What is Product Adoption?

Product adoption is the process that customers follow as they discover, purchase and begin using a new product or service. While companies over all industries invest a lot into marketing and sales, SaaS providers need to place equal emphasis on what happens when a lead turns into a paying customer.

In order for companies to unlock the power behind product-led growth, they first need to understand the psychology and the influences that customers confront on their journey toward signing up for a new SaaS service. But what about what happens after a customer signs on the dotted line? That is where monitoring product adoption comes in.

For example, how do customers learn about new features, integrate them into their workflow and create new habits that further the integration of your product or service in their operations? And, how do you turn a customer from a new acquisition into an advocate? These are the types of questions breaking down the product adoption process can answer for you.

After all, it can cost five times more to acquire a new customer than to keep an existing one, so having a solid understanding of product adoption can not only increase conversions but also help develop a base of loyal champions for your brand.

Why is understanding the product adoption process important?

While the terminology may vary based on the model, the product adoption process is typically summarized in six steps:

• Awareness: The customer researches potential products to solve their challenge.
• Conversion: The customer takes a step toward a new subscription, such as signing up for a free trial or a demo.
• Purchase: The customer signs up for a license or subscription.
• Activation: The customer begins to use the service.
• Renewal: The customer renews their subscription.
• Referral: The customer becomes an advocate for your product or service.

By understanding these steps and the inputs, outputs and considerations customers have at each, SaaS companies can support, incentivize and track their performance against the milestones. As a customer moves from step to step, companies can build loyalty, remove barriers and help to further integrate their product into the customer’s daily workflow.

How can you measure product adoption?

Measuring product adoption can be broken down into two parts: the metrics collected and the method used to track the data.

Tracking customer usage data is often done via one of two methods:

1. Internally to the product: Codes or features within the product itself are tracked at the user level, with time stamps, and are then fed to a centralized database.
2. Real-time from the web application: Either by tracking codes embedded into user traffic or through customer-specific interfaces, data is collected in real time and consolidated in a separate application, such as one tuned for evaluating product experience.

Secondly, SaaS companies can track product adoption by utilizing some of the following metrics:

• Time-to-First Key Action: The amount of time it takes for a customer to utilize a key feature or function of your platform.
• Activation: The number of users that took the key action compared to the total pool of available subscribed users.
• Adoption Rate: The number of active users divided by the total number of subscribers. It can be measured either at the feature or the product level. A growing percentage can point toward waning interest and a pool of users likely to churn.
• NPS Score: Your customers’ overall satisfaction with your company’s product or service and their potential to advocate for it on your behalf.