Ramli John—Manager Director at ProductLed—chatted with John Bonini for a recent episode of the Metrics & Chill podcast. Ramli told John all about how ProductLed focuses on one often overlooked metric to increase MRR for clients – activation.
ProductLed, as the name implies, helps product and software companies scale through product-led growth, via services, courses, and books. And it was that extensive familiarity with product-led companies that helped them identify the biggest bottleneck limiting revenue for many of their clients.
Read on for more details, or listen to the full episode here:
The Metric: Activation
From the beginning, Ramli and team zeroed in on activation rate, because in their experience, it’s the single biggest bottleneck for product-led companies.
“Usually for a product-led company,” Ramli said, “if there’s an MRR issue, we start with activation because if the foundation isn’t set for users, creating that experience, creating that magic moment, they’re not going to stick around.”
And that has a huge impact on everything—meaning improving your activation rate can have serious impacts on retention and revenue.
The Opportunity to Grow Revenue via Activation
Ramli and John discussed one ProductLed client in particular: a design company called Snappa.
Snappa’s MRR was flattening, and the ProductLed team was tasked with fixing that. Based on their experience, the team looked into Snappa’s signup metrics and analytics to see what activation looked like.
They found that “something in their signup process was really the bottleneck to their growth.” That bottleneck was the email verification and double opt-in. A whopping 27% of signups didn’t get past this stage and onto activation. That’s 27% of several thousands monthly signups—a huge opportunity to grow MRR with even a small improvement.
“I call user onboarding and activation ‘the ugly duckling of growth’ because, for a lot of product-led companies they either focus on the top of the funnel—’let’s acquire more users’—or product—just focus on churning out new features over and over again. There’s this middle piece around activation that gets forgotten, and users can feel it when they’re being neglected early on,” Ramli explained.
Ramli noted that the activation benchmark they use for product-led companies without a sales team is 5-10%. And Snappa was well below that. That’s how they knew there was an opportunity here.
Improving Activation Rate by Reducing Friction
With their opportunity uncovered, Ramli and team set up an experiment: “We did a split test. We sent 50% of the traffic to a signup process where the double opt-in was removed. We let it run for 4 weeks before we concluded that we saw an increase in activation.”
The increase in activation was clear early on, but the team continued to monitor how that activate rate growth would ultimately impact MRR—if it would at all. Six months later, they took a look at MRR for users who completed email verification versus those who didn’t.
The answer was clear: removing the double opt-in increased activation and resulted in a bump in MRR.
Ramli and team also ran a few other tests designed to improve activation, using their NES philosophy—Necessity, Ease, and Simplicity.
They tested holding off on account creation until after users reached the activation phase (which, for Snappa, meant completing and downloading their first design). They broke the signup form into a handful of pages to make it feel less overwhelming for users.
The team used Google Optimize to measure and run their A/B tests, Stripe to measure MRR, and Excel to track both cohorts of users (they’ve since moved over to Databox).
By the end of the first 6 months, Snappa’s new and improved activation rate had made a huge difference when it came to MRR.
“After 6 months,” Ramli told John, “we saw a 20% bump in their MRR just from that small removal of something in their onboarding experience.”
Results like that just go to show that activation is a key metric for product-led companies. “If there’s friction blocking users from experiencing the value of a product,” Ramli advised, “ask your team: ‘Is this worth losing money over? Is this worth losing users? Is this worth losing MRR over?’”
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