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Let us look at the right approach to measure product stickiness.
Every B2B SaaS company wants its product to have a good user engagement. But, a few of the companies are guilty of not conducting enough research to check whether the users find it interesting. Hence, ultimately the B2B product fails big in the market, and it ends up being a laughing stock in the eyes of your competitors.
To avoid such a predicament, it is imperative to not only develop a great product but also ensure that users engage with that product effectively. Product stickiness is the one metric to measure the effectiveness of your product once it is launched in the market. In simple words, you can call product stickiness the extent of utilization of the platform by the users in terms of the number of features they operate during a specific period.
I will discuss the definition of product stickiness in further detail and how to measure it effectively in the forthcoming paragraphs of this write-up.
So, without much ado, let us get started with the definition of product stickiness and discuss in depth about product stickiness ratio.
Let me take a unique approach to explain the term – product stickiness.
Imagine you are a B2B SaaS company having two customers – Harry and Joe selling a CRM tool. Harry carries lots of transactions that produce ample leads, for example, 1000 leads per month. He is converting them into opportunities and closing them. This helps him to generate a large number of leads.
On the other hand, Joe has a smaller customer base. For example, he gets approximately 15 leads a month. But Joe is not only using leads and opportunities but also forms, in-built chat, reporting, dashboard, and campaign features, among other features.
Looking at both the scenarios, who do you think is a stickier customer – Harry or Joe? Your answer will be obviously Harry, but the correct answer is Joe. I know you are surprised. Let me give a logical explanation for this answer. Although Joe has less customer base, he uses the product to the optimal capacity. This is what I call product stickiness which is quite high in the case of Joe. It is, in fact, manifolds high in comparison to Harry.
The customer who uses the product with optimal features and enhances their product adoption is termed product sticky, and the process is termed product stickiness.
The most important metric that needs to be considered for product stickiness ratio is user count. Although this is very easy to calculate, there is an important pretext for further analysis. The product stickiness ratio can be calculated by dividing Annual Monthly Users by Daily Active Users. This measurement is quite crucial for deriving the stickiness ratio.
So here I am presenting you the formulae to calculate the product stickiness.
Product stickiness = Daily Active Users (DAU) / Monthly Active Users (MAU)
With the help of the product stickiness ratio, the product manager can decipher the amount of improvement required in the product over time. It also helps to understand the usage patterns of the product and determine the glaring difference between user segments. You can even monitor changes in user behavior over a specific period.
The next thing that product managers need to evaluate for a specific number of days or weeks is how many users logged in and divide it by the number of users who logged in during the last 30 days. The percentage that you arrive at is equal to your product stickiness ratio. The numbers are recalculated daily to arrive at the product stickiness ratio as a moving average of user retention.
For example, if your product stickiness ratio is 20%, you can read it as the number of people who logged into your product at least once every month; one in five will log in on any given day.
DAUs and MAUs are detached absolute numbers, and hence, it becomes very challenging to compare them for different businesses. Also, the definition of active users differs from company to company. But, when it comes to measuring DAU/MAU ratio, it becomes a holistic metric that guarantees you to provide results pertaining to product usage. Since the figure derived from the ratio arrives in percentage, you can compare it with different companies and arrive at your judgment at how they arrived at user engagement goals.
Different teams in a B2B SaaS company can use the product stickiness ratio to arrive at better results.
With the help of the product stickiness ratio, the product manager can decide whether there is a need to develop an altogether new product or an improvement in the existing product can work. It also helps comprehend the product adoption amongst target users, which ultimately positively impacts the product roadmap.
The product stickiness ratio helps the marketing manager in B2B SaaS company segment the users according to the ratio and increase the segment’s usage that has a low DAU/MAU ratio. The marketing manager can use various strategies like educational email campaigns, push notifications, etc., to accomplish this objective. The marketing manager can also create a lookalike audience of the segment having a high DAU/MAU ratio. Such an audience is likely to stick around for an extended period.
The customer success manager can develop plan upgrades for customers by segmenting them based on the DAU/MAU ratio. The next thing that a customer success manager can do is envisage a retention plan for customers with a low DAU/MAU ratio. The reason is that customers with a low average DAU/MAU ratio are more likely to churn.
When the B2B SaaS business is new, the ultimate focus is on acquiring new customers instead of retaining existing customers. But as the product moves ahead in the lifecycle and reaches the mature stage, repeat customers constitute a major part of the product stickiness ratio. That is because, during the mature stage, the market is already saturated, so CAC shoots up. This makes customer retention the priority over customer acquisition.
Hence, the product stickiness ratio might be low at the early stages of your B2B SaaS business and a higher percentage in the growth and mature stages of the product lifecycle.
If you ask me, the easiest way to calculate product stickiness is by measuring the total number of features used by the customers in the product. This is layman’s formulae to calculate product stickiness in a B2B SaaS company.
The higher the product stickiness, the more the product adoption ratio. To ensure product adoption, you need to use an innovative customer success software like SmartKarrot with salient features like playbooks, milestones, surveys, alerts, and customer 360 to keep the customers hooked up with the product for a pretty long time.27
Measuring product stickiness is one of the toughest but most crucial jobs for a B2B SaaS company. Due to this reason, I feel that CCOs need to be active contributors when it comes to determining the product stickiness ratio in a B2B SaaS company. With the help of this ratio, they can explore lots of new areas and open up avenues that have not been explored yet.
Dattatraya Shetty is an IT Professional with 2 Decades of experience in areas of Product Development, Implementation & Service Delivery Management. As the Head of Implementations and SOC Compliance in Smartkarrot he is on a mission to provide relishing customer experience.
Published February 28, 2022, Updated February 28, 2023
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