Engagement: The leading indicator of product-market fit

What is it? How to measure it? How to drive it?

Engagement is probably the most important step in a user’s journey with your product or service and is a strong indicator of product-market fit.

There are many definitions of engagement out there. I like to define it as depth and frequency of interaction with a product, service or feature. It is a measure of the level of a customer’s involvement and personal investment in your product or brand. Engagement is also critical because it is a leading indicator of retention, monetization and referral.

Therefore it is important to drive user engagement ahead of trying to scale through customer acquisition. Without user engagement, your efforts and money spent on acquisition will be wasted — like pouring water in a leaky bucket. You also want to engage your users before trying to drive monetization and referrals.

So how do we measure engagement? Well, let me first tell you how not to measure it. Engagement is not traffic or user visits, nor is it downloads or installs (for mobile apps).

Engagement can be measured as % of users interacting with your core loop over a period of time (i.e. every day, week, etc). And the core loop can be defined as the simplest unit of use or interaction with your product that derives user value.

So first, you need to define your product’s or service’s core loop. Here are some examples:

• Poker game = play a hand.
• Yelp = Search for a place or service. Rating or writing reviews qualify as deeper engagement actions.
• Facebook = Read or like (light engagement), comment or post status (deeper engagement).

Frequency of engagement matters too and it is often used as a way to segment your users. So you will want to measure engagement in cohorts over time (days, weeks, months).

Some commonly used metrics are:

• DAU/MAU (daily active users/monthly active users). % of monthly users who engage in the core loop on a given day.
• MAU/Installs. For mobile apps this is a way to see what % of those who installed your product use it at least once/month.
• # Days performing core loop actions/Week. Highly engaged users will use your product or service 5+ days/week.

So now that we know what’s engagement and how to measure it, how do we drive it?

User engagement can be categorized in one of two types: Natural and Manufactured.

Natural engagement is the result of the derived benefit (or value) from using your product or service. This is the most important form of engagement, and if you don’t have a set of customers in this category you could infer that you haven’t really found product-market fit.

A few years back I attended a conference in which Dick Hardt made an awesome analogy to categorize products. He suggested that products could be categorized as vitamins, pain killers, or viagra.

Vitamins are products that, in theory, are good for you, but their benefits aren’t visible immediately. On the contrary, pain killers provide an immediate benefit. These products solve a current problem or customer pain. And lastly there is viagra, a product that allows you to do something you want to do, but couldn’t do before the product existed. In some cases you couldn’t imagine these products were even possible, but now you can’t live without them.

“Pain killers” and “viagra” products or services drive more natural engagement than “vitamin” products. And the frequency of engagement is tied to the frequency of the need, pain or want (desire) that the product or service addresses.

Manufactured engagement is the result of the deliberate actions you take (features, session and flow design) to boost participation in and/or completion of your core loop. These actions should never be a replacement for natural engagement. However, manufactured engagement could increase interactions with your product and is especially useful in “vitamin” products that require multiple and frequent interactions before users realize their value.

Below is a non exhaustive list of ways to manufacture engagement. Many of these are very prevalent in games, however you can apply them to many different products or services.

• Achievements or Badges — visual recognition or awards for completing specific actions.
• Progression & Aspiration — short or long term goals and the ability to “level up” and unlock product benefits by performing specific actions.
• Suggested Friends, Matchmaking or Personalization — connecting users with their friends or “best strangers” or presenting them with targeted content or features to drive interaction.
• Emails & Notifications — targeted and timely messages that encourage users to interact with your product or service.
• Social Obligation — encouraging users to gift, send birthday wishes or take actions that trigger reciprocity.
• Session Limiters and Appointment Mechanics — designing session breaks and reasons to come back later to your product or service.

Lastly it is important to remove or lower any barriers or friction to use your product or service in order to increase chances of users trying it out and sticking with it. Some examples of things you want to address:

• Tedious sign up flows.
• Long load times, performance issues or bugs.
• Buried or hidden features and content.

So there you have it. As you look for product-market fit pay close attention to user engagement metrics. Ideally you have a pain killer or viagra type product. However, if your product benefits begin to manifest over time, you can use some of the above manufactured engagement mechanics to boost interaction with your product or service and keep users hooked until they reach the point of natural engagement.

If you want to learn about Designing FOREVER games you can read this post https://medium.com/@mbronstein/designing-forever-games-e10cc0c1009f

I have also written a series called “Big Opportunity” where you can read about “Improving the Mundane” and Personal Electric Vehicles