Activation Metrics in B2B SaaS That Power 90% of Forbes Cloud 100
Breaking down the 2 Activation metrics archetypes: Action-Based metrics and Activity-Based metrics.
Buckle Up, Time to Activate!
Before we dive into the nitty-gritty, let’s take a 60-second detour to understand why activation is the secret sauce for startup success, what activation’s ultimate goal is, and some epic blunders I’ve seen startups make along the way.
Ready, set, go!
“If Retention is the king, Activation is the king’s beating heart.” Eugene Segal 😂
Activated users are like gold! Simply put, those users who build a habit using your product have 3X to 6X better mid-term retention (think 180-day retention). And if you’re rocking a Free Trial or Freemium model, activated users will have unmatched conversion rates to Paid plans compared to those who aren’t activated.
When working on activation, you’ve got two big goals.
First, you want to build a habit fast (that’s all about Speed).
Second, you must spread this habit to as many ICP users and teams as possible (hello, Impact!).
But sometimes things go wrong…
Mistake 1: A Low-Fit Metric.
You copy-pasted the Activation metric from others. Ignoring that what worked for Canva won’t work for Monday.
➜ You should align the metric with your business model and value proposition.
#FIT
Mistake 2: Too Many Metrics.
You defined a bunch of Activation metrics.
➜ It's better to use one Activation metric for one value or activity. Less is more. Otherwise, your Activation strategy will be all over the place.
#FOCUS
Mistake 3: It’s an Impossible to Move Metric.
You defined a metric that now you can’t move.
➜ Break it down and simplify. Otherwise, it’s useless. If you can’t move it and rapidly experiment with it, what’s the point?!
#ACTIONABILITY
Now, let’s move to the main event and break down the two archetypes of Activation metrics in B2B SaaS.
1. The Action-Based Activation Metric
Consider this activation metric when there is a shared value prop denominator throughout all your ICP segments.
Here are a few examples of the value prop actions:
Canva - Design exported
Amplitude - Chart shared
Intercom - Message sent
Zoom - Meeting hosted
Please note that 90% plus of the ICP dances around the same value prop in the above examples.
Moving on!
There are two formats for the action-based activation metric.
Format 1: The Time-Bounded Repetitive Value Prop Action
X [Value Prop Actions] in T [Time].
And in Canva’s case: || An illustrative example
➜ 3 [desings exported] in 2 [weeks].
This format is the best fit when:
1. Reaching the setup moment is easy (< 20% drop).
2. The natural frequency is high (> a few times a week).
Format 2: Signup Time-Bounded One-Time Value Prop Action
[Value Prop Action] in T [Time] after the Signup.
And in Amplitude’s case: || An illustrative example
➜ [Chart shared] within 7 [days] after signup.
This format is the best fit when:
1. Reaching the setup moment is hard (> 40% drop)
2. The natural frequency is low (< once a week)
2. The Activity-Based Activation Metric
Consider this activation metric when different value props cater to different ICP segments without one clear common value denominator.
Think Atlassian, Monday, Deel, etc.
It’s those B2B SaaS products that expanded horizontally, transforming into Hubs by bundling multiple products.
The Format: Signup Time-Bounded Active Days
X Active Days within Y Days after the Signup
And in Atlassian’s case: || An illustrative example
➜ 2 active days within 7 days after the signup.
Important! To score an ‘Active Day,’ users don’t have to perform the core value prop actions. Lighter, more basic actions, such as viewing notifications, are sufficient. This is how the Action-Based and the Activity-Based activation metrics differ.
One last tip before you go!
Consider layering on Action-Based with Activity-Based activation metrics in case of a HUB (Horizontal Expansion).
If you liked this write-up.
I am open to:
Product leadership FTE gigs at B2B SaaS PLG DNA scaleups.
Short-term Advising engagements.