Understanding Activation Rate and Choosing the Right Goals

Understanding Activation Rate and Choosing the Right Goals

Introduction:
In the realm of growth and user retention, activation rate plays a crucial role. But what exactly constitutes a good activation rate? Is it simply completing the sign-up flow, or is there something more to it? In this article, we will delve into the concept of activation rate, explore its significance, and provide actionable advice for choosing the right goals to ensure long-term value delivery to users.

The Significance of Activation Rate:
Activation rate is defined as the ratio of users who hit your activation milestone to those who completed your signup flow. A good activation rate is highly predictive of long-term value delivery to the user, which can manifest itself in terms of long-term retention, monetization, or both. It's essential for users who hit the activation milestone to retain at a rate at least 2x better than those who do not complete the activation step.

The Actionability of Activation Rate:
For activation rate to be an effective metric, it needs to be something that growth teams can directly impact. It serves as a leading indicator of a new user sticking around and becoming a customer, rather than just the act of becoming a long-term customer itself. Therefore, defining activation as simply completing the sign-up flow is not sufficient. This alone is unlikely to show a user the value of your product, making it unlikely to be predictive of long-term retention.

Determining the Right Activation Milestone:
To avoid overthinking the selection of an activation milestone, it is advisable to pick a milestone that occurs relatively early in a new user's lifecycle and strongly correlates with long-term retention. This milestone should be a significant step that showcases the value of your product to the user. Several successful companies have defined their activation milestones as follows:

• Facebook: Connecting with at least 7 friends within 10 days.
• Twitter: Following 30 people.
• Dropbox: Uploading at least 1 file.

These examples highlight the importance of choosing an activation milestone that goes beyond mere sign-up completion and focuses on demonstrating the core value of your product to the user.

Climbing the Right Hill: In the pursuit of growth and success, it is crucial to avoid climbing the wrong hill. Meandering and exploring different areas may be beneficial, especially in the early stages. However, once you find the highest hill, it is essential not to waste any more time on the current hill, regardless of how appealing the next step may appear. This is because people often tend to overvalue short-term rewards over long-term ones.