What is Activation Rate?
The Activation Rate (%) represents the percentage of users that complete a specific action defined by a SaaS company as a “milestone.”
Often referred to as the “user activation rate,” the metric enables companies to assess the efficacy of strategies to influence new users to perform specific actions.
How to Calculate Activation Rate?
In practice, companies measure the activation rate in order to track the progress of users and their behavior.
The activation rate is a common metric measured by SaaS, subscription-based, and/or online businesses since it tracks the proportion of users that complete a certain task, i.e. a milestone.
Usually, the milestone is an event — most often occurring during the lead generation or onboarding process — that shifts the potential customer closer to converting into a paid customer or increases the odds of the user returning to the app, platform, or site.
Each company will have its unique set of milestones that determine future performance in terms of user growth, revenue, and churn, among various other internal goals.
The shared feature of most milestones is that the action first and foremost benefits the company economically and can validate that a specific strategy could be viable in the target market.
For instance, one milestone could be the user signing up for a free trial of a product, which means that the user is able to test out the product first, with the end goal being a conversion (i.e. purchase post-trial).
Activation Rate Formula
The formula for calculating the activation rate is as follows.
For example, let’s say that company’s website had 1,000 new site visitors in the past week, and 200 of them signed up for a free mini-course.
In this case, the user activation rate of the company is 20%.
- User Activation Rate = 200 ÷ 1,000 = 20%
Activation Rate Calculator
We’ll now move to a modeling exercise, which you can access by filling out the form below.
1. SaaS B2B Company Assumptions
Suppose a B2B SaaS company offers a sign-up form on its website to request free trials, which if completed, a sales representative will reach out to set up a virtual product demonstration.
The product demo is to ensure that the user understands how the platform functions and realizes its full value, as well as provide an opportunity for the sales team to improve the odds of the user converting once the free trial expires.
The number of free trial requests in the trailing four weeks is as follows.
Requested Free Trials
- Week 1 = 40
- Week 2 = 46
- Week 3 = 51
- Week 4 = 56
From Week 1 to Week 4, the weekly growth rates in the number of customers interested in free trial access were 14%, 12%, and 10%, respectively.
But not all customers that request temporary access to the platform are interested in setting up a time for a live product demonstration.
The number of product demos conducted was as follows.
Product Demos Conducted
- Week 1 = 10
- Week 2 = 13
- Week 3 = 14
- Week 4 = 18
The week-over-week growth rates of the product demos are increasing more quickly relative to the number of free trial requests (i.e. 25%, 22%, and 20%).
2. User Activation Rate Calculation Example
Upon dividing the number of completed milestones (the number of product demos conducted) by the number of new users (the number of free trial requests), we arrive at the following activation rates.
User Activation Rate
- Week 1 = 25.0%
- Week 2 = 27.4%
- Week 3 = 29.9%
- Week 4 = 32.6%
Therefore, we can conclude that our hypothetical company is progressing in the right direction in terms of achieving its goal of increasing the number of product demos conducted per free trial request.
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