CEI: The right way to measure active users & engagement

User engagement, daily active users, how to measure it? Say welcome to Customer Engagement Index!

Let's be honest: SaaS metrics and measuring user engagement with an app aren't the easiest things in the world. Getting it right can be a real headache. The worse part is many SaaS around the globe still rely on vanity metrics and wrong statistics about their own product to develop their strategies.

Of course, user engagement can be measured with correlation metrics and formulas, but unfortunately, it isn't a piece of pie. It requires an analytic eye and the only thing startups can't afford to waste: time.

I generally define retention is simply the act of getting users BACK to revisit, regardless of their actual activity on the site. Contrast this with engagement, which measures how much time they spend with the product, how many features they interact with, etcAndrew Chen, Growth @ Uber (source)

With that, we're gonna show you why relying entirely on "active users" metrics, such as DAU, WAU and MAU, can lead to false information. Also, how actionable metrics can give a little light to the "can't measure my real monthy active users" SaaS nightmare.

And finally, how Pipz newest feature, Customer Engagement Index, is a great engagement metric (and also actionable) that can be used to effectively calculate how much users are engaging with your app. Shall we start?

Most common user engagement metrics for SaaS

Daily, weekly, monthly active users. While Facebook reaches 1.65 billion monthly active users (MAU), there's no doubt most of these users are truly engaging with the social network: liking, sharing, updating. After all, it's Facebook.

But should DAU or MAU be the main SaaS metric used to check if your users are using your app? More important than that: are they really reaching your app's core value?

Calculating the number of active users is easy: just pick up the number of users who did some kind of activity in your app in one day, week or month. The most common activity measured is the number of users who logged in during that period.

Another common SaaS metric for measuring user engagement is "stickiness", which indicates how many users have come back to your app more than once on a week or month.

"Active users" is nothing but a vanity metric

A common error for SaaS is assuming users are binary: they can be only active or inactive, like there's no in between. If users' login, they're active: if not, they're inactive. Right?

The hard truth is that logins don't mean anything. It doesn't indicate if users are actually taking advantage of its features, if your app is solving their problems, and even if they've already passed through user onboarding.

Different companies have almost unlimited definitions for what 'active' means. Some charts don’t even define what that activity is, while others include inadvertent activity — such as having a high proportion of first-time users or accidental one-time users.Jeff Jordan, Tech Investor and Parter @ Andreesen Horowitz (source)

This problems affects both "active users" and "stickiness" metrics. If you're measuring number of active users and how many performed an activity more than once in a week, what defines an active or inactive user? What particular activity should be considered to metrify user activity?

For all you know, "inactive users" could be on vacation, or their business could be passing through a slow sales season, so they don't have the need to login on your product for a while.

The alternative is metrifying not users' actions but their activity time, how much time they've spent in the app. But this kind of metrification can raise even more questions: if they keep logged in for 10 minutes, how are users engaging with the app? Should users with less than 5 minutes of activity be simply ignored, even if they login very quickly to check for notifications or export a report?

You can't make a decision (well, not an assertive one) based alone on the number of users who logged in your app in the past 30 days or on how much time they've spent in it. That's why you need to turn your "active users" metric into an actionable metric, and this is where a customer journey automation platform comes in handy.

Define your app's Unique Value Proposition

The reason users should create their accounts and use your product, and not the competitor's: you need to have it really specified if you wanna start measuring your SaaS user engagement.

Let's say you have an online dating app for cats. On this case, the Unique Value Proposition of your app is letting cat owners create an account so they can find their pet's soulmate. This alone is the reason someone would signup for your product.

While the number of cat owners who signed up for your app is nothing but a vanity metric, an actionable metric is keeping track of the number of users who signed up, finished the user onboarding and then created their kitty's profile.

With that, "signing up", "finishing the user onboarding" and "creating a profile" are Activation Actions, key activities leading to your Unique Value Proposition. Users who passed through all the key activities (thus activated users ) are more likely to be retained.

And now here's the analytic part: you must discover how your app's being used. Measuring daily or monthly active users through logins isn't the best thing to do, and so assuming that your app is being used the way you intended.

Look for activities that users are actually coming back to perform. In our example, even if the Unique Value Proposition is "creating a profile for your pet", users could be coming back to the app not to create a profile, but to like other kitties' profile photos or watching cat videos. After all, who doesn't love cat videos? :3

With a clear definition of what makes a user active, you'll have better statistics on your daily, weekly or monthly active users, and user engagement. But you should also pay attention no to leave users out of the equation, since users can be coming back to the app for doing something else, such as finding cat lovers in their city without liking photos or creating a profile.

