Unless your business is selling very high-ticket items such as real estate or luxury yachts, which most people buy rather infrequently, you probably want your customers to use your product consistently and intensively. If your customers use your product all the time, it’s a sign that it delivers a lot of value to them, and they will probably keep paying for it or using it. On the other hand, if customers hardly use the product, that signals that your business is providing very little value to them. Perhaps the product is not a great solution for their needs, they are finding it difficult to use your product, or the support that your business provides is very suboptimal and frustrating. In any case, those are serious problems that will probably sink your business in the long-run.
3.2.1 Ratio of People Performing Key Actions
Products exist and thrive in the marketplace because they solve challenges better than other solutions allowing customers to perform actions that are valuable to them. However, such actions vary for each product. For example, a social media app such as Instagram depends on people sharing pictures, reacting to them, and interacting with other. Those responsible for growth at Instagram might be tracking actions such as the number of new posts, the number of replies to posts, the number of likes, the number of times a user shares posts, or even the number of friend invites that an average user sends. On the other hand, if your product is a SaaS project management software, you might want to track actions such as the average number of times that tickets are assigned to team members, the number of project tasks created and closed, or the number of times that team members comment on a task.
3.2.2 Daily, Weekly, Monthly Active Users
Another very useful way to measure engagement of a product is how many people use it in a given span of time. Let’s imagine again that your company has build an online project management tool. What if a 10,000 users created an account, but only a hundred users log in during a given month? The absolute number of registered customers or even customers growth tall you nothing, but measuring how many of those folks use your product in a time period to the total customer base can tell you a lot about how engaging your product is.
The three common measures are daily active users (DAU), weekly active users (WAU) as well as monthly active users (MAU). These metrics capture the total number of users that performed some action, such as signing in or creating a post, that would deem them to be “active.” For example, if you define active users as those that log into your app, and you have 1,000 daily active users, that means that 1,000 users logged into your app during that given day.
The main challenge in this approach is determining what constitutes an “active” user. For example, is an active user one that comes to your app but does not do anything? Or is an active user that comes to your site (or opens your app), logs in, and does something such as creates a task or post? Your numbers will vary greatly depending on how you define “active,” but I would encourage you to be honest with yourself and define active users in a strict enough way that it will gauge engagement.
3.2.3 Ratio of Daily Active Users to Monthly Active Users (Stickiness)
A related metric is the ratio of daily active users over monthly active users, which measures “stickiness” of the product. Let’s consider the extreme cases of this ration to better understand how it signals the engagement of your product. If your product has 1,000 users that are active on any given day as well as 1,000 users that are active in any given month, that implies that the same 1,000 users were active each day for a whole month. In other words, they used your product every day. That is an enviable claim that even the most successful products in the world cannot make.
Consider now a case where you have about 33 daily active users and 1,000 monthly active users. (It’s worth noting that you can’t have less than 33 DAU because they would not add up to 1,000 over thirty days.) Your ratio of daily active users to monthly active users would imply that every day a new set of 33 users were active meaning that none of them used your product on more than one day in a whole month. It would be safe to say that you product is not very engaging.
This post is part of the Growthzilla Book series, which is an online draft of the print edition that will be available in 2018. Be sure to check back next Tuesday to learn about common retention metrics. New sections of Growthzilla are published every week.