User Engagement leads to Retention, which leads to #Growth


User Engagement Metrics are awesome for growth. So, let me give a quick run through of how you can use specific metrics to track key user actions and improve user engagement, and hence grow your business faster. So, lets start by defining User Engagement and User Engagement Actions and why you should care.

User Engagement and User Engagement Actions

Lincoln Murphy says user engagement is "when your customer is realising value from your SaaS." More generally you can say "user engagement is when your customer is realising value from your product/service/website/app".

Engagement is when your customer is realising value @lincolnmurphy #Saas

A good way to measure the value customers gain is their use of key User Engagement Actions. If a user is consistently performing key User Engagement Actions it is a good indication of engagement.

Key User Engagement Actions are specific to each product, so you'll need to decide for your own business, but to give you an idea here are a few examples of certain types of User Engagement Actions for some different online businesses:

  • Team Collaboration APP: Add Task, Complete Task, Invite Team Members
  • A/B Test SaaS App: Create Test, Start Test, End Test, Share Results
  • Online Billing APP: Create Invoice, Send Invoice, Receive Payment
  • Publish an Event: For our own product our Key User Engagement Action is when users Publish a User Tracking Event.

So if you can measure your User Engagement by tracking User Engagement Actions, and then use that data to test and improve your user engagement, you are on the road to growth.

How User Engagement affects Growth

User Engagement impacts profoundly the growth of your business, on multiple levels. If users are getting value then they are going to stay around for longer. And if you can retain each user for longer, you will have more opportunity to generate revenue from each user (meaning a greater Lifetime Value, so you can afford a higher cost of Customer Acquisition) and more opportunity to have each user refer other new users - all of which leads to growth.

Put simply, User Engagement leads to Retention, which leads to Revenue and Referrals, both of which lead to Growth.

Common User Engagement Metrics

Every business is different, and your users will behave differently from those of other businesses. Don't just blindly adopt the following metrics, instead think about how useful they may be, or how there my be something similar in your business, and then focus in on one (or two) to measure. You may try a few metrics until you find the best one for your business, but it’s totally worth it.

USER ENGAGEMENT METRIC 1: DAU, WAU, MAU

DAU, WAU, MAU stand for Daily, Weekly, and Monthly Active Users, that is the unique amount of users who are "active" within a given amount of time. DAU and MAU metrics have been used for years by websites and reflect the most basic way of measuring user engagement.

To use them well, you need to pay attention to the following:

(1) How you define Active User

The key lies in how you define "active" user. Is "user signed" in enough to define a user as "active"? Perhaps its better to to measure a more valuable action like "Update a Task", "Invite Collaborator", "Share Content" (see above). Lincoln Murphy goes into more detail on this here and its worth reading to better define your active users.

(2) By ignoring the absolute numbers and looking at the ratio

Some folks think DAU and MAU are pseudo vanity metrics and many have rejected them as meaningless. (Mixpanel calls them "bullshit metrics'). But, you can take more value by not looking at the absolute numbers, but by comparing the Daily Active Users with Monthly Active Users to calculate "stickiness" which is a measure of how much users are engaging with the product.

USER ENGAGEMENT METRIC 2: Stickiness, The DAU/MAU Ratio

User Stickiness is the ratio of DAUs to MAUs.

Stickiness is generally calculated as the ratio of Daily Active Users to Monthly Active Users. A DAU/MAU ratio of 50% would mean that the average user of your app is using it 15 out of 30 days that month.

USER ENGAGEMENT METRIC 3: D1, D7, D30 User Retention

D1, D7 and D30 retentions are calculated as the percentage of users who are active at any time after 1 day, 7 days and 30 days of signing up or installing your app.

This is often shown in tabular form in tools like Woopra, Mixpanel and KISSmetrics cohorts analysis, but the most useful way to model the data though is as a Retention Curve.

Take a look at the sample Retention Curve shown below. This curve shows the percent of users that remain active after a period of time.

user engagement metrics: the user retention curve shows a fast drop and then the curve levels off (or hits zero)

The retention curve has two key features:

  • it tends to drop off really fast at the start (more later on this)
  • the curve then (hopefully) tends to flatten out over time. If instead of flattening it hits hit zero, its a strong signal you urgently need to improve user engagement.

