What is PARO? Product Activation Rate Optimization – how to activate more users and achieve higher growth

Product Activation Rate Optimization

If you’re a SaaS company that wants to grow faster, you should definitely be thinking about Product Activation Rate Optimization: raising the percentage of users who stick around long enough to experience the value of your product.

See if you can relate to the following story:

Simon is looking for a new project management tool for his SaaS company. He browses around and finds something that looks promising. Gant charts, time tracking, segmentation of users by department — all features he wants. So far, so good.

So he creates an account. And begins an experience that will haunt his dreams for the next few nights…

The UI is counter-intuitive. The Gant chart is hidden within the Advanced Settings, which are only accessible as a power user. The time tracking feature doesn’t differentiate between billable and non-billable time.

To cap it all, the product tour at the beginning is boring, bureaucratic — and compulsory.

Simon is bitterly disappointed. He had been keen to try this out. His company actually has the funds to become an enterprise customer.

And now this. He quits before he has had a chance to experience the value of the product. He’ll probably tell all his friends in SaaS project management to avoid this tool like the coronavirus.

Product Activation Rate Optimization Steve crying

If you’ve worked online, you are bound to have had unfortunate experiences like Simon’s as a customer. But what if we flip the script and look at this scenario from the perspective of the project management tool, instead of the customer?

If you’re a SaaS company like this project management tool, the bottom line is this:

For every customer you have like Simon who rage quits before really getting to use the product, you’re losing out on:

  • Monthly recurring revenue
  • Referrals
  • Excited, engaged users

It’s therefore in your interests to optimize the onboarding experience so that as many users experience the value of the product as possible. This point is called “activation.” We’ve written about this before here at Userpilot.

In this article, we’ll explain how to increase your Product Activation Rate (PAR) so that your SaaS company can grow more quickly.

CONTENTS

What is Product Activation?

The Aha Moment – the moment of activation

How do I calculate Product Activation Rate?

How to Optimize Product Activation Rate

  1. Use session recording tools to identify and overcome frustration in the user journey
  2. Remove unnecessary fields & roadblocks from your sign-up flow
  3. Replace empty states with meaningful templates
  4. Personalize the new user’s onboarding flow
  5. Test to see if your changes have the desired effect
  6. Exit interviews

Wrapping Up

TL;DR: Product Activation Rate Optimization in a Nutshell

  • Activation is when the user experiences the benefit of your product first-hand
  • Product Activation Rate is the percentage of users acquired that activate

To optimize Product Activation Rate:

  • Analyze your customer journey to find and remove obstacles to activation
  • Make sign-up frictionless -as quick and easy as possible – in most cases
  • The user should never be confronted with a blank screen (empty state) during onboarding
  • Know which unique value your user wants to experience and provide an interactive walkthrough that matches their use case
  • A/B test your solutions to see if they actually increase Product Activation Rate
  • If all else fails, talk to the users who are churning before activation

What is Product Activation?

Let’s firstly explore a bit more about what activation is and why it’s important.

Activation is all about the user’s first experience with a given product. If you recall the story of Simon and his project management tool, the tool failed because his first experience with the product was so bad.

It’s not sufficient to just use the product. Simon started using the product, but he hated it and quit after a few minutes.

It’s not even sufficient to get the user to understand the value of the product. Simon knew he wanted a tool that had a great Gant chart and time tracking, and he knew his chosen tool had those features… at least in theory.

Activation is about getting the user to EXPERIENCE the value of the product. Big difference. It’s about real, lived value, as opposed to the hypothetical value proposed on the product management tool’s sales page.

To put it another way, it’s true that many SaaS companies fail because they can’t acquire enough users. But acquiring a user, getting them to create an account and / or download your app is only half the battle. The user actually has to experience the value of the product to want to use it.

This is why Activation is one of Dave McClure’s 5 pirate metrics (AARRR), viewed on the same level of importance as customer acquisition, retention, revenue and referrals.

For SaaS companies specifically, it’s arguably more important than all of the above. When Fairmarkit ran a simulation in which each of the pirate metrics were increased 25% from industry-standard benchmarks, it was activation that increased MRR the most:

MetricMRR increase after 12 months if metric increases 25%
Acquisition25%
Activation34%
Revenue25%
Retention31.07%
Referrals7.44%

Ben Winter from Fairmarkit points out that increased activation would not only increase MRR, but also retention and referrals, making the overall effect on MRR likely even larger!

The Aha Moment – the moment of activation

That precious moment when your user activates is called the Aha Moment. It’s the moment when your user has transformed from someone who’s just trying out your product into someone who really gets it and loves it. As Fairmarkit’s analysis shows, getting a user to activate will positively impact other pirate metrics as well.

Once a user has experienced the Aha Moment and experienced the value of your product, they’re very likely to stay on and become a regular customer. This is also probably the time when they stop shopping around and commit to your product.

In other words, activation is what all product managers dream of achieving.

Aha moment

The Aha Moment is a little tricky to understand in abstraction, so let’s quantify the concept with some specific examples.

Exactly what constitutes an Aha Moment will vary from business to business.