Measure user engagement with Customer Engagement Index

Okay, we've already defined which actions define if users are active or inactive, so the number of active users can be calculated with more accuracy, and so the user engagement.

But just between us: this process of watching, calculating and measuring can be a real pain in the neck. But not if you use the Customer Engagement Index.

With this feature, you're able to assign different values for every kind of interaction and events users trigger with your app, much like a lead scoring system. These events can be anything you want, from the users login to executing a very specific action related to your Unique Value Proposition.

With it, you can do two very interesting things:

1) Define exactly what is an active user

As we've talked before, the whole "active user" concept changes from SaaS to SaaS. For our cat dating app example, it could be users who created a profile for their pets and came back to check for notifications, who enjoys liking other profile's photos or just logged in to watch cat videos.

By assigning different values for each one of these actions according to its relation to your app's Unique Value Proposition, you can set the target value users' must reach to be considered active. Together with the target value, you can also set a "login time", to discover how much time users remained active in your app.

Infographic: Check out how Customer Engagement Index outperforms any other engagement metrics! | Pipz Customer Journey Automation

Notice that the effectivity of user engagement metrification relies on which actions your users are doing. Logging in, for example, isn't exactly an action of an active user. But what if the user logged in just to check if there's other users on its location, didn't found anything and then logged out?

The "login time" takes care of this problem, indicating that the user was indeed active and remained online for more than 10 minutes, but didn't engaged enough with your app. Simple, right?

The same goes for users who logged in, checked for notifications or watched a quick video, then logged out. The target value based on its events was reached (10 points plus 20 points for each video watched), even if the user logs out with less than 10 minutes of activity.

2) Measure the user engagement index with your app

After assigning values to events your users activate in your app, each one of them will have an engagement value attributed to them. With that, some users can get more than 300 points/day, and other, less than 20.

To avoid great differences between user engagement values, Pipz calculates the Customer Engagement Index of your engaged users on the time-frame you chose, and assigns to them a value between 0% and 100%.

It's a sort of median, where the most engaged user gets 100%, and inactive users gets a 0%. With it, you're able to keep an eye on your most engaged users (who are more likely to upgrade to a higher plan), and more importante: predict user churn .

The Customer Engagement Index is an actionable metric

Face it: your SaaS doesn't need vanity metrics, but actionable metrics.

You need real numbers that reflect how users are actually engaging with your app. No assumptions, no shots in the dark. Here's why Customer Engagement Index comes in handy. Here's some actions and decisions you can make with CEI:

1. Optimize your engagement strategies:

If you're experiencing active users with a low CEI, they're probably logging in your app but aren't passing through the key activities to reach your Unique Value Proposition. And if they're not using the app at its full potential, they're more likely to reach the attriction stage of the customer lifecycle shortly after signing in.

This can be caused by different reasons, such as:

  • User onboarding isn't didatic enough;
  • UX design isn't intuitive or appealing enough;
  • Users don't feel encouraged to engage with other users;

To solve that, you'll have to take some time to optimize your engagement strategies, to encourage user engagement, make some improvements in your user onboarding and UX design. In other words, make your app irresistible .

2. Work on retention strategies:

Churn is a beast all SaaS want to keep away from. And the best way to avoid it is knowing when it's going to show up.

Variations in the Customer Engagement Index can tell if your users are losing touch with your app, and when is the "critical moment" where users stop using it. If your users' CEI is lowering too fast after a week or a month, it's time to work on your retention strategies to keep them close to your app.

Keep them engaged through personalized transactional emails , in-app notifications and nurturing emails. Make them know about your features and how to properly use it. The important thing here is creating an open channel of communication between users and your SaaS. If they're having questions, they need to know that you'll be there to help them.

3. Keep an eye on valuable highly engaged users:

In almost every app, there's always users who login, interact, share and comment every single day. These are the most valuable users a SaaS company can have. Loyal users.

As you know, Loyalty is the last stage of the customer lifecycle , and that means these users can be really useful to spread the word on your app and its features. More than that, highly engaged users are great sources of intel for improving, testing and suggesting features.

By measuring user engagement with CEI, you can keep track of which users are having a high engagement index. Thus, you could send them a personalized email or in-app notification to show them you're thankful, maybe granting beta access to a great new feature you're developing.

The key here is keeping engaged users loyal to your company.

See? Measuring user engagement and the number of daily, weekly or monthly active users doesn't have to be the pebble in your shoe. With the help of Customer Engagement Index, you can not only measure but make decisions based on real, reliable information. Exit vanity metrics, enters actionable metric.

Are you excited to try this Pipz new feature? I'm sure you are!

Why won't you request an invitation to get your beta access and start automating the entire customer journey? It's quick and simple: we're looking forward on having you as our next beta user. Good luck!

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