Product adoption is the key to a successful and growing SaaS product. Without it, your product will fail.
Simply put, product adoption is the process of customers discovering, purchasing, and implementing a new application into their work or lives. Many companies invest a lot of time and money into the first part of the process – the discovery.
From expensive marketing tactics to free trials, SaaS companies place a significant emphasis on the acquisition part of the customer lifecycle, but what happens after a new user converts to a paying customer is even more critical and often overlooked. If paying customers isn’t fully utilizing your software, they will cancel or not renew their subscription.
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.
Product adoption is essential for any SaaS business that is serious about gaining returning customers that love what they have to offer.
When companies focus on customer adoption, they are not merely increasing conversions; they’re developing a base of customers who know and share the value of their product.
In this guide, we’re taking a closer look at what a product adoption framework looks like for SaaS companies and how you can measure your adoption rates and best practices to improve your overall customer adoption.
Why should SaaS companies care about customer adoption?
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.
This path is essential as it creates a base of regular, loyal customers that believe in the value of what the company produces. They have complete buy-in with the company’s software and use it as part of their daily processes.
What are the six stages of the product adoption process?
The typical customer lifecycle for a SaaS product has six stages:
Read More: The 6 Stages of the SaaS Customer Lifecycle
SaaS products need a robust customer adoption strategy that moves users from each stage to the next. The following table summarizes the roles marketing, sales, and customer success play in each step of the process:
Who is driving?
The potential user learns of your product
The user signs up for a free resource or trial
The user purchases a subscription
The user begins implementing the software and becomes a frequent active user
The user purchases another term (typically monthly or yearly)
Customer Success and Sales
The user is so pleased with the application they refer a friend or colleague.
When people think about product adoption, they often think of the activation phase – getting someone to use your product after buying it. But, it’s helpful to picture a product adoption framework as a cycle.
All the referrals you get from the last step will entire the cycle at awareness. The cycle continues to repeat itself as you add more users.
The customer adoption cycle is also helpful for when you’re introducing new features. Here’s how each step could apply:
- Awareness – Users learn about your feature release and how it can solve a problem.
- Conversion – user watches a video you released about the new feature.
- Purchase – if the feature requires an upgrade, the user could make a purchase.
- Activation – user begins incorporating the feature into their routines.
- Renewal – if the feature required an upgrade, users could renew their upgraded subscription.
- Referral – the user lets other people know about the new features.
What are the benefits of product adoption?
Product adoption provides several benefits for companies. As with every business, success is dependent upon customer conversion and retention.
That makes customer adoption essential, as the result of effective adoption is that users find the product so valuable that they continue to use it.
After implementing a product adoption framework, businesses experience higher user retention, as well as lower churn.
Decreasing churn leads to regular, high revenue for the business. Churn refers to the loss of profit or users and is the antithesis of success. By utilizing customer adoption, companies can ensure they have low churn, as they effectively gain loyal customers as a result of their process.
But customer adoption isn’t just about reducing churn; the right adoption strategy can also be the key to growth. As illustrated in the adoption lifecycle, if you can develop a successful product adoption framework that moves users through all six stages, your super users should start referring their friends and colleagues.
Therefore, improved adoption rates can reduce your customer acquisition costs as you reap the benefits of word-of-mouth marketing.
How do you measure product adoption?
There are several key metrics by which you can measure the effectiveness of your product adoption framework. You’ll want to assess how core features are performing, what’s most appealing to new users, and the time and value of the actions that users take with your product.
All these assessments work together to form a complete portrait of how people adopt your product — and how you can improve the experience. Before we look at metrics and benchmarks, you’ll need to define and track these key data points:
- Key action – an action providing the most value to your users, examples include running a report or completing an entry.
- Daily active users – total number of users who performed at least one key action in a day
- Weekly active users – total number of users who performed at least one key action in a week
You can also calculate monthly active users, but for weekly or monthly users, you may want to consider raising the threshold on the number of key actions. Depending on your application, you might not consider a person who only completes one key activity, an active user.
In that case, you could define your monthly activity users as people who complete at least eight or more key activities.
Once you’ve defined and track these metrics, you can begin to measure your customer adoption success by looking at:
- Adoption rate
- Time-to-first key action
- Time to value
There’s a lot of variety in how different consultants and experts recommend you calculate your adoption rate. In general, you’re trying to measure how successful you’ve been at onboarding and getting people to use your application.
One way to look at that is to examine the percentage of people who actually used your application in a given time period.
Adoption Rate = Active Users ÷ Subscribed Users x 100
So if you were trying to measure your adoption rate for a month where you had 75 monthly active users out of 100 subscribed users, you’d have an adoption rate of 75%.
The inactive users are the ones who are most likely to leave, so increasing your adoption rate by lowering inactive users should also reduce your churn rate.
You can also calculate adoption rates for certain features.
Feature Adoption Rate = People Who Use New Feature ÷ Active Users x 100
Time-to-first- key action
This metric refers to the time it takes a new user to start using an existing feature. It can also describe the time it takes a current user to try a new feature. The key action is whatever the user does to make this shift, e.g., completing a transaction or visiting a new feature in an app.
You can use this metric to suggest the appeal of the new feature or how quickly new users begin using core features of the product. Choose several key actions that best describe your primary goals, rather than trying to measure everything.
