Activation rate

What is activation rate?

Activation Rate aids businesses in assessing how soon and successfully their new customers realize value. It shows the proportion of customers who finish an activity that a SaaS firm has designated as a “milestone” within a certain time frame, where the activity is seen as or is recognized to offer significant customer value.

The indicator, often known as “user activation rate,” allows businesses to evaluate the effectiveness of initiatives to persuade new users to do certain activities.

How to measure activation rate

In reality, businesses assess the activation rate to monitor customers’ growth and activities. Any activity that the company considers to be a successful element in the customer experience is called activation. For instance, an e-commerce website would see a client placing the first order in the initial week as a sign that the item benefits the client.

Since it monitors the percentage of customers that finish a certain activity or milestone, the activation rate is a typical statistic tracked by SaaS, subscription-based, and/or online companies. The milestone, most frequently occurring during the conversion tracking or enrollment process, moves the user closer to becoming a paying client or enhances the likelihood of returning to the application, platform, or website. Additionally, it may gauge a product’s performance throughout the client’s lifetime.

Since the Activation Rate usually happens early in the consumer journey, weaknesses in this stage may be remedied with little harm to the company’s bottom line. Each organization will establish its own set of benchmarks that will help predict future success in regard to internal objectives like user growth, revenue, and turnover.

For example, one milestone may be the consumer enrolling for a product’s free trial, which allows them to try it out before making a purchase decision. So you can calculate the activation rate by the number of customers enrolling for a free trial divided by the total number of users who signed up on the platform.

A low activation rate indicates that there may be problems with recruiting or the customer experience that keep clients from activating. A high activation rate indicates that the product is effective at generating value for the user rapidly and that further promotion and recruitment efforts would be beneficial. Customers of mobile apps often have greater Activation Rates than desktop or mobile web consumers.

Making the activation procedure straightforward and uncomplicated is crucial for increasing the Activation Rate and minimizing friction wherever it occurs. The benefit to the business and the ability to confirm that a particular strategy is operating as planned are the most common features of most milestones.

Activation rate formula

To calculate the activation rate, the following formula is used:

Let’s understand the calculation with an example.

SaaS activation rate clculation example

Assume XYZ, a B2B SaaS firm, has a sign-up page for trial periods on its site. If filled out, they will receive a call for a product presentation. The goal of the product presentation is to make sure that the customer is aware of how the platform works and appreciates its full worth. It also increases the likelihood that the customer will convert after the trial version has ended.

In the last three weeks, there was the following number of inquiries for a trial version.

Inquiries
1st week = 40
2nd week = 46
3rd week = 51

The weekly increase in customers considering a trial version was 14% and 12%, respectively, from Week 1 to Week 3. However, not all were eager to schedule a time for a live product presentation. The following is a list of how many product presentations were done.

Product Presentations Conducted
1st week = 10
2nd week = 13
3rd week = 14

Now, from the numbers given above, the activation rate can be calculated with the following:

Here,
The number of users finishing milestones = the number of product presentations done.
The total number of new users = the number of requests for trial versions.

Therefore, the activation rate for each week =
1st week = 10/40 x 100 = 25.0%
2nd week = 13/46 x 100 = 28.2%
3rd week = 14/51 x 100 = 27.45%