For Dropbox, it’s once a user has uploaded one file. The company has learned that once you’ve seen the benefits of their product by uploading one file, you’ll probably come back and upload more.

For Facebook, it’s when a user acquires their first 7 friends within 10 days. This means that a user has effectively understood that they can use Facebook to connect to other people, and is therefore likely to continue on the site.

For Twitter, it’s once you’ve followed 30 other Twitter accounts. Following this number of accounts gives you a critical mass in terms of the variety of other people’s tweets to read. This makes for an engaging user experience, and the user is probably not going to want to give that up.

Here at Userpilot, we view users as activated once they have installed the Javascript widget to their app. This enables the user to see the onboarding experiences they’ve had on their own product.

In each of these examples, once a company has activated a user, that user is more likely to stick around and tell their friends about their positive experience. For the company, that means:

tooltip
  • More users
  • More revenue
  • More referrals

How do I calculate Product Activation Rate?

It follows that product managers have every incentive to get as many of their users to activate as possible.

But the story of Simon shows us that not all users will reach the Aha Moment and activate.

Those that do are a percentage of all the users that sign up for a product.

In other words, PAR should be seen as a function of both the number of users who activate, AND the total number of users.

You can calculate this as a percentage by dividing the number of activated users by the total number of users, and multiplying by 100.

Product Activation Rate Optimization Formula Calculation

Your SaaS company should absolutely be tracking this percentage on at least a monthly basis, and doing whatever it can to optimize Product Activation Rate.

It’s probably one of the most important product metrics you should be looking at.

In the rest of this article, we will explore what steps SaaS companies should take to optimize their Product Activation Rate over time.

How to Optimize Product Activation Rate?

1. Use product analytics tools to identify and overcome frustration in the user journey

As Peter Drucker, a management guru, once said, “[only] what gets measured, gets managed.” By analogy – in order to improve your Product Activation Rate – you need to measure it and understand what affects it negatively or positively.

There are a few ways to analyze what affects your PAR:

  1. by installing a session recording tool like Fullstory or Hotjar, so that you can watch in-app user experiences as they go through your onboarding process.
  2. by using a Product Analytics tool
  3. by using an integrated Product Adoption platform;
Speaking of product adoption – why don’t you join our free online course to see how to improve it?

Installing a session recording tool like Fullstory or Hotjar, is valuable for optimizing Product Activation Rate for two reasons:

  1. You’ll map out the micro-steps users need to take between sign-up and the Aha Moment
  2. You’ll get a feel for where your users are getting frustrated and where they are quitting before ever activating

Let’s use our hypothetical project management tool as an example to illustrate how this might work. Say that your Hotjar analysis gives you the following insights:

  • Users that try the time tracking within their first 5 minutes of using the product have an 85% chance of quitting the product. This is a huge issue.
  • There’s a risk that a user makes an account, clicks around a bit and then just leaves.
  • The optimal user creates their first project management board within 10 minutes of creating their account. They populate that with real data within 24 hours of using the product.

In this scenario, the following ideas would increase PAR:

As a short-term fix, make the placement of the time tracking less immediately obvious, so that users are less likely to find it so early in their user journey. Longer-term, work out what it is about the time tracking that users dislike so much. Conduct exit interviews with users who quit after using the time tracking in order to figure this out.

Use a welcome screen to encourage users to create their first project management board immediately upon creating their account. Use gamification to reward them for doing so, perhaps with a funny animal pop-up.

Apart from the highly qualitative insights provided by user journey recordings, you can also look at more quantitative methods – such as funnel analysis.

Funnel analysis ‘collapses’ statistically significant samples of user recordings into quantitative data where users drop out in their user journey.

heap

Source: Heap

To run funnel analytics you need to plot out the user journey in terms of in-app events, and track where users are dropping out because they are missing the necessary activities.

If you have opted for an integrated solution to build your in-app product adoption experiences, you will be able to measure the effectiveness of each of them directly in the platform:

userpilot user metrics for Product Activation Rate Optimization

Source:

Userpilot – sign up for FREE to measure your user activation!

2. Remove unnecessary fields & roadblocks from your sign-up flow

The point here is to make sign-up as easy and smooth as possible, so as to reduce the time between acquisition and activation.

This will reduce the chances of a user quitting before they reach the Aha Moment, thereby increasing PAR.

Consider implementing the following:

One-Click Registration: allow users to register through a commonly used third party where they already have an account, such as Google or Facebook.

Facebook signup

Few Sign-Up Fields: The highest converting sign-up pages have forms that are 2-3 fields long. If you need more fields than that, spread them over multiple pages.

Use Autofill: Auto-populate phone fields with dashes and date fields with slashes. When the user has filled in one field, move to the next one automatically.

Lazy Registration: if you can wait until after registration to get a piece of user information you need, then do so.

CAVEAT: for certain products, a sign-up process with more friction is actually going to be better than one with less. This is especially true when your product is too complex to demonstrate value on its own, or requires lots of integrations to set up. See this post for more details.

