A Primer on Measuring Product Adoption

Last updated
November 3, 2022
by

Travis Taborek

Discover why measuring product and user adoption is important, the challenges involved in quantifying it, and 15 product adoption KPIs and metrics to use in your product adoption strategy to judge the success of your new product with formulas for each.

Table of Contents

    If you launch an app on the app store, and no one downloads it, does it even exist? That’s the 21st-century zen riddle of the modern-day app developer.

    You can make the most beautifully designed, useful app in the world. You can make an app that has gorgeous eye-popping colors and a UI design that brings grown adults to tears. You can make an app that does everything from managing your calendar to monitoring your stock portfolio to buttering your toast. At the end of the day though, if there’s no one around to download your app and use its features, then it has no value to your business and there’s no point in making it in the first place.

    That’s why measuring user adoption is important. Understanding what draws people to your app and at what point they begin to see its value can make or break the success of your app.

    It’s a lot more complicated than knowing how many users are adopting your product or using your new features. How long does it take until they start using it regularly? When do they first start using your key features? How long does it take to onboard new users to your app, and how do you measure the feedback they give?

    This post will cover why measuring product and user adoption is important, the challenges involved in quantifying it, and give you 15 key KPIs and metrics to use in your product adoption strategy to judge the success of your new product with formulas for each.

    What Are Product Adoption Metrics?

    Product adoption (or user adoption) is when your target users go from being interested in your new product, app, or feature to using it regularly as a part of their day-to-day lives.

    Product adoption metrics measure how long it takes for them to reach that point. They also identify what pain points and bottlenecks exist in your product adoption, and the actions you can take to improve them.

    Let’s say that you’re an ecommerce company. You just launched a dedicated ecommerce retail app that you’ve promoted across your website, your social media, and your newsletter. User adoption metrics look at how many of your customers then visit the app store, download your app, and start using it regularly to buy your products rather than your website.

    Knowing how quickly your users adopt your product and what obstacles prevent them from doing so can make the difference between your new product’s success or failure. Customer adoption can be tricky to measure in a way that’s useful though, especially if you start after your product has already launched. You need to know exactly what metrics are most important and why.

    There are several challenges that may hamper your product adoption, such as:

    • Product USP: Communicating your product’s value, what it does and why it’s useful, helps your users understand why they need your product. This becomes more challenging the more unique your product is
    • Cost structure: Your product or app should be priced similarly to similar products in your niche. If it’s too high, your users can’t afford it and will go to your competitors instead. If it’s too low, your users will get suspicious and assume that the price point is reflective of poor quality
    • Fear of change: People are used to what they know. If they’re already comfortable with whatever similar products they have, it can be tricky to convince them to make the switch and learn a new app from scratch
    • No sense of urgency: Getting your customers to adopt your product is an uphill battle if it doesn’t solve a specific pain point or need

    Why Should You Measure Product and User Adoption?

    Your product adoption metrics give you the insights you need to make your new product or feature successful and measure the ROI of its development. They help you identify weaknesses in your product marketing and why you might be losing users, and what’s working about your product marketing.

    Optimizing your product adoption rate doesn’t just improve your immediate bottom line, but it also unlocks opportunities for future growth. Knowing what's working in your customer adoption can give you ideas for new products and features for their next iteration.

    How to Measure Product Adoption Rate

    Your product adoption rate specifically measures the frequency with which your customers go from learning about your product to becoming regular users. It excludes users who either used your product or feature once or twice and then never picked it up again,

    Your overall product adoption rate is measured as the proportion of new active users to the total number of users, summarized in the formula:

    Product Adoption Rate = (New Active Users / Total Active Users) x 100

    It’s important to keep in mind though that this is a general definition only, and that product adoption rate is not an isolated metric.

    There are dozens of different factors that influence how likely it is that a customer will adopt a new product or service. Not all of them can be attributed to a fixed point in time, nor can all of them be quantified into a formula.

    To make the most out of your user adoption metrics, consider plotting your product adoption rate and your related KPIs on a timeline and tracking how they change every time you add a new feature or a new improvement. This way, you can correlate improvements to your product adoption metrics to the changes that influence them and identify what works best.

    With that said, how do you know what product adoption metrics you should be looking at?

    How to Choose the Right Product Adoption Metrics for Your Business

    It’s helpful to think about your product adoption cycle in stages: from the moment your ideal customer becomes aware that your product exists, down to the moment that they start using it regularly. There are multiple steps a customer has to go through before they finally adopt your product.

    The goals you have for your product may change as it goes through its lifecycle. When it’s introduced, when you add new features and readjust your marketing campaign accordingly, and when you broaden your target audience, the market adoption metrics that contribute to its success will change with them.

    Your product adoption rate is not a straight line that goes up or down, but a curve that fluctuates as your product changes with the needs of your customers.

