While using a product or a service, the most critical and pertinent questions that come to mind are – does this product solve a problem? How easy was it to use? Did it help me accomplish a task faster? Will I continue to pay to use it?
All these factors come into play depending on how one engages with a product. While users look at a micro view of product engagement, business owners, product managers, and other stakeholders must be on top of product engagement to ensure it aligns with product goals.
Staying on top of engagement is an integral part of the product experience and forms the basis of most internal metrics and conversations on adoption rates. Without a scoring model, engagement can mean different things to different people. Hence, putting in place a structure to be on the same page is critical to the success of an organization.
Product engagement measures your target users’ interaction and engagement with your product. It gives insights into how often your customers use your product, which features are preferred the most, and which are the challenging areas of engagement. It would help if you increased product engagement to take your business forward.
But at the most granular level, product engagement supersedes just direct measurements. It is also the process of continuously monitoring product usage behavior to align metrics to goals, make quick changes and create a robust ecosystem that reduces customer churn and increases stickiness.
In a digital-first world and highly saturated Software-as-a-service (SaaS) markets with daily innovations, products are created and shipped blind without product engagement. Knowing exactly what users want, measuring that want, and taking steps to monetize the want accurately is at the forefront of measuring engagement within products.
Measuring how happy and satisfied users are with the whole product experience is the cornerstone of success for organizations. A business requires product-based growth, and engagement is the key to retaining customers and propelling the business. Along with that, product engagement provides essential insights and critical areas of improvement for understanding your business decisions.
When you measure your product engagement, you will be able to understand the user persona and their reasons behind the usage or no usage of your product.
Why are users using a particular feature more?
Why are users spending more time browsing and reading than using your product?
What drives users to buy paid subscriptions?
What are users’ preferences and suggestions?
How often do users hit milestones that a business defines as success metrics?
The answers to these questions will help you improvise your product and invest right. This way, you will be able to attract high-value customers in large numbers.
Product engagement is the ultimate growth driver for your business. A product with a high stickiness brings users back and retains them. Customers will only pay for your product if they see value in it. If they are kept engaged with the product, a higher retention rate will result in a fast-growing business.
Now that you know what product engagement is and why it is critical to a business, it is also essential to understand how to measure product engagement. Success metrics can be arbitrary if they aren’t defined. Adding qualitative and quantitative components can make the measurement process even more complicated. You can streamline the metrics using product engagement software to align with business goals.
The five steps below are critical to measuring product engagement.
Step 1: Define what engagement means to your brand
The most fundamental step in measuring product engagement is defining what “engagement” is. As mentioned above, engagement could mean different things for different individuals when left to an individual’s imagination. Business owners may look at new customers, customer churn, revenue operations leaders look at annual retention rates, product owners look at feature updates, and UX leaders look at usability metrics. All of these factors are interrelated. However, if there’s a lack of a North star that everyone in the organization is aligned to, the set-up, management, and reporting are haphazard.
Step 2: Set-up and monitor milestones
Data is at the heart of actionable insights, and automated monitoring based on various trigger points in the user journey is imperative. Most product-first organizations already monitor multiple milestones. It’s how it’s done that’s questionable. A mature product management tool like Statwide makes setting up and monitoring milestones easier.
Step 3: Align milestones measurement to the relative importance
Once the tracking is set up, the milestones must be weighed appropriately. Each activity conducted within the product holds a different value and impact. As mentioned above, the user journey basis of UX is other than the user journey for churn. Bad UX could increase annoyances, but the product’s value could greatly outweigh the annoyances. Similarly, there could be a particular instance where bad UX leads to customer churn even if the tool’s functionality is spot on.
Therefore, assigning values to each milestone is critical. Defining how the milestones affect different stakeholders and businesses establishes the score attached to each milestone.