3. Replace empty states with meaningful templates

If you sign up for most SaaS products, one of the first things you’ll see is an empty dashboard.

empty state - Product Activation Rate Optimization hack

Superficially, this makes sense; this is a new user who hasn’t created anything yet. The problem is that users are turned off by empty states. They figure there’s nothing going on, so what’s the point of using the product? The effort for them to create the first item on the dashboard seems so much greater when there’s nothing else there.

So the user quits before they are able to activate, reducing PAR.

To fix this problem, SaaS companies need to let users explore the core value of their product as soon as possible — without even having to sign up or use the product themselves.

A good way to do this is to create case studies, templates and use cases for your product, and include them in onboarding to show users what they can potentially do with your product.

Instead of being demoralized by a blank screen, your users will then browse the case studies and start coming up with ideas for using the product.

This will increase engagement in the crucial early stages of trying the product, increasing the odds that the user will stick around long enough to activate.

One business that successfully implemented meaningful templates like this is Autopilot, an automation tool that allows marketers to visualize their customer journey.

By replacing the previous blank slate in their onboarding with customer journey templates, Autopilot doubled their activation rates.

Find out more about Autopilot’s experience in this video from Product Drive.

4. Personalize the new user’s onboarding flow

Many SaaS companies have a variety of users, each of whom would define “experiencing the value of the product” in a different way.

Let’s take Userpilot as an example.

Userpilot is a “product adoption platform” that can be used by “product teams.” But there are lots of different individuals who could be on a product team:

  •   A Product Marketing Manager (PMM) or a Product Manager (PM) who wants to build a new user onboarding flow without involving their devs
  •   A PM who wants to run an NPS survey in-app
  •   A PMM who wants to announce new product launches inside their app
  •   A Customer Service Manager who wants to quickly promote their new Advanced User Webinar to a specific segment of the users

Each of these use cases is different. If we want to get a PM to activate, we can’t exactly drag them through a 30-minute tour on onboarding when all they came for was to run their NPS survey.

To solve this problem, create a welcome screen that includes a microsurvey to figure out who your user is and what their goal is. You can even ask the user to pick their avatar, as if they were playing a video game!

gamification avatar

After choosing their avatar, users should be presented with an interactive walkthrough that will point them to the exact thing that they want to achieve as quickly as possible.

By walkthrough, I don’t mean a classic, linear product tour that dumps a huge amount of information on the user in one go. Most users won’t have the memory to retain it, so you’ll just end up turning them off before they activate.

The walkthrough should instead be personalized, interactive and fun, encouraging the user to take the specific actions that will lead to activation.

An interactive walkthrough based on the user’s specific needs will massively reduce TTV and get the user to the Aha Moment much faster.

5. Test to see if your changes have the desired effect

It’s not sufficient to just make a change to your onboarding process and hope that it works. You have to measure the impact of your actions.

To continue the example we’ve been using, the project management app could use Hotjar to monitor user behavior.

They could run an experiment whereby 50% of their users have funny meerkat graphics pop up whenever they achieve a goal on the way to activation, and 50% do not.

meerkat

Source

If the users that are receiving the gamified reward have a higher Product Activation Rate than the control group over, say, a month, then their experiment has worked. It’s time to roll out this feature across the entire product. If not, then goodbye meerkats. Time to move on to the next solution on the list.

Userpilot has a feature that allows you to conduct A/B tests on in-app experiences.

A/B test userpilot

I would caution against running too many A/B tests at once. It’s difficult to get a clear picture of what’s moving Product Activation Rate up or down if you’re testing 58 variables at once.

6. Exit interviews

Product Activation Rate Optimization exit interview

Source: Getanewsletter.com

If all else fails, there’s no substitute for actually talking to your users.

So few companies actually take the time to do this. I remember feeling really special and respected  a few years ago, when the makers of an online course I had taken listened to me for half an hour to get my feedback.

Your key goal in these interviews should be to figure out why certain users are leaving your SaaS product (hence “exit” interviews).

What is preventing them from activating?

Is there a competitor they would rather use? Why?

What feature did they sign up to your product to use originally? Was that feature not as smooth as it should have been?

Questions like these are humbling to ask — and the answers will be perhaps even more humbling. But they will teach you about your user experience from the user’s perspective.

They will give you insights that you can feed back into the product development cycle to help optimize your Product Activation Rate.

If you need to bribe your users with a free month of your platform in order to have a feedback call, or an Amazon gift voucher, so be it!

gunny gif

What if our project management tool had spoken with Simon? He would have told them that :

  • The UI is counter-intuitive.
  • The Gant chart is hidden within the Advanced Settings, which are only accessible as a power user.
  • The time tracking feature doesn’t differentiate between billable and non-billable time.

This is all useful feedback to help the tool improve Product Activation Rate in future.

Wrapping Up – Product Activation Rate Optimization – Key Takaways

In summary, you can think of PAR optimization as making the user experience between acquisition and activation as seamless, short, engaging, and as personalized to the individual as possible.

If the project management tool had followed these actionable tips, there’s a good chance Simon would have been less frustrated, and stuck around until activation.

Here’s to a world with fewer customer experiences like Simon’s.

About the author:

Geoff Walters is a content manager and entrepreneur with 8+ years of experience in building product businesses.

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