Definition
Customer activation rate is a SaaS metric that tells companies the percentage of customers that convert from being newly acquired to a customer using the product/service. The activation rate is calculated by dividing the total number of users using the product/service by the total number of newly signed up users.
Example
Activation rate = (active users / signed up for trial users) x 100For instance, a company may have run a promotional offer to allow customers to try out their software for free. Once the users sign up for the free version and try it once, these become activated only once they convert to the paid version. The higher the customer activation rate, the more value users are deriving from the company's product or service.Suppose 1,000 users sign up for Vareto's FP&A service. Out of these, 700 continue subscriptions after the free trial period. Thus, the activation rate = (700/1,000) x 100 = 70%
Why it matters
Customer Activation Rate is a crucial metric as it gives insights to companies early in the customer lifecycle. In case there is any underperformance, it can be addressed without impacting the company's bottom line. A low activation rate means that the company may have user experience or onboarding issues that need to be addressed.