The Most Important KPI Metric for SaaS
While building Kindling, we've instinctively focused on the user's experience with our product. Over time, we've become more sophisticated in our ability to track the true impact of our efforts on the user's experience through the introduction of a KPI metric representing engagement. This has jump-started our understanding of how our efforts are translating for our users.
Engagement Creates Value
We have a central premise for Kindling: increased engagement results in greater value for our customers which raises the probability for renewal. Renewals are the ultimate measurement for how you're doing in SaaS, which means engagement is one of the most impactful metrics to track. Kindling is a social system that comes to life through user-generated content. The more that interesting and relevant content that flows through Kindling, the more likely users are to interact with this content, and the more positive outcomes are likely to emerge. Problems solved, opportunities realized.
In order to determine if your company's activities are increasing or decreasing your users' engagement with your product over time, you first need a metric. Identify the valuable contributions a user can make in your product, and if you find activities that you’re not leaving a record of in data, add those. You should only choose the activities that create value, so exclude noise like a user editing their notification settings or clicking a navigation item. This will result in the truest measure of meaningful activity.
Next, normalize this by the number of active users per day, so that you can compare this figure across time as your user base grows. Now you have a true engagement metric. As you track this over time, the rate of change in this number will very explicitly tell you how well your company efforts and the software platform are able to engage users. This information is gold.
We’ve observed four main drivers of engagement for Kindling:
Focusing on performance brings into view two additional metrics: server response time and browser page load time. Simply stated: humans don’t like to wait for information, and the longer you make them wait, the more likely they are to click over to espn.com or switch over to email. Every millisecond counts. We’ve seen a strong correlation between increasing engagement and decreasing user wait times.
This is the most obvious driver and likely the one that your product team focuses on the most. Obviously, we attempt to focus on those features that are more likely to increase engagement. But how does that translate to your roadmap? Changes that simplify the user’s experience correlate strongly with increased engagement. Without exposing too much of our secret recipe, we’ve found two other engagement drivers: quality of notifications (in both granularity and content) and the system's ability to identify and recommend relevant content. Our advice is to develop a thesis about a feature, ship it, and track its impact on engagement. If the needle moves up, you’ve done good. If the needle moves down, you have a problem.
This is the area that the Kindling product team is beginning to focus on the most. I've taken inspiration from watching my daughter use Instagram, which is effectively an elaborate social game for her and her friends. There’s a certain amount of social pressure to participate. You can imagine what the notification that interrupts her on the phone when someone likes her photo does for engagement. Humans crave rewards and a small social payoff. Kindling is a social system with amazing content and lots of opportunity to deliver social reward, and we’ll continue to look for the best ways to leverage this psychology to drive engagement. Sally just followed my idea? I just passed Jim on the Marketing Leaderboard? My idea was just approved? Cool.
One example of psychology driving engagement in Kindling is that Campaigns drive a disproportionate amount of user activity. Why? Campaigns are both targeted and time-constrained, and people like contributing to a very specific context (answering a particular question), and real estate brokers figured out long ago that urgency is a great way to spur action.
We’ve spent a tremendous amount of company energy on figuring out to help a customer not only successfully launch Kindling (the software), but on how to best structure their Innovation Program. We've found that these efforts lead to a much healthier Program generally, and as a result, increase user engagement. We recently launched Kindling Academy, which allows our users to learn about a Kindling feature or answer a specific question, without having to contact our support team. Informed, motivated users are more likely to engage, so focus your energies on keeping your users informed.
Measure Twice, Cut Once
It can be very difficult to draw direct causation from any particular activity and its impact on user engagement, but that doesn’t mean you shouldn’t try. We've found that tracking the rate of change in engagement against key milestones like a big new feature or the launch of Academy to be crucially important. So try focusing at first on the trend line. Over time, is your product, and your company’s efforts, engaging users more or less often? An upward-facing trend means that in aggregate you’re succeeding in creating value, and in turn, more likely to renew your customers. And to answer the question posed by this post, renewals are ultimately the most important metric for your enterprise SaaS app.
A final cautionary note: as with everything, try not to take this to the extreme. You can easily goose up your short-term engagement numbers by forcing users to do additional, unnecessary work. But users are smart, and you can't fool them too long (this reminds me of media sites that force you to click through a slideshow article to get you to view ten ads versus one).
Always keep an eye towards long-term user satisfaction and engagement.