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How SaaS Companies Can Improve User Engagement

Lilya Khimchenko

Lilya Khimchenko

CMO

The global SaaS market is growing at a breakneck pace. According to Fortune Business Insights, from almost $131 billion in 2021, it will reach over $716 billion in 2028.

Although such explosive SaaS industry growth is a promising sign for the companies involved, it’s worth noting that the competition between them is intensifying. No SaaS businesses want to be left behind, so they constantly look for new ways to attract and retain their customers.

You probably don’t want to fall behind other SaaS companies, either. If so, then we have good news for you. Consider your user engagement strategy and enjoy the benefits it will give you.

Today’s article is a comprehensive look at user engagement. We’ll tell you about the importance of this approach for SaaS businesses and explain how you can track your customer engagement.

Arounda specialists are knowledgeable about the SaaS niche, having delivered over 20 thriving projects. Thus, we can share insights on user engagement strategies based on our profound experience in software as a service.

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Want to improve your SaaS engagement? Let`s have a talk.

What Is User Engagement?

User engagement involves tracking various success metrics that help determine how actively users interact with a SaaS product. Following these interactions also shows how valuable the software-as-a-service solution is to its customers.

To understand user engagement better, you must remember to evaluate several indicators at once. By tracking just one thing, you won’t be able to get the full picture. Additionally, the metrics you must study will vary depending on the types of SaaS products.

It’s because the success formula will be different for various software. For one product, thriving will mean that the user spends a certain amount of time on it every day. For other types of SaaS solutions, for example, automation tools, daily interaction won’t be a measure of success but rather the opposite.

Why Is Customer Engagement Essential for SaaS Companies?

User engagement is the basis for the growth of any SaaS company. It’s because such businesses typically operate on a subscription model. If they cannot attract customers, then they won’t be able to generate stable profits.

Customer engagement, in turn, guarantees that the user will return to your SaaS product again and again. If you understand what clients expect from your software, you will be able to retain them and even encourage them to use your product more often.

The main points to consider are how convenient it is for your customers to interact with your software and how you can improve this interaction.

A poor onboarding process, your product’s excessive complexity, or the lack of SaaS value for end users are just a few unfavorable customer engagement examples. The good thing is that you can avoid such negative involvement with a well-thought-out strategy.

6 Customer Engagement Metrics SaaS Companies Need to Track

Now you’re probably wondering how to improve user engagement. To do this, you should familiarize yourself with the main metrics that will help determine how satisfied your customers are with your SaaS solution.

Customer Churn Rate

The customer churn rate is a metric that helps measure the rate of users who leave your SaaS product over a certain period. Accordingly, the less churn your software has, the more customers you manage to retain.

In general, it is okay that some users abandon your product. Nevertheless, you’ll want to check whether the churn rate is acceptable for the industry in which you operate.

To calculate the customer churn rate, you must choose the time frame in which you will conduct research. It can be, for example, a week, a month, a quarter, or a year.

Let’s say you set a time frame of one year. Then the formula for calculating the churn rate will be as follows:

This way you get the churn rate.

User Retention Rate

User retention is a metric that allows you to measure the percentage of first users who return to your SaaS product in subsequent periods.

To calculate the user retention rate, use this formula:

Customer Effort Score

Customer effort score or CES is a metric that helps measure how much effort a user must make to satisfy their request or solve their problem using your software.

This indicator is critical for understanding how easily the customer interacts with your product. As a rule, the more steps a user has to go through to fulfill his need, the less satisfied he will be.

To collect CES data, you need to survey your customers. Usually, companies ask users to rate how easy it was for them to perform a certain action in the SaaS product. After that, the client must choose a numerical scale or agree/disagree with a given statement.

To get the survey results, you must divide the sum of the effort ratings by the total number of user responses.

Customer Lifetime Value

Customer lifetime value or CLV (otherwise just LTV) is a metric that helps measure the total revenue you can potentially get from a customer during their lifetime in your product.

CLV is a valuable indicator that will help you make strategic decisions about your SaaS solution. Thanks to this metric, you can determine whether it is profitable to spend on attracting customers or on their retention. Ideally, invest no more than a third of the CLV on user acquisition.

To calculate CLV, you must divide the average revenue per account by the monthly churn rate.

Daily or Monthly Active Users

Indicators of daily and monthly active users let you know how many unique customers use your product in the specified periods.

To calculate the average number of active users, you must divide the total number of users per day/month by the number of days/months.

Customer Engagement Rate

Finally, you can also calculate the customer engagement rate. To do this, you need to divide the total number of active users during a certain period by the total number of users.

Considering all the metrics we mentioned, you will significantly increase SaaS engagement.

What Are the User Engagement Solutions?

If you’re clear on how to measure your customer engagement and satisfaction, what are some ways you can improve these metrics? There are special tools you can use for this. Here are some most common user engagement examples:

Email Marketing Tools

Email marketing allows you to remind your users about yourself. You can use it to regularly send customers promotional offers and personalized messages, the introduction of new features, and so on. Popular email marketing tools include SendGrid, Mailchimp, and SendPulse.

Live Chat Tools

Adding a live chat feature to your SaaS product would also be great. Such a solution will help you to be constantly in touch with your customers, which will increase their engagement level. Some live chat solutions include Zendesk, Freshchat, and Chatra.

Analytics and Tracking Tools

Analytics software and tracking tools help you collect and study data about your users’ behavior in your product. Examining the collected information will enable you to improve your SaaS engagement significantly. Popular tools for tracking and analytics are Google Analytics, Adobe Analytics, and FullStory.

Feedback and Survey Tools

To understand your customers better and ensure they have a flawless experience with your SaaS product, you need tools to conduct surveys and get user feedback. Popular solutions for this are Savio and InMoment.

Personalization Tools

You can attract even more customers if you personalize your acquisition strategies. You can do this using tools like Appcues and Engage.

Content Marketing Tools

To build trust with customers and perfectly harmonize with them, tell them more about your product through content marketing. Popular tools for working with content are Google Docs, Grammarly, Ahrefs, and Airstory.

Push Notifications Tools

Similar to email marketing, you can send regular notifications to your users. These can be messages about updates or any changes in customer accounts. These can also be personalized offers. Popular tools include OneSignal, Google Firebase, and LeanPlum.

Final Thoughts

User engagement should be a priority for you as a SaaS business. It’s a well-thought-out strategy and the correct metrics assessment that will allow you to stand out among competitors in a saturated software-as-a-service market.

As a SaaS company with a vast software-as-a-service portfolio, Arounda knows everything about customer engagement.

So, if you need someone to help with that, contact our dedicated team.

Lilya Khimchenko
I make sure our clients get the high-quality result from the beginning stage of the idea discovery & strategy to the final digital product.

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