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June 2, 2022

  

 mins to read

Understanding User Engagement in SaaS-Based Products

Most SaaS products are subscription-based. Their viability depends on the number of customers willing to continue their subscription. If a user is not engaged enough, they are likely to forget about your product among tens of others they use regularly (until they get a notification of automatic monthly payment).

As a SaaS design agency, we often hear clients claiming that their objective is to increase user engagement, and functional UX design can help with that. However, to become a real objective, we need to first find out how to measure the level of engagement correctly and, what is more important, to understand user engagement: what impacts it and how to manage it.

What user engagement means and why it has to be measured

If you think that user engagement is a self-explanatory term, you will be surprised to find out how many definitions there are. Let’s not overcomplicate the matter. For now, we’ll just assume it is self-explanatory and will get through details later.

"User engagement" is more ephemeral than "monthly revenue" or "number of subscribers". It is harder to measure yet impacts product performance as much as other more “tangible” factors.

How to determine a high engagement score

While some SaaS metrics have clear benchmarks that are universal, user engagement is fluid and each business has to establish its own standards. Here is how different customer engagement models work.

For example, a social media app like Instagram can have ten visits a day and 1 hour of time spent in it daily by one user. But how often do you turn on your ad block? You don’t have to open the app unless you are being asked to stop adblocking on some page.

Some things work well when they are not noticeable at all. If a user has to turn on the ad block often, it is likely to signal issues: something is going wrong so they need to look for a solution in the settings.

If you are about to launch a product and don’t have the reference metrics of a similar product, consider defining the right metrics after you’ve started and have been tracking user engagement for some time.

By drawing a graph of user engagement, you can see what are the average, high, and low results for your product. Based on this info, you can set objectives for future development (if you think user engagement needs to be increased).

The most important are not absolute numbers, but dynamics. User engagement score helps to analyze how successful the latest design update was. Also, you can see which groups of users are less engaged, and whom you want to focus on.

To measure user engagement for both abovementioned types of products, InnerTrends suggests counting how often users receive value from your product, not how often they open the app.

“Receiving value” is also called an “engagement action”. For a pizza delivery service, it would be an order, for a file exchange service it would be an upload or download.

User engagement = No. of engagement actions x Frequency

Frequency here helps to define how regular is the usage of the product. Let’s say you binge watch 3 films in a day, but only do it once every few weeks. A user who watches 1 film every week, would have a higher engagement score, according to this formula.

Here is an example, user engagement score of a streaming service, such as Mubi, where a user is watching 1 film a week:

SaaS ser engagement formula

To make the formula more complete, assign different actions a number of points, and calculate the sum of points instead of the numbers of actions. For example, watching a film until the end - 5 points, adding a film to a playlist - 1 point, writing a review - 3 points.

Note that high customer engagement also doesn’t necessarily mean high customer loyalty and lower churn rate. Data from InnerTrends, a product analytics tool, shows that companies lose around 10% of highly engaged users monthly.

Keeping that in mind, user engagement should be just one of a few metrics for measuring the performance of a product. In our dedicated article, you can find a full list of key SaaS metrics.

Metrics of user engagement in SaaS products

Based on the product specifics, some metrics would work for one while being totally irrelevant to another. Don’t take this list as a comprehensive guide, more like some ideas that you can use for developing your own user engagement measurement system.

Session time

This would be a good metric for social media, where the mastery of stealing users’ time and attention is a key to success. On the other hand, sometimes increased session time can be a sign of confusing UX design, not the sign of  “an engaging app”.

Key features usage

You can count usage by the number of actions users take or by using the frequency formula shown above. What is special about this metric is that it can give more than just one result. For instance, you can measure the results for different features and see which ones are used most. 

Maybe you will realize that people don’t need one of the features? Or never use it because it is hidden deep in the menu? Or maybe they use only the features that are not related to paid tier? Measuring the usage of key features separately can give you many answers.

The number of outcomes

If your product is a music streaming service, a number of tracks added to playlists can be a user engagement metric. You define yourself what are the “outcomes” to measure in your product: number of documents, files, messages, likes… Just make sure that it is directly related to user engagement and is not a vanity metric.

Vanity metrics

Term “vanity metrics”, introduced by Eric Ries, stands for those metrics that look impressive but actually don’t bring valuable information about the business.

According to Nielsen Norman Group, the total number of page views is a vanity metric if we want to measure user engagement. It can be a result of your product appearing on a popular news website, and often this metric does not relate to what the team can do.

Instead, they suggest measuring page views per session or screens per session. If users click through different screens, it means that they are interacting with the app, and not just opened it accidentally.

Who owns user engagement in a product team

If you want to be serious with metrics, you know there should be a person responsible for each of them. What about user engagement? If you don’t have anyone responsible for it, that’s ok. 

As user engagement consists of so many factors,assigning it to one department will put it out of sight of the rest. So a smart approach would be to make all the team members aware of this metric and try to analyze what can be done for improvement.

If you think that “where everyone is responsible, no one is really responsible”, as Albert Bandura said, you can have a person responsible for tracking user engagement. That “tracker” would record how the measures taken have influenced user engagement and analyze the dynamics without being the only one responsible. The duty of this person is to bring all the info to the meeting, not to be accountable for the metric itself.

Few tips on user engagement improvement:

  1. Focus on communication that helps to build a relationship with users. Make your newsletter more personalized and “human”. Invest in attentive customer service instead of email, phone, and chatbots. Make your social media and email copy sound like a real person.
  2. Use elements of gamification. Of course, gamification does not fit every product, but nowadays it is widespread not only in lifestyle apps. My banking app is using badges for different kinds of spending, and I’m sure some people find it fun. However, I’m also grateful that badges come as an “extra” feature and don’t appear as notifications all the time.
  3. Ask your users. Who would know how to engage them better than users themselves? Use surveys, individual interviews, and focus groups. Without asking people “how do you prefer us to engage you?”, you can’t learn which ideas for increasing user engagement would work and which wouldn’t — until you implement them.

Here is how we used these principles in our UX design for Handprinter, an ecological habits tracker. Here you have a social element that shows how people in your network are performing, as well as little gamification.

Image credit: Handprinter by Eleken

The impact is visualized and shown as a balance. The tab “actions” shows some ideas on reducing carbon footprint and each action has impact labels-just like points in a video game. Users can share their actions with the community and see their network of friends for reducing their footprint. To learn more, read the full case study.

Final thoughts

Understanding SaaS user engagement is highly important for tracking product performance. However, it can not be put into a one-fits-all formula. Every product owner needs to think of the actions and indicators that will best reflect user engagement. Based on representative metrics, effective models of user engagement can be developed.

Do you want to know how to take on real action to make users fall in love with your product? Read our article about 11 user engagement strategies and make your own user engagement checklist.

Masha Panchenko

Author

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