Dive deep into all things SaaS product adoption—what it is, each step of the process, how to track and measure it, and how to increase product engagement.
You worked hard on building your SaaS product from the ground up, finding users, and showing them all of the benefits your product offers. Every new subscription signup is a great, validating feeling.
But of all those signups, how many will stick around for a week, a month, or even a year? How many will advocate for the product, share it with their circles, and become dedicated users?
That depends on how well you can enhance the product to boost product adoption. In other words, how well you can convert new users into power users to supercharge your business.
Other metrics like total users, MRR (monthly recurring revenue), or churn rates may give you an idea of your business's health, but they won't illustrate the complete picture. For that, you need to come up with a solid product adoption strategy, implementing multiple metrics to comprehend how effectively the product is motivating users to adopt the product into their lives.
Why should product adoption be top of your list as a product owner or manager? Achieving a high product adoption rate is vital to any product's success. A high product adoption rate improves user retention, lowers customer churn, encourages rewards, and drives more stable revenue and higher growth. When users discover the value in a product quickly (AKA reaching their aha moment), they form habits, and the product becomes sticky, resulting in adoption.
This definitive guide will teach you everything you'll need to know about product adoption—what it is, each step of the process, tracking and measuring it, and increasing product engagement and adoption. Get ready to be an expert in guiding your potential users through each stage of the process, from their initial free trial through early product adoption to brand affinity and advocacy.
What is product adoption?
Adoption is about more than getting someone to use the product. Instead, it's heavily tied to the value users gain from it. Product adoption happens after users learn about a product, try it, and finally embrace it as a beneficial tool for solving their problem. The product adoption process involves multiple small steps to convert a potential user into a satisfied customer.
Users who find value in a product build habits and frequently return, making the product sticky. These habits, in turn, lead to adoption. A high product adoption rate has various benefits, like decreased customer churn, improved user retention rates, increased subscription renewals, and more stable revenue and growth. It's essential for building a sustainable business where people love your product and want to tell the world about it.
Why is product adoption so important?
Product adoption is essential because it's an early indicator of user retention. Optimized product adoption improves retention rates and encourages expansion opportunities. So, if net revenue retention is crucial to your business, product adoption should be a significant focus when growing a product.
Churn is the last event in a customer's life cycle, so the opportunity to retain a customer must fall before they cut ties with your product. Regardless, some companies attempt to improve retention by taking a reactive approach, for example, trying to save an at-risk customer with intense focus for 90 days. However, this isn't a sustainable or scalable method.
Luckily, there's a better way to improve customer retention. Prioritizing product adoption is an excellent way to reduce churn and boost revenue. When product owners focus on getting users invested in their product, it becomes more ingrained in their daily lives. Higher user engagement heightens the product's value and creates more satisfied customers. As time goes on, switching products becomes inconvenient and less attractive for users, and subscription renewals become easier. If the product adoption process is improved, users will be more open to sticking around for the long haul.
Let's get our feet wet with some simple tips to make SaaS user adoption stickier and more effective (we'll dive deeper into these ideas later!):
Ensure the product’s user onboarding process is simple, helpful, and explanatory.
Ensure the product tour is easy to navigate and leads users in the right direction.
Ensure new features stand out so that users don't skip over them.
What is the product adoption curve?
The product adoption curve illustrates how diverse customer segments adopt a new product at varying stages of a product's lifecycle. It comes from a theory developed by Everett M. Rogers, who contends that there are five distinct stages for product adoption:
The first adopting segment is the innovators. They typically have technical traits and are considered to be technology enthusiasts. Innovators don't mind bugs or missing features. They're risk-takers and like to be the first to try a new, unproven product, making them an excellent source for early feedback. However, their enthusiasm is fleeting because they usually quickly move on to a new product or idea. Innovators prefer free or discounted products and generally won't pay premium prices.
Unlike innovators, early adopters try to find solutions to real problems and generally have access to capital for innovative pursuits. They're often thought leaders in their industry and look for disruptive products to try. Early adopters are visionaries, so it's not difficult to convince them of a product, but since they're a tad more risk-averse, they require positive reviews before adopting new products. Since early adopters are all about solving real problems, they're less tolerant of missing features, bugs, and other technical issues. They also want more support when trying a new product and expect customization, making them a demanding customer segment.