This is an incredibly useful way to measure your user engagement, and the aim over time is to move the curve upwards by working to improve your user engagement, both at the start when new users signup, as well as over time.

UPDATE (1): Amplitude is the only tool I'm aware of where you can quickly see the curve (please correct me if you know other tools that generate these curves!).

UPDATE (2): I wrote this article to show you how to create Retention Curves using Mixpanel Cohorts Data and Google Sheets.

USER ENGAGEMENT METRIC 4: Focus on W1 User Retention

Most new users are lost at the beginning, a short time after signup. For website and web-apps, typically 60-80% of new users are lost within the first week of signup. In mobile it can be 70-80% users lost after the first day.

Brian Balfour (Hubspot) says that 7 day, or "Week 1 Retention (W1)" "has one of the biggest impacts on your retention over time" because improvements that you make in week 1 retention carry through the entire retention curve.

W1 Retention has HUGE impact on user retention (@BBalfour @Hubspot)

Basically if you can get more people to engage early with your product, that will have a a ripple effect pulling the entire curve upwards (as shown in the arrow), so you'll keep more customers, and hence grow faster. Nice!

Boost user engagement for new users

Improving this metric is all about figuring out how to quickly get new users to experience the core value of the product in that critical first week. And the more people you get to experience that core value really quickly the more those users will tend to engage and retain with your product.

USER ENGAGEMENT METRIC 5: Tripwire Metrics: Using 'Red Flags' to Engage Users

Typically users don't ask for help, and tend to drift away if they don't get value quickly. If you can spot those users and reach out, you may be able to engage them. To help spot users who aren't engaged, you can use Tripwire Metrics to identify users who aren't engaging well and use that data to quickly act to engage them during those vital first 7 days.

The guys at Groove managed this, and were able to engage 10% of those users. They noticed that users who engaged well (and were therefore significantly more likely to become paying customers) spent an average of 3 minutes and 18 seconds in the first session, and logged in an average of 4.4 times per day, whereas those who were not engaged (and unlikely to convert) only spent an average of 0.35 seconds on their first session and logged in 0.3 times/day.

So, they set up an alert to spot these non-engaged users and would then reach out to those users to offer personalised help getting setup which resulted in those users becoming more engaged and 30% of those who responded would then convert to a customer.

use

Here's a template email you could use (it's based on the Groove email below):

Hi John,

I got an alert that you might be having trouble setting up ____________.

If so, I'd love to help. Just reply to this and let me know.

Thanks,

Shannon

Here's the actual email used by Groove to engage "red flag" users:

the Email that BOOSTED conversions 350% #growthhacking #saas (@Groove)

IMAGE CREDITS: Groovehq.com

Have a think about what user engagement metrics you could use as tripwires to alert you about users that aren't engaged so you could reach out. For example, you could automate an email like this for a user who hasn't performed a Key User Engagement Action within 1 or 2 days of signing up.

So, what can you do next?

The first thing you need in place is a basic marketing analytics stack, that will allow you to easily communicate with users and track your progress. Then you can use these tools to help you test and improve your user engagement.

Here's a simple formula to get started:

  1. Start Measuring: Pick one metric thats useful to you to represent user engagement and start tracking it. (Automate this if possible. Great tools include Google Analytics is a basic free tool, Mixpanel and KISSmetrics are more advanced to tracking individual users. Popcorn Metrics can help you set up website user events tracking without coding.
  2. Get a baseline: so you know where you are currently.
  3. Brainstorm: ideas that could improve your user engagement metric.
  4. Prioritise: those ideas (looking for the biggest impact on engagement with the least resources).
  5. Run minimal viable tests: (30 days is a good rule of thumb test duration).
  6. Analyse the data: review the test data and what you've learned.
  7. Iterate: through the tests, or propose new tests.

This cycle is continuous, so get into the habit of experimenting to continually improve your user engagement metrics.

Lastly, here's that link again to the article I wrote to show you how to create Retention Curves using Mixpanel Cohorts Data and Google Sheets.

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p.s. Check this simple tool to reveal which analytics tools your competitor is using!