Step 4: Calculate scores
Engagement scores are valuable when the whole organization and all the stakeholders that reference the data and insights are aligned with them. Defining and setting up metrics needs to be democratized and well published. Only in this case, when a score is published, it makes sense to all the relevant stakeholders, and they each know problem areas, growth areas, areas for improvement, and hero areas in the product. Make sure to calculate scores basis the weightage and then publish them in metrics that make sense to everyone.
Step 5: Convert scores to actionable insights
Once the scores are calculated, the hard part is done. It is essential to take the scores and do something meaningful with them. One of the significant outcomes of the scoring process is you can start capturing behavioral trends in users and allow for user segmentation. Users can also be evaluated in cohorts based on various internal factors such as demographics, predefined success metrics, power users, and more.
This level of macro and micro-analysis allows you to make quick changes, co-create with your customer base, and perform longitudinal monitoring to track behavioral changes. These factors impact the business value of the product, profitability, scoring against the competition, and more.
Another essential factor of this scoring model is that it allows you to compare business groups, streamline product and service upgrades, market effectively and build platforms that solve actual user needs.
Now that we know why product engagement is essential and the ideal method to calculate engagement metrics, let’s look at some critical reports that business owners can pull out by monitoring various parameters in a product engagement tool. Mixing some or all of these parameters helps create profitable businesses, develop award-winning companies, and cultivate a happy set of business stakeholders.
Some of the most critical product engagement metrics that various stakeholders track and monitor, are as follows!
The product engagement score (PES) is the most commonly calculated as far as product engagement is involved. With the PES, you can calculate and evaluate various touchpoints in a user’s lifecycle with the product. This score showcases different pain points over a given timeframe.
To calculate the product engagement score, you need three parameters – adoption, stickiness, and growth. Below, we will detail how to calculate each of them. But for now, assuming you have a numerical value assigned to each of the above three parameters for each user, you can calculate your PES.
The formula to calculate the product engagement score = (Adoption + Stickiness + Growth) / 3
Using this simple formula, you can calculate your PES for each user. It is then straightforward to expand this calculation to various metrics, including multiple users, cohorts of users, users that make specific interactions with the products, and more.
As mentioned above, product or feature adoption is a crucial factor calculated for the product engagement score and an essential metric. Product or feature adoption is the average number of interactions that count towards a predefined milestone your users take in a given timeframe. This metric in product engagement calculates how many users are making specific interactions as envisaged for the user base.
It is necessary to understand the core features as well as the money-making features of your platform and drive higher engagement towards these features. This counts as an essential metric in validating hypotheses about product usage.
The formula to calculate adoption = predefined interactions made * number of users.
Product stickiness, as the name stands, depicts how sticky or valuable your product is to a user that causes them to return. While “login” is one way to look at returning customers, predefined metrics offer a better insight into customers logging in and making specific interactions with the product.
The higher the product quality, UX, and the problems it solves, the greater the product’s stickiness. By assigning a numerical value to product stickiness, business owners can validate gaps in competition, calculate profitability, forecast product management and development, and more.
The formula to calculate product stickiness = Daily active users (DAU) / Monthly active users (MAU)
Growth or quick ratio evaluates user acquisition and also user retention. In a snapshot view, this metric provides a good idea of how various factors such as marketing, sales, product, and customer success teams have performed. This metric highlights immediate changes that must be made to maintain and increase a customer base. The calculator for this metric provides a value between 0 to 100 for each predefined timeline you are calculating to convey growth.
The formula to calculate growth = (new + recovered) / dropped
Where new – a new user making the first interaction in a period
Recovered – the user wasn’t available in the previous period but was available in the current period
Dropped – the user was available during the last period but wasn’t available in the current period
This metric is on similar lines as stickiness but purely measures active users for the organizations that value that metric while evaluating success factors. While this is not necessarily a strictly tactical product engagement metric, it still offers a good insight into how many users are returning to your platform daily.
The number of users returning to your platform is the count of active users.
