positive confirmation to status upgrades.
Some companies offer access to exclusive communities or information while others simply congratulate their active users or show them happy faces!
In essence, external triggers can initially motivate users and increase engagement and activation.
Ask for Micro-Commitments
We tend to value things by how ‘easy’ or ‘difficult’ they are. The same holds true for products.
Paradoxically, we seem not to care too much about things we achieved effortlessly.
There’s a sweet spot between feeling frustrated when trying to achieve something and feeling rewarded for being part of an elite group of people. People tend to take for granted products or services which were simply thrown into.
These become sort of a given and they don’t care too much about them. On the other hand, though, when required to do some work people suddenly feel like they deserved the product or service and care about it a lot more. The sweet spot can be found through micro-commitments.
Asking for micro-commitments is an extremely valuable aspect of the user experience.
This doesn’t mean that your signup process must in any way be more complex than it needs to. However, it may be a good idea to ask users to invest in your product or service by providing specific information or performing actions in order to be accepted.
Key to this element is timing. Asking for too much too soon might have the opposite effect and generate frustration. The micro-commitment can be put off to a later stage such as when setting up profiles or integrations with other apps or services.
Users who aren’t encouraged to put any of their time and resources into something, end up feeling much less of a link between themselves and the product. They never reach the “reward” point mentioned in the habit formation and will be much more likely to eventually churn.
Create a Better Onboarding Experience
Take your users by the hand. The first experience someone has in an app is the one that sets a precedent for their relationship with your company from there on out.
If the first emotion they feel from your product once they start to use it is irritation or confusion, there’s a high chance they won’t stick around. The path to a customer’s desired outcome needs to be clear, not so long that it results in frustration, and painless. Obviously, to fulfill this, you need to have a firm grasp on what users’ desired outcomes are and notice whatever problems they face along the way.
Onboarding is making decisions for the users. The easier the customer journey the better the whole user experience is.
Create Early-on Engagement
People sometimes sign up for apps and services and then, for whatever reason, they interrupt the onboarding process. These users are not even given the chance to appreciate all the features and benefits of your solution.
Sure, a few of them can be activated via “we miss you” or “you’re not being that very active” emails. But the idea is that the sooner a user interacts with you brand the more involved they’ll be with your free trial or test version.
The important factor here is time. We need potential customers to dive in straight away and collect the first positive impressions of our product.
Look at Duolingo, for example. They don’t have any gates between users and product. You go to the website, start with your first language class and you’re required to sign up only afterwards.
Being too greedy with email and profile information can sometimes be counter-productive. You want users to enjoy your product as soon as possible and associate a positive feeling with the experience.
Another classic example is Slack. Unlike Duolingo, they require you to sign up from the very beginning (directly on the home page) and confirm your mail because this step is directly connected with the core functionality of the product.
After confirming your mail though you’re immediately praised (remember when we talked about small rewards?) and guided through the process of creating a team which is super sleek and fast. Don’t you love that they already suggest your team’s domain based on your email address? Why would it be different, right?
Same for invitations. If you’re inviting people within the company, why would the domain be different? With Slack, you simply need to enter names, not mails.
But the critical part of Slack’s onboarding process is the slackbot. Not only does this bot introduce and explain the product, but it also sets up your own profile.
The experience is flawless and the very first of point of contact with the actual product is funny, intelligent, and well-designed. Boom!….By chatting with the bot we are already using the product!
Letting customers guess what they need to do next is not a smart move. A progress bar can be useful to try and motivate users but this element is not enough.
LinkedIn, for example, suggests you to add sections to you profile and shows you how advanced your presentation is.
the problem is that you can simply close up this suggestion window or ignore it because, in the meantime, you want to perform other tasks and are distracted. Similar windows can lead to activation but it is easy for the user to procrastinate.
An actual checklist, as it happens in Quora, for example, shows you exactly what to do. The onboarding process has a regular flow and you are suddenly in charge of what the user does and when.
People feel guided and compelled to finish the tasks you prepared for them. Additionally they get to experience your product the way you intended and see the actual benefits of your solution.
This can be achieved by embedding checklists directly in the application itself or by using a virtual assistant that guides users during the onboarding process.
Of course, all these tactics are subject to whether customers actually can reach their desired outcome with the product.
Active, paying customers are generated through product fit. They need to see and appreciate the value of the product beyond the issues connected to signing up and learning how to use a new software solution.
Design is just as important as the basic idea of a product, and churn can kill a product entirely if allowed to drag a company down into an abyss of constantly escaping users- Designing a seamless user experience that leads to activation is critical because poor onboarding automatically translates into higher churn.