How to measure product engagement - 6 steps
Understanding how users make use of your product is great. But to improve engagement, you need to have some metrics that you can track over time. The steps below will help you take those measurements and understand what the data is telling you.
1. Set up product analytics
There are several great, free, tools you can use to keep track of analytics for your SaaS business. Almost everyone knows of Google Analytics, which is a great tool for tracking basic website information. Our own ProfitWell Metrics is another free option that's designed specifically for SaaS and subscription services. Metrics has an add-on feature called Engagement that will let you better track user engagement; this includes the effects of engagement on revenue. With ProfitWell Engagement, you'll be able to better predict which customers are at risk of churning.
2. Discover the most important metrics to keep track of
Depending on your business the metrics you need to track will vary; however, Between Google Analytics and ProfitWell Metrics, you'll find no shortage of metrics to be tracked. While most of them are going to be useful in some way, focusing your product engagement efforts on the most relevant metrics is important. The metrics listed below are generally a good start to gathering meaningful data about your product's engagement.
- Active users (DAU, WAU, MAU) - Daily, weekly, and monthly active users give you important information about who is using your product and when. If you have a lot of customers, but only a small percentage are regularly engaged with the product, then you've got trouble.
- Conversion rates - What percentage of people are signing up for a free trial, or upgrading to a paid tier or higher-priced plan? This lets you know whether customers see value in your product. If they aren't, your engagement numbers will suffer.
- Customer retention / Churn - These two metrics are flip sides of the same coin. Customer retention tells you what percentage of new customers stick around for a given length of time, and churn tells you how many customers leave over a given time period. See more about retention in the next section.
3. Measure product engagement score (PES)
In this case, PES is perhaps the most important metric to keep track of. So much so that tracking it gets its own section in our steps. Your PES is a combination of three factors: stickiness, feature adoption, and retention.
- Stickiness - This is the percentage of your users that come back every day, or every week. You can choose either time period for tracking this metric, just be sure to use it consistently.
- Feature adoption - A lot of your features may go unused. By tracking which of them sees the most usage by the most customers, say 80%, you'll be able to determine which features are most popular.
- Retention - This is the number of users who are still around after a period of time. Three months is a good starting point, though, like the other factors, you can choose whatever value you want as long as you stick with it.
4. Detect problem areas
Now that you're armed with data, it's time to figure out the factors that are preventing your product engagement from being as good as it can be. Is your new feature slow to be adopted? Are you not converting as many customers as you could be? Is churn happening much quicker than you'd like? All of the metrics you've tracked can be improved, but focusing on the problem areas first will yield more productive results.
5. Construct a hypothesis
Finding the problem is relatively easy; figuring out the cause of it can be more difficult. Low retention and low conversions may go hand and hand. If your marketing department isn't doing a good job of conveying, and repeating your value proposition, both metrics can suffer. You can guess whether a feature simply isn't liked or isn't promoted or explained enough by looking at the performance of similar features with the right CRO tools. The reasons each of these metrics are low will vary from business to business, but the data should guide you in the general direction of the problem.
6. Track and Measure results
You can't just assume your hypothesis is correct. Nor can you assume your efforts at improving product retention are successful. One of the primary reasons for tracking metrics in the first place is to measure progress over time. This will help you know whether your improvements are working, which in turn will help you confirm or eliminate a hypothesis. ProfitWell Engagement makes this easy by giving you a laser focus on engagement metrics and how they relate to your revenue and customer segments.