SaaS companies that really care about their customers are always looking for ways to boost customer engagement. However, measuring customer engagement objectively can be tricky and you cannot leave everything on subjective analysis. The good news is that there are plenty of metrics you can track to gauge customer engagement and that’s exactly what this post will cover. Let’s start with what customer engagement is and why it is so important for businesses to keep track of the essential metrics.
What is Customer Engagement?
Customer engagement goes beyond transactions and refers to the ongoing cultivation of business-customer relationship. It indicates the level of involvement and the emotional connection businesses make with their customers. It’s a consistent and intentional approach by businesses to increase loyalty and provide value to the customer at every point of interaction.
Sometimes used interchangeably with customer experience and customer satisfaction, customer engagement goes beyond customer satisfaction and overlaps with both. Customer experience refers to the perception that a customer forms based on what they experience, see, learn or hear about a brand, while customer satisfaction points to how much they like or dislike their experience with a company, its products or services.
Both customer experience and customer satisfaction are important, but customer engagement goes a step further in order to build a rapport by providing tailored solutions and listening to their feedback. Satisfied and engaged customers are the ones who think that your products or services offer great value and feel that the business cares about them and that its offerings are the best option for them.
A customer is satisfied when the product/services have met or exceeded his/her expectations. Customer experience encompasses the overall impression, and all touchpoints and interactions from pre-purchase to post-purchase interactions, including:
- The product/service
- Customer service
- After sales services
Customer engagement is about creating an ongoing and meaningful experience and making customers become active participants. Some key characteristics of engaged customers include:
They advocate for the brand and become brand ambassadors
Provide regular feedback
Become long-term, loyal customers.
Customer engagement is an ongoing process that requires businesses to continuously nurture the relationship through targeted marketing, personalized communication and proactive customer support.
Why Measuring Customer Engagement is Important?
The ultimate goal of businesses is to increase sales and generate revenue, and customer engagement is one of the ways to achieve that goal. However, customer engagement isn’t a particularly great strategy for generating short-term profits. It’s about long-term success by positioning your brand and applying best practices and proven tools to implement a customer engagement strategy.
The success of a customer engagement strategy can be gauged by a variety of metrics (more on that later). Here are some of the main reasons why measuring and keeping track of customer engagement is important at every stage of the customer journey.
Helps Gauge Customer Loyalty and Retention
Engaged customers are much more likely to keep using products/services, remain loyal to a brand and recommend it to others. Keeping track of customer engagement helps businesses identify highly engaged customers and take action to retain them. This also allows them to take initiatives to understand why others are not feeling engaged and take appropriate action.
Helps Identify Business Opportunities
It’s difficult to know what the customers want and whether or not products or services are meeting their expectations without engaging with the customer. Measuring customer engagement not only helps identify engaged customers, but it also helps businesses identify opportunities to drive revenue growth and increase CLTV (Customer Lifetime Value) through cross-selling and up-selling efforts.
Helps Improve Products and Services
Keeping track of customer engagement enables businesses to gain valuable insights into how they are interacting with the brand and their engagement patterns. This helps identify areas that need improvement and help in product feature optimization and improve the user experience.
Provides Meaningful and Actionable Insights
Insights and valuable feedback are more likely to come from engaged customers, which helps businesses identify trends, gain insights into customer pain points, expectations and preferences. Feedback from engaged customers enables marketers to refine marketing strategies, come up with better products and services, and improve the overall customer experience and satisfaction levels.
Customer engagement has become a key differentiator in today’s cutthroat competition and competitive business landscape. Engaged customers promote the business, act as its brand ambassador and are more likely to stick with a particular brand. Considering the high CAC (Customer Acquisition Costs) in the SaaS industry, customer engagement can give businesses a competitive advantage and helps them benchmark their performance against the competition.
Key Metrics to Track Customer Engagement
Businesses need to understand the rational and emotional attachment of customers with a brand and how they spend throughout the sales process/customer journey. The reason why it’s difficult to quantify customer engagement is because it’s an emotional factor for the most part. That’s why businesses need to be careful about picking the right metrics to gauge customer engagement. Picking these metrics can vary from one business and industry to another. The following are some key metrics to monitor and track to gauge the level of customer engagement, which are more relevant to the SaaS industry.
