Activation vs Retention in SAAS

Diego Iglesias
Bootcamp
Published in
3 min readDec 14, 2022
Photo by Markus Winkler on Unsplash

In order to succeed in the world of digital products, particularly in the SAAS space, it is essential for product teams to focus on two key aspects of the user experience: activation and retention.

Activation refers to the process of engaging a new user with the product, encouraging them to take the desired action and become a regular user. Retention, on the other hand, is about keeping existing users engaged and satisfied with the product, encouraging them to continue using it and potentially even becoming advocates for it.

In terms of metrics, we could define:

  • Activation — the % of users who reach a specific milestone in the onboarding process
  • Retention — the % of users who keep using your product, month after month

While both are crucial for the success of a digital product, they require different approaches and strategies. It is important for product teams to understand when to focus on each of these aspects and how to measure their effectiveness.

When it comes to activation, the goal is to get new users to engage with the product in a meaningful way. This typically involves getting them to take a specific action, such as completing a sign-up process or making a purchase. We refer to this as AHA moment, when people first realize the value of a product.
The key to achieving this is to make the user experience as smooth and intuitive as possible, providing clear instructions and feedback along the way. It’s highly recommended to map out a clear user journey to identify pain points and roadblocks.

To measure activation, we can use metrics such as the number of new users, the percentage of users who complete a specific action, and the time it takes for a user to complete that action. These metrics can help us identify areas for improvement and make adjustments to the user experience in order to increase activation rates.

Once a user has been successfully activated, the focus shifts to retention. The goal here is to keep the user engaged with the product and ensure that they continue to use it on a regular basis. We need to make sure that the user gets the expected value on their journey and that they are able to achieve their goals using our product. We can’t forget that at its core, any product must solve the user’s problems.

To measure retention efforts, we can use metrics such as:

  • Number of active users
  • Frequency of user interactions with the product
  • Amount of time users spend using the product.

Where should we focus?

Focus on activation or retention will depend on the needs and specific goals of the company and the issues that it’s facing. In general, it’s important to balance both areas to achieve a sustainable growth and a loyal user base.

Activation is the first step for retention

Without successful activation, users will abandon the product before even using it. Ensuring users reach their activation milestone as soon as possible will mean that they understand the value of your product and will engage more with it. Most of the time, the value of your product is not apparent.

Activation also directly determines revenue, because we need to be able to show free users the value of our product in order to convince them to pay for it. But if we are loosing existing customers, our efforts will be for nothing. Working on customer retention allows you to identify any potential issues that arise during the user journey.

It’s 5–25% more expensive to acquire a new customer than retain existing customers. Furthermore, increasing your customer retention rate by even 5% can increase your company’s overall revenue between 25–95%.

In addition, having a high retention rate can open up opportunities to increase revenue, as you can sell to existing customers who already have a connection with your product.

— Are you focusing on activation or retention? Let’s talk on Twitter

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