Your “key” actions are likely those that would provide the most value to your users; you might also measure a product’s more advanced features to see if they are worth keeping around.
Activation: Percentage of users who performed the key action for the first time
It’s also helpful to measure the number of users who took the key action compared to your total users. This metric gives you another way to look at how users respond to new features or which features are most compelling to new users.
As with the adoption rate, link this metric to a time period for more actionable data.
Time to value
As mentioned above, some features of your product provide greater value than others. Time-to-value measures the time it takes for users to obtain their desired results from a given feature.
Naturally, you want this time to be as short as possible, because adopters who derive value from your product more quickly are more likely to become regular users.
You should prioritize TTV assessments surrounding your key feature and provide a path of least resistance for your users. The shorter you can get this value to be, the more likely you are to encourage an adopter to take the next step in the user journey.
Determine your product’s core features and value opportunities, then use the above metrics to understand if you provide the best user experience in your product.
Generally, you need to measure these within a time period to obtain more specific guidance. Focus on the key actions that support your product’s user journey, then evaluate whether users are taking those actions.
What is a good adoption rate?
In general, the higher your adoption rate, the better. More people using your software means they’re seeing the value of your product and will renew the subscription. For specific metrics, consider these SaaS benchmarks from a 2019 Mixpanel study:
What’s a good adoption rate for your product will vary depending on the industry and type of application. For example, B2B applications will have different adoption benchmarks than B2C solutions.
In the Mixpanel study, media, finance, and eCommerce applications were growing much faster than SaaS solutions, so the industry or use case your application serves could impact your customer adoption rate.
Economic and market forces could also play a role in determining your adoption rate. For example, products that enable remote work like video conferencing solutions saw rapid growth due to COVID-19.
How can you improve product adoption rates?
SaaS companies, like businesses in other industries, strategize ways to increase revenue. Improving customer adoption increases new user efficiency rates, which results in higher product revenue.
No matter the type of software a SaaS business offers, companies face roadblocks in the product adoption process, experiencing customer churn. Smart SaaS companies focus on improving product adoption by following proven, successful practices.
7 Ways to Improve Product Adoption
- Improve customer onboarding by creating awareness of the product benefits. Besides offering basic education on what the product is, what it does, and who can benefit by using it, make sure you reveal an “Aha” moment as a part of your onboarding. The “aha” moment is when users realize the value your software provides, such as how it will save them time. For more tips, check out our blog post Tips for Using Product Tours to Reveal Your Aha Moment.
- Beef up your product support. Add a live chat feature, embedded videos, and interactive guides to your in-app support. Include tooltips, on-screen messages, and in-app tutorials. Additional education and information that’s easy to access influence adoption. A frustrated customer is more likely to reject the software, so don’t let that person become frustrated. Consider product adoption software to help you with this tip, saving you time.
- Create a memorable first experience for the user. The tools mentioned above are part of this first experience tip, making it easier for them to navigate and complete tasks. Create more than one onboarding experience, targeting different types of users. You can segment your audiences by job title, or software experience level, and then set up every kind of user with the appropriate first-time experience.
- Make a big deal when introducing new features. Give new feature introduction treatment similar to a new product launch, but a bit smaller version. Implement an onboarding plan for the functionality and make users interested in the new addition.
- Implement in-app marketing techniques. Your tips and notifications can improve the user experience and can act as ways to promote the product and its features. In-app announcements can be useful. Decide on what you’re trying to achieve and use tools that support that goal.
- Support in-app marketing with emails. Emails keep you in front of the customer. Use them to give information, tips, and highlights new features. Pay attention to the timing of the emails based on where the customer is in the new product adoption stages.
- Continue to use data to improve. Collect and review data on an ongoing basis. Explore indicators of problems and find out why they exist. Develop and implement new strategies to enhance product adoption.
Implementing these seven product adoption strategies will boost your level of customer adoption. Companies that have high user adoption numbers experience higher marketing ROI and lower marketing costs. Overall, the gain for your company will be increased revenue in the long run.
How a Digital Adoption Platform Improves Product and Customer Adoption
One of the easiest ways to implement these best practices for product adoption is to use a digital adoption platform or DAP.
DAPs like Apty make it easy for you to provide on-screen guidance, product tours, and guided onboarding to your users. The benefits of using a digital adoption platform with your SaaS product include:
- Faster onboarding – Replace video sessions and custom onboarding sessions with on-screen guidance so users can get started immediately.
- Lower support costs and fewer tickets – On-screen guidance enables users to solve problems on their own without opening a support ticket.
- Decreased churn and increased customer satisfaction – Since DAPs make your application easier to use, customers are happier and more likely to renew.
- Deliver better product tours – DAPs make it easier to create and segment product tours to guide users through your adoption and onboarding process.
Product Adoption Key Takeaways
If you’re looking to improve your product adoption and grow your SaaS product, remember these key points:
- SaaS customers follow a life cycle. Make sure product adoption is a priority at each stage as you move users from novice to expert.
- Track and measure key product adoption metrics so you can identify weaknesses and areas for improvement.
Leverage best practices and a digital adoption platform to boost user engagement and drive higher adoption rates.