B2B SaaS is extremely competitive especially for horizontal SaaS products. If you are in the SMB space then that makes it even more challenging for you to survive and then grow. There are a few important metrics the product needs to track assiduously –
- CAC ( Customer Acquisition Cost)
- LTV ( Customer Lifetime Value)
- Payback Period
- NPS ( Net promoter Score)
- Sales Velocity
I’m sure most SaaS companies do track these numbers. The key to success is to reduce Churn, CAC and to increase LTV, NPS. One of the key factors that enable a SaaS product to achieve this is customer engagement. But how do you define and measure customer engagement?
What is Customer Engagement?
Customer engagement is the interaction/ activity of your customer on the platform. The customer engagement could be a positive or a negative one and it’s equally important to understand the nature of this engagement.
- A negative engagement increases the risk of Churn, so there are immediate actions that need to be taken to ensure the customer stays.
- Similarly, a happy and engaged customer provides you with an opportunity to up-sell or cross-sell.
So, how do you measure Customer Engagement?
Measuring customer engagement inside the product is the same process as lead scoring at the top of funnel. I had covered lead scoring earlier. Lead scoring is a top of the funnel score that we use to qualify leads based on their activity or interaction with various assets/ touchpoints of the product. You could measure customer engagement with either of the two options:
(1) Use 3rd part software tools that let you define and analyse various events inside the product. Here are a few tools you could consider
(2) Setup your own system where you log various datapoints in your DB and run queries to analyse the same.
In either case, you would have define the important events of engagement and also assign points for these events which would help you calculate the all important engagement score. The events that need to be tracked would be based on the application. For eg:
Helpdesk Software: Add support email, setup forwarding rules, setup DNS, Added Agent
A/B Test SaaS App: Create Test, Start Test, End Test, Share Results
Online Billing APP: Create Invoice, Send Invoice, Receive Payment
Once you have defined the events you can log them and also assign weights to each of these events to calculate your Customer engagement score.
Customer Engagement Score = (wt1*e1) + (wt2 * e2) + … + (wt# + e#)
where wt is the weight assigned and e represents the event being tracked.
Along with the consolidated user engagement score, you could also monitor certain specific or low level metrics that again define user engagement. A few examples are:
- Daily Active Users ( DAU)
- Weekly Active Users ( WAU)
- Monthly Active users ( MAU)
- DAU/ MAU Ratio
- User Retention – Day1, Day7, Day30
The core metric that you need to track varies from product to product/ app to app. It’s for you to decide what numbers matter for your product.
Capturing and understanding these metrics defined above is the first step. Setting up steps to improve on these metrics is the next step. This entire process can be automated using a comprehensive automation tool like Marketo, Autopilot, Hubspot Enterprise etc. The right set of messages at the right time goes a long way in optimizing each of the above metrics.
Pipefy is a great tool for workflow/ process management. It lets you organize all your processes in one place. On signup up with Pipefy, they send you a set of emails to increase engagement.
One of the first emails that they send is a library of pre-existing templates ( most used ones) which would enable the users to get started immediately.
They track weekly retention and send out a mailer to engage the inactive users. This is the second email they send out to inactive users –
Then they follow it up with this email within a few days:
Another example is how Groove improved customer activation using customer engagement data. Grove is a helpdesk software and one of the first things that a user should do after signing up is to setup a support email. They also measure the avg. time it takes for the user to setup the initial support email and if that doesn’t happen then they send an automated email. Here’s the template they use :
They also track user retention and sends out mailers to inactive users to re-engage them. Here’s the template they use for that.
These are proactive measures you can take to increase engagement and user engagement. You can personalize these messages/ automated communications that go out further by segmenting the data. An eg: For Horizontal SaaS products you get registrations from a bunch of industry verticals. You can further segment the user data based on industry vertical and send relevant use case for the industry/ use terminologies that the prospect could relate to. At FieldEZ, we segment prospects based on Industry and the use cases differ across Industry. FieldEZ is used as a Lead/ Sales management tool in industries such as BFSI, Pharma while it’s primarily used for Ticket Management in the Consumer Durables or Manufacturing industry segments.
Other than this customer segmentation also helps in:
- Identifying what features matter most to a particular segment
- Measure LTV, CAC, Payback Period, Churn, NPS etc for each segment and work on optimizing the same
- Measure profitability of each segment
- Test separate user onboarding techniques for each segment – Messaging and Core interactions based on what matters to the segment