In SaaS, having a hungry appetite for information can poison you if you use the wrong metrics to measure product success. You need to leverage product metrics that are linked to customer success if you want to thrive.
In this guide, we’ll go through five key product metrics you can use to measure success. All of them are simple and easy to use.
Let’s jump right in.
Metric 1 - Adoption Rate
Adoption rate is one of the most important metrics for measuring SaaS product success because it tells you the percentage of new users to all users.
However, it can also go further by measuring utilization and activation, giving you insight into how effective your products are.
Basic formula (percentage of new users to all users)
On a basic level, your adoption rate is the percentage of new users to all users. You can figure this out using this simple formula:
This will tell you how many people are signing up as a percentage.
However, it won’t tell you anything about utilization and activation - product metrics that tell you the following things:
- Customer satisfaction in your product
- How effective your onboarding process is
Advanced formula (percentage of new active users to signups)
If you also want to measure your new active users against new signups (which you should), you can do so with this formula:
This formula measures the number of new active users against new signups, giving you fresh insight into activation and utilisation. It also measures customer growth and customer satisfaction by linking sign up data to active users.
What’s a good adoption rate?
70% is a good benchmark for both the basic and advanced formulas. 70% shows you have a product with high retention and low churn rates.
Metric 2 - Conversion Rate
The conversion rate measures how many people take the action you want them to. For example, you could measure how many people fill in a signup box, complete your checkout, or upgrade to new features in your SaaS product.
Conversion rate formula
All you need to do is divide the number of conversions by the total number of visitors/users (we recommend using user sessions).
Figuring out your conversion rate is important because it is a measurement of how effective your sales funnel is. Are there any weak spots? Are you leaking customers, and if so, where are you leaking them from?
What’s a good conversion rate?
While the average SaaS conversion rates range between 3-5%, a 10% conversion rate or more isn’t an unrealistic goal. You will need a good onboarding process and a clear value proposition, so your visitors are convinced to sign up.
Metric 3 - Activation Rate
Activation rate is the percentage of users who achieve success. It measures how quickly and effectively your users get value, using a predetermined key action as a measurement. When users perform this action, they are judged to have achieved value.
This is not the “AHA!” moment users have when they find your product, but the moment they get value using your product.
According to figures from Ben Winter of Fairmarkit, a 25% increase in activation rate contributes to a 34% increase in MRR in 12 months (research on Appcues).
Activation rate formula
The formula to determine your activation rate is simple:
There’s no ‘universal’ measurement of activation rate because measurements differ for every business. You need to define what in-app events occur when people get value from your product and use these as your key actions.
What’s a good activation rate?
An activation rate above 60% should be your goal. This means less than half of people quitting somewhere in your onboarding process.
The best SaaS businesses have an activation rate north of 70%. A low activation rate means your onboarding process probably needs work.
Metric 4 - Net Promoter Score® (NPS)
Net Promoter Score® (NPS) is a metric used in customer experience programmes. It is a trademark of Bain & Company, Satmetrix Systems and Fred Reichheld.
NPS is an index ranging from -100 to 100 that measures your customer’s willingness to recommend (promote) your products. It’s helpful as a gauge for customer satisfaction and it can help to predict future business growth.
Customers are asked to rate you on an 11-point scale on their likelihood of recommending you. Customers are then segmented into 3 categories:
- Detractors: Gave a score lower than 6
- Passives: Gave a score of 7 or 8
- Promoters: Gave a score of 9 or 10
Net Promoter Score formula
The formula to determine your NPS is as follows:
This will give you an index score between -100 to 100. This is your NPS. You can use it to gauge customer satisfaction and create better experiences for your customers.
What’s a good NPS?
Global benchmark data from SurveyMonkey shows that the median score is +44 and the average score is +32. The top 25% of organizations have an NPS of at least +72. So, to be in the top 25%, aim for an NPS score of +72.
Metric 5 - Customer Satisfaction Score (CSAT)
Customer satisfaction score (CSAT) is another metric that measures customer satisfaction, but it isn’t a trademarked technique like NPS.
To calculate your customer satisfaction score, you need to run surveys to collect responses from customers. The survey is simple:
- Question: How satisfied are/were you?
- Survey scale: 1 – 3, 1 – 5, or 1 – 10 (worst to best)
You should choose a scale for ‘positive’ responses. We recommend 7-10.
Customer Satisfaction Score formula
Once you have 10 or more responses, run this simple formula:
This formula will give you your CSAT score as a percentage.
We love CSAT because it’s so simple - it helps you close the loop on customer satisfaction with easy-to-collect and accurate data.
What’s a good CSAT?
The happier your customers, the better. You should aim for an 80% CSAT score. This means satisfying at least 8 out of 10 customers.
By leveraging these five product metrics in SaaS, you will nail down customer satisfaction using important metrics - not mumbo jumbo.