Activation Metrics: The Real Measure of Startup Success?

If you run a digital company, particularly one engaged in SaaS or a subscription business, the line between somebody being a prospect and a customer is not always clearly drawn. If you’re involved in a startup, it’s easy to get excited when every visitor to your website seems to be signing up for your services or starting free trial accounts.

However, as startup-guide author Justin Mares was quick to point out in his 2014 KISSmetrics blog post, 6 Advanced Steps for Doubling Your Activation Rate, until your new sign ups take action to derive value from your product or service, success is far from assured.

That’s why activation metrics are such a critical measurement to get on top of. There is no more potent indicator of digital business performance than the rate at which customers are “activated”.

Shake Well to Activate

While the thought of activated customers might summon images of a B-movie, it actually refers to the point at which customers initiate an “activation event”. When someone signs up for your service or software for example, you can be said to have acquired that person as a customer, but activation only occurs when he or she actually makes use of it. Even this doesn’t always mean that you and your customer are now bound in a happy relationship. As Justin Mares explains, up to 60% of people who sign up for a trial software product make use of it one time before abandoning it.

What is an Activation Event?

As previously mentioned, an activation event takes place when a customer that you have acquired, get’s the value promised by your marketing activity. Sidekick’s Dan Wolchonok explains the main elements of an activation event in his Hubspot Product Blog article, The Metric Watched by Top Startup Growth Teams. Dan identifies these elements as follows:

• The activation event has to be meaningful in terms of the value delivered to the customer
• It’s strictly a one-time event
• It signifies your business’ effectiveness in getting customers to realize value from your product or service

Some hypothetical examples of activation events might be as follows:

1) A customer who has signed up for your SaaS reporting software runs her first report using live data

2) A subscriber to your Uber-like public transport service makes her first taxi booking.

3) A user who downloaded your productivity app creates his first to-do list.

Some Variants of Activation Metrics

The most basic and essential activation metric is “activation rate”—the rate at which your acquired customers become active customers by initiating an activation event. The overall activation rate can also be monitored by marketing channel. So for example, you might find that customers activate at a higher rate when they come to you through social media marketing than those who find you via PPC advertising.

A useful spin-off metric is “time to activate”. How long does it take for a customer to initiate an activation event once she has initially engaged with your marketing content or signed up for a trial account? Another useful statistic to measure is the retention rate of activated users over a period of time.

Of course measuring these performance indicators is only a productive activity if you take actions based on the insights provided. Once you know how long your customers take to activate, you can start optimizing your marketing to bring this time down. If one marketing channel brings a higher activation rate than another, you can either work on improving the channel that’s not so successful or simply invest more in the one that brings the highest activation rate.

Improving Your Activation Rates

Activation metrics are vital to keep tabs on if your business is a startup. However, even after attaining growth, you shouldn’t lose sight of activation rates. In fact, as your business grows, you’ll reach a point where it’s impractical to keep any kind of personal contact with all your customers. Monitoring activation events at that stage is therefore essential to ensure customers receive value from your product or service offerings.

If you are aiming to improve activation rates, you first need to define your activation events. This is something you will decide on yourself or with your team. The important thing is to know what you expect your customers to do after signing up or otherwise interacting with your marketing content. With that knowledge, you can define an activation event and monitor the rate at which your customers experience that event.

Activate a Metric that Matters

If there is one key takeaway from this brief look at activation metrics, it’s this: Count not your customers by the rate at which they fill sign-up forms, measure instead the point at which value is realized.

If you would like some help in setting up and monitoring activation rates and other meaningful metrics to track your digital company’s performance, why not speak to us here at McGaw.io? We’re ready and waiting to answer your questions—just ask your question below in the comments section.