Measuring Product Stickiness and Product Health

Product stickiness is the tendency of users to keep returning to a product that they find engaging and valuable. Customers make sticky products a part of their everyday lives, using them more often. Users renew subscriptions for sticky products regularly. They display customer loyalty to sticky products.

Why Is Product Stickiness Critical to Growth?

Product stickiness is integral to the growth of your SaaS products in three key ways:

  1. Customer retention
  2. Account expansion
  3. Lifetime value

Customer Retention

In the world of SaaS, profitability correlates with retention. Simply put, the stickier a product, the higher the customer retention rate. It makes sense: People will naturally keep using products they find engaging and useful.

Account Expansion

Having a highly sticky product in your SaaS roster accelerates growth by making it easier to sell upgrades and add-ons. The more people enjoy a product, the more likely they are to buy the bells and whistles that go along with it. These expansions to your product line can go a long way in increasing your monthly recurring revenue.

Customer Lifetime Value

A customer’s lifetime value (LTV) is the amount of money earned from their engagement with your business. The higher the LTV, the higher the overall profitability of your SaaS company. LTV is important to remember when making future financial decisions about your business.

Note that there are many ways to calculate customer LTV, but most depend on the costs associated with your product and the revenue earned.

How to Calculate Product Stickiness

Although product stickiness may seem like an arbitrary metric, it is measurable and quantifiable with a simple equation. This is how product stickiness is generally assumed:

Product stickiness = daily active users (DAUs) / monthly active users (MAUs)

For example, if your SaaS product sees 5,000 active users per day and 10,000 active users each month, the product’s stickiness rate would be 50%:

5,000/10,000 = 0.5

What to Consider When Calculating Product Stickiness for SaaS Applications

For certain SaaS applications, daily usage may not be the best metric. Payroll system applications, for example, can be incredibly sticky, but usage is not logged in the daily metric. In this case, you may want to adjust your calculations to follow a business cycle (i.e., weekly).

Onboarding a large customer could skew your daily active user count with a sudden spike in usage followed by a big drop as usage normalizes. It may be helpful to separately track new customers per day and per week to account for this behavior — or leave your large customers out of this metric until they have completed onboarding.

It’s also critical to define what constitutes an “active” user. This is usually tied to important workflows that depend on the type of application. In addition, you should clarify that these are unique users within a certain time.

How Not to Be Misled by Product Stickiness

When calculating the stickiness rate of a product, the primary metric (daily active users / monthly active users) can often be misleading — and worse, it can cause business leaders to make uninformed decisions.

The problem? Without a good definition of “Active”–and without segmenting the data about how users are using your product–the data tells you nothing.

The product stickiness rate does not tell you:

  • How many days out of the month most users are active
  • How many days out of the month nobody uses the product
  • Whether the usage frequency is enough for users to get long-term value from the product

(According to UserPilot, the average product stickiness rate in the SaaS industry is 13%. This comes out to about four days of activity per user per month):

Not having the complete picture could lead you to invest time and resources in the wrong aspects of product development or growth strategy.

So what now?

Define Active Users

When thinking about DAU, MAU, the definition of “Active” matters. What actions does a user take within your product that deliver value? What is the minimum amount users can perform this action to get value from the product? Now, identify these actions and develop a measurable way to track them for a clear and accurate picture of how your product is being used.

Segment the Data by Usage

You can get a clearer picture of your product stickiness by segmenting the daily and monthly data into different types of usage. What percentage of users access the product every once in a while? What percentage of users are active and regularly access the product after onboarding?

What percentage could be called “power users”?

Dividing your product’s users into different segments and calculating the DAU/MAU rate for each gives you a starting point for making better product decisions and understanding how customers are using your product.

How to Create Sticky Products from the Start

Onboarding

If product stickiness is determined by how helpful your customers find the product, you need to make users aware of all the features your product offers — and fast. What is the best way to do so? Onboarding.

Try implementing features that will make for a successful onboarding experience, such as:

  • Quick and easy signup
  • An informative welcome screen
  • Interactive product walkthroughs
  • In-app messaging and announcements
  • Secondary onboarding
  • A/B tests

With an effective onboarding strategy, you are creating a beneficial user experience right from the get-go, improving feature adoption, customer retention, and product stickiness.

Upsells

Upselling is another product stickiness strategy. When upselling your SaaS product, the goal is to increase revenue, expand accounts, and make your customers aware of features they didn’t know existed (or needed!).

One way to proactively upsell your product is to include a view of the premium features within the main product platform — giving users a taste of what they’ll get when they level up.

Just Ask!

Another strategy for ensuring that your products are as sticky as possible is to simply ask your customers! Usability tests, customer interviews, and in-app surveys (even concise micro surveys) can help you identify customer pain points, enhance features, and provide better support. You can also learn what your customers like best about your product and amplify those qualities.

Additional Product Stickiness Metrics

Open Rate

Open rate refers to the percentage of customers who have opened your product and set it up within a certain time. The more customers need to use the product, the higher the open rate. Remember, though, that sending out frequent notifications to increase product opens could cause customers to open the application and not use it.

Lness

The Lness distribution for your product refers to the number of days customers used your product within a specific period. For example, an Lness distribution of L1+/7 would mean that users interact with your product once over seven days, while L28+/28 would indicate daily use over a month.

Product health refers to a complete diagnostic overview of the status of your product in the market, including how it is being used, what customers think about it, its place in relation to competitors, and more.

Aside from product stickiness, other key product health metrics include:

  • User adoption
  • User retention
  • User growth
  • Net promoter score and likelihood to repurchase (NPS & Loyalty)
  • Monthly recurring revenue (MRR)
  • Average revenue per user (ARPU)
  • Revenue churn (Revenue Lost)
  • Logo churn (Customers lost)
  • Customer cost of acquisitions (CAC)
  • Lifetime value per customer (LTV)

How Does Product Stickiness Contribute to Overall Product Health?

Product stickiness is an important aspect of the overall health of a product because it speaks to how helpful a product actually is, how easy it is for a user to get started, and how satisfied users are with the product. It directly relates to your SaaS business’s revenue, churn rate, and growth.

If you’re looking for a surefire way to keep both your customers and board members happy, use this resource to evaluate and improve the stickiness of your SaaS products. Explore our case studies to learn how we helped improve product health for our founders and partners.

Visit our best practices library to learn insights and analysis from our team of experts on how to make selling customer success and services simpler, launching your first customer health scores, product release process and tiering and more in the growth program section of our website.

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