The activation rate measure indicates how many users have completed a milestone after onboarding your product. Often customers pay for a product or service and never end up using it. This could be due to several factors, including the complexity of the product, better alternatives in the market, bad UI/UX, or even something simple like lack of help and support. Activation rate helps to surface logic and workflow flaws since users don’t hit certain predefined milestones after creating accounts or logging in.
The number of users hitting predefined milestones is the activation rate.
Retention rate is an essential metric for product leaders and business owners as it showcases the number of users returning to the platform and hitting certain milestones. It is well known that maintaining a steady customer base is easier and more profitable than bringing in new customers. A high retention rate signifies that a lot is going right for your product.
The formula to calculate retention rate = [(CE – CN) / CS] x 100
Where CE – existing number of customers in a predefined period
CN – new customers in that same period
CS – the total number of customers when the period started
The churn rate is one of the most critical aspects that any business owner looks at since it tells them the number of people that stop being customers of the platform. This metric is crucial because it sheds light on problem areas and shines a light on product retention gaps. The higher the churn rate, the lower the profitability of a product.
The churn rate is the number of users moving away from your product in a certain period.
Once the objective of product engagement is established, there are different ways with which you can increase product engagement for your business. Some instances are:
Have an easy-to-use interface
Users nowadays are tech savvy but also prefer simplicity and an intuitive ecosystem. An interface with great UI/UX design tends to have higher returning customers and maintain sticky ones. Your customers should have ease while using your product.
Make the signup process effortless
Signing up is a one-time process, but it stays in the mind of the users. If the process is complicated, the users even choose to ignore and not use the product but rather go through a tedious process of registering. Make the signup process as effortless as possible for the users to quickly be able to take benefit of your product.
Welcome new users with a personalized onboarding process
Personalization and hyper-presonalization help in retaining customers. When users are onboarding to your product, make sure that there is something customized to their preferences. This will make your users feel special and looked after. Users who see personalization and feel special are bound to stay loyal to your brand or business.
Provide an interactive tour of the product
When giving a walkthrough of your product, rather than going for the mundane videos and tutorials or brochures with instructions or manuals, provide an interactive tour to the users. Something new and different that they don’t have to go through is always bound to increase their level of likeness towards the product.
Market new features
Consistently market new features. Whenever you come up with updates and fresh features, ensure that the users get personalized notifications. This way, you not only make them feel important, you also market your new features in the most innovative way possible.
Provide live support and in-app messaging
Users do not prefer going to customer support. Not because they don’t want help but because the image of customer support has to wait long on the phone. Always provide live chat support or in-app messaging for their convenience.
Constantly learn and improve
When you measure all the metrics for the product engagement, learn from the areas that require improvements and keep updating your product based on that. Consider your users’ feedback and suggestions to understand their needs and requirements.
A/B test
The best way to prove or disprove hypotheses is to A/B test features, upgrades, updates, UX, and more. Having a preconceived notion limits the ability to get better. A/B testing allows for trying new things to see what sticks and doesn’t and helps make better decisions faster. This also enables you to co-create with your customers and offer a superior experience through active and passive listening.
We have now looked at various aspects of product management, including what it is, why is it needed for your brand, metrics that can be calculated, and steps to estimate these metrics. Accomplishing a lot of this requires the right platform in place that helps you be agile and effective.
Things to look for while picking the right product engagement software for your brand
Various products help solve multiple needs. However, an underlying theme of an effective product engagement software should consist of the following components:
All these factors and more make Statwide the choice of multiple users globally as the best product engagement software.
Built on top of a mature data-driven engine, Statwide allows users to quickly set up complex action-based driven logic on a product ecosystem. With a powerful engine that captures multi-variate quantitative data at various touchpoints in the user journey, you get micro and macro-level views of users’ behavior.
To see how Statwide can help you make mature data-backed decisions throughout the product lifecycle, get started with a free 15-day trial!
Join companies that have successfully reduced their churn rate by up to 40% using StatWide’s predictive analytics.
