user adoption metrics

How to calculate the adoption rate and its impact on customer LTV?

Adoption is the phase where customers get acquainted with your product, integrate it into their workflow and learn ways to use it that maximizes their benefit. Customers only adopt a product if it helps them achieve their goal.

Why the Adoption Phase Matters in SaaS

Generally, a subscription-based business, renewals, and recurring payments hold the key values. In response, many SaaS user adoption companies have started exploring strategies that focus on driving product usage by end-users.

If paying customers aren’t fully utilizing your software, they will cancel or not renew their subscription. The adoption phase develops a whole other level of commitment on the part of both you and your users. The adoption stage of the user journey is where beginners become regular users. This is important because regulars are your core user base. They understand and fully appreciate your product’s value.

If you don’t have a solid adoption strategy in place, you’ll waste all the time and money you spent on marketing and converting a customer. According to Harvard Business Review, it costs 5 to 25 times more to acquire a new customer than keep an existing one.

After implementing a product adoption framework, businesses experience higher user retention, as well as lower churn.

Suggested Reading: Why is Customer Retention Important for B2B SaaS Business?

Numerous SaaS companies with long-term goals of growth and success tend to focus time and effort on product adoption. By concentrating on adoption, SaaS companies move their users along the pathway from basic conversion to becoming regular users.

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How to Calculate Adoption Rate

There are several key metrics using which you can calculate your adoption rate. You can start by assessing how core features are performing and the time and value of the actions that users take with your product.

A customer success platform like CustomerSuccessBox can gather these insights into a visual and actionable presentation.Once you’ve identified these metrics, you can begin to measure your customer adoption success by looking at:

Calculating Customer Adoption Rates for Product Access

Different experts would recommend different ways to calculate your adoption rate. But the ultimate goal is to measure how successful you’ve been at onboarding, getting people to use your application and how well do they actually adopt the product.

Adoption Rate = Number of Unique Daily Logins ÷ Total Number of Purchased Account Licenses

Calculating Customer Adoption Rates for Usage

This metric helps understand customer adoption by determining the time a customer spends using your product. It also allows you to determine an overview of how much time the average user spends with the product per login. 

Average Time Spent in App Per Login = Amount of Active Time Spent in App Per Week ÷ Total Number of Logins Per Week   

Calculating Customer Adoption Rates of Feature Usage

This metric is similar to the product access model, but feature usage is more about determining actionable next steps. You can measure the number of times a feature is accessed per day/week/month.

Feature Adoption Rate = Number of Times Feature Accessed ÷ Number of Logins Per Week  

Maintaining Positive Customer Lifetime Value

Customer Lifetime Value can be simply defined as –  a metric that shows how much net profit your company can make of one customer over time.

After a successful adoption customers start trusting and implementing your product and this leads to increased customer lifetime value (CLV). 

During the adoption phase there can be many reasons why the customer lifetime value can decrease. Here are some implementations to avoid that :

Provide 24/7 Support

As your customers are in the adoption phase they are getting acquainted with your product and experiencing various different things. This is the time they need your support 24/7. 

You can do this through round-the-clock customer support. While it’s expensive, it’s also worth it. 

Demonstrate Your Product’s Value

The more your customers know about your product, greater benefit will they be able to acquire from your services. During the adoption period, it is necessary for you to demonstrate your product value. This shows what you have and how your product can be really helpful to the customers to solve their problems.

Offer Live Chat Support

Studies show around 80% of business buyers want companies to respond and interact with them in real-time. During the adoption phase, live chat is extremely useful for businesses. About 79% of customers say they prefer using live chat because it offers immediate responses. 

Set Goals

During the adoption phase, it is very necessary for you to know where you are and where you want to be, where your customers are, and what they expect out of your product. So it is very important for you to set goals and work accordingly and help your customers adopt your product in an efficient manner.

Look to the Future

You must ensure your customer that your product will always hold value for them even when their goals change in the future. Your product will always be updated and upgraded. This will result in future security for your customers and they will intend to trust you more.

What is a good adoption rate in SaaS?

As your customers learn more about your product, they start implementing it even more and gain value. SaaS companies that have high user adoption numbers experience higher marketing ROI and lower marketing costs. A good product adoption rate means higher retention, lower churn, and more predictable revenue. For specific metrics, consider these SaaS benchmarks from a Mixpanel study:


Metric

Median

90th percentile

User Growth
Measured as the month-over-month growth in weekly active users.



4%


72%
Activation
Measured as a percentage of users who completed a key activity in their first week.
17%65%

5 user adoption strategies for B2B SaaS businesses

Implementing these five tips will improve adoption rate, user experience and can act as ways to promote the product and its features.

Below, we’ve listed 5 proven tactics to increase your average CLV and generate more revenue from your existing customers.

Identify your activation criteria

Your activation criteria are things customers do that improve the likelihood that they’ll come back to your product a second, third, and fourth time.

Activation criteria should be a specific task that delivers value to the user and helps them understand why they should continue using it.

Get to the heart of why customers use your product

You’ll need to work with your sales team to understand what the real-life challenges your prospects are dealing with that prompt them to look for a solution like yours. 

To really get to the heart of why customers start and keep using your product, you can look at your current customers as well as your prospects.

Easy Communications

Clear communication is the key to know your employees better. You must explain to them about the importance of adopting a SaaS user model. Aside from this, make the process super simpler by breaking it down into sub-points.

Accessible Training

Schedule training monthly, quarterly, or annually. It should not be like a ‘one-time thing’. Also, do not exclude your new employees. Regular training will not only help the experienced users but also ensure that the new ones are looked after well.

You’ll need key people at each location who ‘run point’ on the onboarding process while you use online collaboration tools to do training sessions and share information.

Analyze feature and product usage

When you think about user adoption, many companies focus on that initial onboarding phase, getting customers to start using their product. But user adoption is a continuous challenge, you want your customers to keep using your product long term. 

Analyzing product usage data is an important user adoption strategy. The more you analyze, the better ways you know to increase the adoption rate.

Takeaway

SaaS customers follow a life cycle. Make sure product adoption is a priority at each stage as you move users from novice to expert. This is a crucial phase and must be given importance. By increasing your adoption rate, you reduce churn and increase retention rate while having a great impact on the customer lifetime value.

Renewals

Swagata is a growth marketer at CustomerSuccessBox. Advocate for great customer experience. She is an avid traveler and when she is not working always on the lookout for new places to explore.