The early majority enjoys business continuity and doesn't want to pioneer new products, which is a significant shift in attitude from the previous two stages. The early majority is also slower at making decisions and prefers to allow others to test new products before they do. They would instead rely on positive reviews from those who have had success with a product before making the leap. They are a challenging customer segment because they primarily communicate with each other and less with early adopters. This can be frustrating for product owners, as early adopters are the best to provide them with references. Gaining the interest and trust of the early majority is usually a sign of product/market fit, where you can typically find a loyal customer base and a tremendous potential for growth.
The late majority is next up to adopt a product. At this stage, we reach the peak of the curve, where the early majority and late majority cross paths. Things start to slow down a bit here, as customers in the late majority are conservative, don't proactively seek change, and don't have large budgets for new products. Although they dislike change, the late majority recognizes that failing to adopt products can put them at a competitive disadvantage globally. They don't like that, so they tend to adopt products out of necessity instead of curiosity (but only the thoroughly tried and tested products.)
Laggards are the final adopting segment and are usually less comfortable with new technology. They are skeptical, value traditional ways of thinking and doing things, and resist change more than any other customer segment. They'll typically cave eventually, but only when not using a product makes their daily life difficult or if their traditional methods are no longer acceptable or available. When laggards come on board, a product has already reached its prime in the market.
The 5 stages that lead to product adoption
The first stage of product adoption is awareness, a person's knowledge or understanding of the product. A potential customer may not even know that your product exists or may not realize the problem that your product solves. Educating potential customers about your product and its benefits is vital to spreading the word and making your product stand out. Investing in digital and social media advertising and creating a killer marketing team are essential keys to raising awareness about your product.
After a prospective user is aware of your product, it's time to get them interested. This step takes them from general knowledge of the product to seeing its value and a potential solution to the problem they're trying to solve. The prospective user may research your product or a competitor's product to get more information. Product owners can help discover more about the product by providing in-depth videos, blog posts, and an active social media presence.
Once the information-gathering stage has been completed, the prospective user will naturally begin evaluating your product compared to its competitors. Here, they'll decide if the product is a good solution for them and whether or not they'll purchase it. It's essential to have accessible marketing material to outline the features of a product versus its competitors at this stage so that the prospective customer can better evaluate the product.
After research and evaluation come the trial stage. The user has now decided that the product is the best solution for them and will purchase it (or participate in a free trial) to test it out. Allowing users to try out the product before they fully buy it can be a great tool to let the potential customer see the total value of its offerings. Temporarily reduced costs, money-back guarantee, or free trial can assist the user in getting a feel for the product and fully understanding how it could benefit them. Strong customer success teams creating a successful onboarding process are vital for this stage to lead to product adoption.
If the trial stage goes successfully and the user is satisfied with the results, they will move into the last stage of the product adoption process and fully adopt or buy it. This process is critical to converting prospects into paying customers and hinges heavily on customer success, marketing, and sales teams to do most of the work.
How do you measure product adoption?
You can use multiple key metrics to measure how effective your product adoption framework is. You'll need to discover what's most appealing about the product to new users, see how core features perform, and assess the time and value of user actions.
All of these areas work together to create a complete look at how users adopt the product and how you can improve their experience. Before we take a look at metrics benchmarks, let's find out how to define and track these main data points:
Key action: An action within the product offering the most value to users
Daily active users: The total number of users who performed at least one key action in one day
Weekly active users: The total number of users who performed at least one key action in one week
Once you've defined and tracked these metrics, you can start measuring your user adoption access by looking at:
Time-to-first key action
Time to value (TTV)
When calculating the adoption rate, the goal is to measure how successful you've onboarded users to the product. One way to solve this is to examine the percentage of users who used the product in a specific period.
Adoption Rate = Active Users / Subscribed Users x 100
For example, if you measure the adoption rate for a week where you had 75 weekly active users out of 100 subscribed users, the adoption rate would equal 75%.
The inactive users are the ones most likely to leave, so increasing the adoption rate by decreasing inactive users should reduce the churn rate.
To calculate adoption rates for specific features, try this formula:
Feature Adoption Rate = Users Who Use New Feature / Active Users x 100
Time-to-first key action
This metric illustrates the time it takes a new user to begin using an existing feature within the product. It also describes the time a current user takes to try out a new feature. The "key action" refers to whatever the user does to take action, i.e., visiting a new feature in an app or completing a transaction.
