Every team I’ve been part of has set a retention target and paid it a lot of attention. I’m sure that’s true for you as well. Everybody knows that poor retention can kill a business.
“Oh shit - this account is up for renewal in 90 days! We’ve got to get on this asap!”
Sound familiar? Churn is an outcome. It’s the last thing that happens. Sure, you may be able to save an at-risk customer with 90 days of intense focus. But that’s neither sustainable nor scalable.
How about this one? “We really need to boost expansion revenue this month! Let’s run an upgrade campaign and try to sell this add-on to as many customers as possible!”
I mean, have we ever thought more about net retention? The problem is that most of us are reactive in our approach. Running ad hoc upgrade campaigns to hit short-term targets, like waiting until an account is at-risk to address it, is unscalable, and often requires a ton of work.
It doesn’t have to be like this. Follow me, young Skywalker, and I’ll show you the way.
What is product adoption and why is it important?
Product adoption is the process of new users learning about, choosing, and using your product more deeply and/or frequently over time. Ultimately, it’s about maximizing the value that your product delivers to each and every user.
Successful product adoption is an early indicator of retention. It also generates more expansion opportunities—organically and repeatably.
But there’s a lot working against us. You’ve seen the MarTech 5000 (edit: 8000!) graphic. There’s never been more competition, and the cost of switching vendors has never been lower. Average retention rates are low right now, and for many, declining.
And software users are coming in with increasingly higher expectations. They (ok, we) want every experience to be personalized, self-service, and instantly gratifying. That’s led to shifts in go-to-market strategies (hey PLG!), and now people are using our products way earlier in the evaluation process. It’s easy to understand just how important it is to deliver value quickly and ensure users adopt your product early.
All that being said, I’m here to tell you that aligning on product adoption is the best way to get ahead of churn and boost revenue. As users become more invested, your product more ingrained in their day-to-day, you increase the value of your product and create happier, more satisfied customers. Switching vendors becomes less attractive, renewals become easier. If you’re improving adoption, users will be more receptive to expanding, and—if you package and price effectively—they’ll likely run into more paywalls.
To be clear, product adoption is not a goal you can achieve. You’ll introduce new features. You’ll refresh your user interface. Your users’ needs will evolve. But you can observe, measure, and improve product adoption.
Measuring product adoption with a product adoption score (PAS)
Product adoption score (PAS) is a metric used to understand and measure customers’ adoption of your product, relative to the ideal. Unlike customer health scores, which usually consider qualitative data (e.g. a champion left the organization), the product adoption score focuses on hard numbers and clear, repeatable actions.
The key to creating a useful PAS is first identifying behaviors and usage patterns that correlate with retention. Start by identifying your best-retained customers. Don’t rely on contract value, case studies, or even NPS. Take note of behaviors and usage patterns they have in common. Which features are they using? How often are they logging in?
Next, check for and remove bias. Survivorship bias is common. Compare these patterns against other current and churned customers’ with a regression analysis. Then hone in on the strongest correlations and design your scoring model. Be sure to properly weight each factor if possible, then validate it again by running the model against your entire customer base. Does it feel right? You may be surprised by what you find, but you know your business.
If this sounds overwhelming, that’s ok. This isn’t easy for every business. You may not have enough sample size due to a smaller customer base, because your product is new, or because you serve a wide variety of very unique users. You may have limited access to usage data. The reality is, you may need to start by making a few assumptions, and again, that’s ok. Just do your best to validate those assumptions up front, then again and again over time.
I always find examples helpful when trying to understand new concepts, so let me tell you about how we designed our PAS at Appcues.
Once we identified the behaviors and usage patterns that would drive our PAS, we decided to start with a simple, binary, weighted model. For example:
- Utilization rate. We found that customers showing Appcues content to >n% of their users stuck around longer. Instead of scoring based on each customer’s utilization rate, we drew a line at n%. If they were below that: 0. If above: 1.
- NPS surveys. We also found that customers using Appcues to field in-app NPS surveys retained better. That was always true, so we went binary here as well. Are they showing NPS surveys to users? Yes: 1. No: 0.
Once we nailed the levers and the initial binary scoring, we knew we needed to apply weights to each of those levers based on how strongly and uniquely each correlated with retention.
The binary inputs are weighted by the coefficient, producing each piece of and adding up to the total score. We tried a few versions up front and chose the one that stood up to the most scrutiny. Once we established the score, we exposed it to the entire company and worked it into our Objectives, Goals, Strategies, and Measures (OGSM, similar to OKRs).
Using PAS to create cross-functional alignment and get results
So now we’ve got this total product adoption score, and that’s helpful at a high-level. But the real magic isn’t in the score itself. It’s in the inputs. Your PAS inputs provide a roadmap for improving retention and expansion.
Thinking back to the sample calculation above, you can start to think about each of these individual components as a sort of checklist. These are the behaviors you want to drive. And you can probably imagine how, with each team focused on these components of the product adoption score, you can create some real alignment. They can inform customer success priorities and strategy, the content of customer nurture programs, the features you spotlight inside of your product, the content you produce… even how you price and package your product. The list goes on.
To create that alignment at Appcues, we made sure our PAS was highly-visible to the entire company. We included it in our OGSM. Management reviews it weekly, and it’s presented alongside retention and revenue at every company meeting.
On the action front, another long list. Here are a few examples:
- Created new in-app nudges and guides for key features
- Added usage-based, dynamic content to recurring emails
- Re-launched an old feature and introduced a net new feature
- Introduced a net new feature
- Decided to ungate a premium feature and offer it on all plans
But what would this pseudo case study be without results? While we’ve improved average PAS quite a bit, that wouldn’t matter if we didn’t see a positive impact on retention.
As you can see, retention has improved quite a bit, both by count and revenue. No specific numbers here, obviously. But they’re good. And PAS has played a huge role.