User Adoption Metrics
Monthly Active Users (MAU)
It refers to the number of unique users (on a monthly basis) who actively engage with a SaaS solution, providing a quick snapshot of the level of customer engagement with the product/service. MAU can be measured across different customer segments and phases such as onboarding e.g. a lot of users quitting using the solution after onboarding means there was something wrong.
Daily Active Users (DAU)
The DAU complements the MAU by providing granular insights into usage patterns and customer engagement over a short period of time.
Time Spent in the App
Used to track the average amount of time a user actively spends in an app and helps identify important areas for improvement and evaluate user engagement. The metric takes both average usage time and frequency into account to gauge how happy users are with the app. Businesses can also benchmark the number of active users against the total number of purchased licenses as unused licenses indicate that customers might need some other offering.
The metric is used to measure the adoption and usage of a particular feature within a solution and helps identify which functionalities and features are used the most, and drive higher customer engagement.
The churn rate is a critical metric to measure and refers to the percentage of users who terminated their subscription over a given time period. A high churn rate indicates the inability of a business to keep its customers engaged and deliver a product that satisfies their needs. Revenue churn is another metric a business can use to measure the effect of customer churn on the overall revenue.
Customer Lifetime Value (CLTV)
The metric is an estimation of the total revenue or value a customer generates over their entire journey as a customer. CLTV takes into account different factors, including average revenue per customer, customer retention rate and length of the relationship. You can also use ARPA (Average Revenue per Account = total revenue/number of customers).
Customer Satisfaction Metrics
Net Promoter Score (NPS)
The NPS is usually measured by asking customers to rate their level of satisfaction and loyalty, and how likely they are to recommend your brand/products/services to others. The score helps identify important areas of improvement and provides insights into the level of customer satisfaction and engagement.
Customer Effort Score (CES)
The metric is used to help quantify the level of ease with which the users can interact with a solution and the amount of effort they have to put in order to achieve the desired outcomes. A lower CES score indicates a higher level of customer satisfaction and engagement.
Customer Engagement Score
How businesses measure the customer engagement score varies from one business and industry to another. Businesses can define and create their own score by coming up with relevant inputs such as longest-standing customers, satisfied customers or other milestones within a time frame.
High Referral Rates
Although low referral levels do not necessarily translate into low customer engagement, customers referring your product/services to others is a sign of customer engagement. Some tweaks in the customer engagement strategy can help increase the referral rate at which customers refer your brand to others.
Customer Support Metrics
Average Response Time
There are many metrics that help businesses evaluate support services. Average Response Time refers to the time it takes for the CS team to respond to customer issues or questions and should be clearly defined in the SLA (Service Level Agreement). Businesses that keep their customers waiting for a reply tend to have low customer engagement, which makes a shorter response time crucial for keeping customers engaged and maintaining a high level of customer satisfaction.
First Response Resolution (FRR)
It’s an important CS metric that defines the percentage of customer interactions, issues or queries that get resolved in the first interaction. A higher FRR number indicates effective and efficient CS, which ultimately results in improved customer engagement.
Businesses should also take into account other metrics that provide a broader picture of the overall performance of a SaaS business. These include:
- CAC (Customer Acquisition Cost)
- Months to recover CAC
- CAC-to-LTV ratio
- Lead-to-customer rate
- Free-to-paid conversion
- Number of support tickets created
- Bounce rate
- Measure and increase customer engagement on the social media
Measuring and tracking a customer engagement strategy allows businesses to identify key areas of improvement and monitor the effectiveness of their marketing initiatives. It helps drive customer-centric initiatives that increase customer satisfaction, build brand loyalty and drive business growth. Feelings of customers are intangible and it’s hard to accurately quantify them, but evaluating key customer engagement metrics can help businesses get a fair idea of where they stand against the competition and what initiatives they can take to improve engagement.