Use this metric to check the popularity of the new feature or how quickly new users start using the product's core features. Select multiple key actions that best describe the product's main goals, rather than trying to measure everything.
The "key" actions would typically offer the most value to users. You may also want to measure a product's more nuanced or advanced features to check if they're worth keeping.
Activation is a metric that refers to the percentage of users who performed the key action for the first time. This metric lets you see how users react to new features or which features are most appealing to new users. It's helpful to measure the number of users who took the key action and compare it to the products' total users.
Similarly to the adoption rate, connect this metric to a specific period for more actionable insights.
Time to value (TTV)
Time to Value (TTV) is a metric that refers to how long it takes a new user to realize and gain value from a product. A short TTV means users get a return on their time investment faster, making them more likely to stick around. TTV is a crucial principle in the SaaS space because there's simply no time to waste when it comes to retaining customers.
Product owners should strive to lower their TTV as much as possible so that their users discover and enjoy value from the product more quickly. Regardless of who the user is and whether they invested time, effort, or money into trying out the product, they'll want value from what it's offering. Failure to give that value to a user can lose their business for life.
How do you increase and drive product adoption in SaaS?
Improving a product is the best way to improve the adoption process, from making it more sticky to decreasing friction in the onboarding flow. Providing a solid user experience throughout the product adoption lifecycle ups your chances of gaining full adoption. Follow these tips to help you create a seamless product adoption process:
Improve the user onboarding experience
The onboarding experience is your first and only opportunity to make a great impression. Users will abandon your product if they find the onboarding process confusing or incomplete, or they may not even get started with your product at all. Improve your onboarding experience and encourage adoption by identifying and fixing knowledge gaps. Implementing product tours is a great way to improve the user onboarding experience. Product tours encourage users to take meaningful action and decrease new users' time to value.
Conduct user research and testing
User testing gives insight into how customers use the product and what issues they're having. User research provides an in-depth look into users' behavior and feelings about the product. Product teams can use the qualitative and quantitative information to make significant improvements.
Implement in-app messaging to target users
In-app messages and tooltips are small but powerful UI patterns designed to give users instant value. They nudge users toward features, help during onboarding, offer on-demand support, and provide users with additional information or 'helpful hints' at the optimal time in their workflow. Tooltips are invaluable because they're hyper-specific and contextual and are most frequently attached to an individual element within a product and convey a targeted message.
Promote new product updates and features
Communicate new features and updates both inside and outside of the product. Highlight new ways the product can help users and show your commitment to improving the product and bringing more value. However, building in-app product announcements in-house can be costly, time-consuming, and challenging to maintain. With Lou, you can launch new feature announcements for free in just minutes, with no dev time required.
Recommended product adoption tools and software
The most effective user onboarding platforms will reduce your product's user churn rate while increasing conversion rates. In particular, take note of these tools, and check out more here.
Our product is kicking off this list: a proactive user onboarding platform that welcomes new users guide them towards essential goals and transforms them into power users. Our no-code solution streamlines the onboarding process, helps users see value soon, and improves user activation and retention.
Amplitude is a data platform that analyzes behavioral cohorts or groups of users categorized around specific usage patterns or actions. You can use this tool to help identify different aha moments in your product and then focus your onboarding flow around driving users to each one.
A new user must take actions (or multiple actions) in your product to achieve their aha moment. You can use a product analytics platform like Heap to identify these moments, also known as critical activation events. Once you've identified the critical actions in the product, you can reduce users' time to value (TTV) by making them stand out during the onboarding flow.
It's possible to store your company's customer data in one system with Klayvio. The platform delivers customized experiences to users and encourages growth. You can create onboarding experiences across email and owned channels and measure the results.
Localytics is a mobile app analytics and marketing platform that gives you the insights you need to improve your mobile app acquisition, engagement, and retention efforts. The platform can track up to 100 thousand monthly active users and 12 million data points, giving insight into user flows and funnels.
Conclusion: Product adoption rates differ for every SaaS product
The most important part of increasing the adoption of a product is to keep a close eye on your user base, discover and iterate on their needs, and make adjustments quickly. Remember that you can't rush the product adoption process. You can only consistently improve the product and make the product's onboarding flow as seamless as possible.
With Lou, you can provide users with in-app guidance and support to improve their experience and power user adoption. Learn more about Lou here!
Published on January 27th, 2022
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