In the last post, we skimmed the surface on Retention- what it means, why it is important and how you should define it. In Part-2 of this series, let’s talk about Engagement metrics. The goal is to help think about engagement for your product and apply first principles thinking on what it means.
While retention is important, one could argue that engagement is probably more important. Because Retention is the output whereas Engagement is the input.
What are engagement metrics and what constitutes them?
In the most simplistic terms, engagement metrics tell you how deeply users are using the product to get value from it. The more a user uses the product, the more engaged that user would be considered. Engagement is highly important because it leads to Retention — something that all businesses want. It is in fact, the leading indicator to retention.
Let’s take an example of Instagram — the app responsible for making me realize that I can be addicted to things. There are 2 sides of the business — the creators who create content in the form of reels, posts, stories and the consumers that consume all the content created by the creators. For this post, we will look at the consumer side only (because why not!).
So how do we determine which action should be considered to identify whether a user is truly “engaged” with the product? Is opening the app good enough or does comments on a post define what an engaged user is. What we need to determine is what bar the user needs to cross. Given the subjectivity of it, you might think you can pretty much choose anything. But is it really that simple?
Not really !!
Here are the 3 attributes of every engagement metric that needs to be defined:
- Core action → Of the multiple features such as viewing, liking, commenting, which action should you choose?
- Timeframe → In what timeframe should a user have taken that action to be considered as engaged? Eg- daily or weekly or monthly
- Frequency of core action → How many times does a user need to do that to be considered as engaged? Eg- is 1 comment enough or are 5 required?
Now, let’s break it down and look at each of these.
Core Action
First of all, let’s put all the actions that are “core” to the product on a scale of effort required (low to high). This is usually a qualitative judgment. One can say with high confidence that opening Instagram is an easy task but liking and commenting on a post require more effort from the user. In the case of commenting, they need to consume a few posts, then determine which post is worthy of commenting, and then finally write a few words, re-read it, and then post it. This requires a LOT of effort from the user.
A general rule of thumb is that you should choose an action somewhere in the middle of the graph i.e. choose an action that is neither too hard that very few people do it nor too easy so that everyone does it.
Next, choose how that core action is linked to retention. Ensure that the action that you choose leads to retention.
Please note that all of these are core actions, and not just any action that a user takes on your product.
Timeframe
This refers to the natural frequency of the use i.e. how frequently do you expect the user to come and take that platform. For the Instagram consumer side, this would be a daily.
Note that your expected natural frequency could be different from the actual natural frequency. This could be checked by plotting a histogram of the total number of users who are active for “x” days (where x=1,2,3…) and then visualizing where the maxima is. If this doesn’t align, then it means that your users are not using the product as frequently 😐 😑 😭 or perhaps using it more frequently 🥲 than you had hypothesized.
Frequency of core action
This refers to the number of times that core action needs to be taken. Let’s say we took “Liking” a post as the core action. So, does a user need to like 1 post or 5 posts to be considered as engaged?
The simple way to understand is how it ties to retention. In general, it is a good practice to see the likelihood of retaining on the platform vis-a-vis the number of posts liked. You should choose the inflection point and use all engagement tactics in your arsenal to get a user to that many likes (in this case, 6)
And that is how you choose an engagement metric 🙂
Then why do they keep talking about MAU and DAU?
These are high level output metrics that give an indication of how the product is performing and are generally used to report the popularity of the app more than anything. Also, they tell an incomplete picture.
DAU stands for Daily Active Users. Most companies define a user coming into the app as active (irrespective of any action taken by the user). MAU stands for Monthly Active Users. This refers to users coming into the app at least once in a month. So, if the natural frequency of your product is daily but users are coming in once a month, your MAU will be high but in reality your product could be one step away from failure.
These metrics give an impression that if users are coming in, they are getting value. In reality, it could just be spammy emails and push notifications that might be getting users in. Just blindly looking and being impressed with these metrics (remember Threads!) gives an incomplete picture.
How to elevate your engagement levels?
Engagement tactics are ancillary to the product. Your product is at the center and all tactics revolve around the product. First of all, your product needs to solve a core problem well for a set of users — ELSE what is the point.
Humans are flawed in so many ways. One of those is that we forget things!! This is why engagement tactics help remind a user of the value they are getting from our product. So that they keep coming back.
The ultimate objective of various tactics is to help form Habit Loops <add link here>. A habit loop has a cue that leads a user to do a task that results in a reward.
Examples of “cues” are anything that reminds a user of the product. These are devised to be shared with the user either when the user feels a pain-point or when a user could potentially be benefitted/rewarded with. You need to remind a user to come back to the product.
To design these cues, one must think about
- What channels to use (physical or digital- emails, push notifications, in-product notifications etc.)
- At what time should these be used?
- How frequently do these need to be sent to the user?
You can optimize and personalize this as much as possible but that comes with diminishing returns. This is also why AI is needed in hyper-optimizing each channel for each user to maximize overall conversion.
The Routine will be the core action that we want the user to take and should always take the user to that very step with the context explained.
Lastly, the reward could be social recognition (likes, follows etc.) or other things such as time saved, money saved etc.
So, if you are anything like me, you too have been a victim of these habit loops so much that even when there are no cues, you seek the reward. In lay man terms, you too keep opening Instagram even without being reminded.
In Part-3, we will go further up the funnel and discuss acquisition and activation. Stay tuned!