    A useful framework to think of the new product adoption process is the Diffusion of Innovation Theory described by E.M. Rogers in 1962. In it, Rogers defines the 5 factors that influence the adoption of a new innovation or technology into the mainstream:

    1. Relative Advantage: How useful your new product or app is when compared to similar products, compared to how hard it is to learn how to sign up for and use
    2. Compatibility: How closely your products' main use case or selling point aligns with what your customer actually wants or needs. The less of a divide there is between what your product does and what your customers want it to do, the more likely customers will adopt it
    3. Complexity: How difficult your product or app is to learn how to use. The easier it is for your customer to adopt your product, the more likely it is that they will. This can be improved with tutorials, demos, and a streamlined onboarding process
    4. Trialability: How much your customers try your product and play around with the features before purchasing or signing up for it. Letting your customers test out your product before paying for it reduces the perceived risk of a purchase. The easier and more accessible a product is, the lower that perceived risk and the more likely they’ll commit to a purchase or subscription
    5. Observability: This metric directly measures how useful your product is. If your product produces obvious results or makes your customers' life noticeably better or more convenient compared to similar products, the more likely it’ll attract your customers' attention

    These are the qualitative factors that influence product adoption. They’re more of an abstract framework to help you think about what metrics are important to look at. However, you can tie them to your product adoption metrics when you modify your product, change your marketing strategy, or introduce new features.

    When it comes to KPIs you can plot on a graph, generally speaking, you need to find out:

    • Breath of adoption: Who your product is meant for, and who is most likely to use it
    • Depth of adoption: What your product does, what it’s for, and what problems it solves
    • Time to adopt: How long it takes for your users to understand why your product is useful and better than the alternatives
    • Duration of adoption: How long your customers continue to use your product after adoption, compared to how many of those customers unsubscribe or churn

    A good way to single out which KPIs you need to measure your product adoption is to narrow down which ones are associated with each of these goals.

    15 Product and User Adoption KPIs and Metrics to Follow

    Once you understand what it is that you actually need to know, then you’re ready to hone in on what customer adoption KPIs you need to track to determine whether your product launch is successful or not. It’s helpful if you track each of them according to the stage of the market adoption journey you want to track, e.g. how many people it appeals to, how long before they start using it regularly, and how closely what your product matches what your customer needs.

    With that said, these are the 15 most important KPIs and metrics to measure your product adoption rate.

    1. Time-to-First Key Action

    The time-to-first key action is also known as your Aha moment, or the point where your customer goes “Aha, so THAT’S how this newfangled app works!”

    This metric tracks how fast your new users figure out how to use your new product or app. It shows how quickly an existing user adapts to a new feature, or how long a new user takes to try your app’s main feature after learning about it. This is calculated in days, weeks, months, or years.

    To use a ridesharing app as an example, a time-to-first key action could be when an existing customer books a carpool ride to the airport for the first time, or when a new user orders their first ride for their morning commute after they had just signed up.

    A good data analysis practice is to define which product features are most important. If you try to track every single functionality your app has, you’ll add too much white noise and end up with a bunch of useless and irrelevant data.

    2. Time-to-Value (TTV)

    TTV is the time it takes for a customer to realize that your product is actually useful to them somehow. It’s measured as the time between a user’s first interaction with your app and the moment they realize that it’s actually good for something.

    Once again, for time-to-value to be useful to you, you need to define what that moment in time is. It can be when your customer first signs up for your product, or engages it with it several days a week rather than just once every few months. It’ll vary depending on your product and what stage it's at in its development.

    3. Onboarding Completion Rate

    This metric is associated with the awareness stage or the consideration stage of your customer journey, depending on whether your app onboarding happens during the trial period or after your customer subscribes. The formula for this is pretty straightforward:

    Onboarding completion rate = Number of people that completed onboarding / Number of people that started the onboarding process

    This helps you understand how many users bother to go through your product’s tutorials and demos, and whether or not they successfully show them how the app works. If a lot of people drop out of the customer journey during the onboarding process, it means either they realize that the product isn’t for them, or that the onboarding process itself needs fixing.

    4. Number of Daily/Monthly Active Users (DAU/MAU)

    This measures how many of your users stick around and keep using the app after they’ve moved for the trial period and subscribed or made repeat purchases. In other words, it shows you how many of your customers use your product or app on a regular basis, compared to how many just use it once in a while.

    Strive to keep the difference between your daily and monthly active users as narrow as possible. Knowing your proportion of daily users to monthly users can show you which of your users need more help before they’ll fully adopt your product.

    5. User Churn Rate

    Churn rate is a fairly standard marketing metric. Your churn rate measures how many users drop out of the customer journey and never touch your app or product again, measured in:

    Customer churn = (Number of customers lost during a time period / Number of customers at the beginning of that time) period x 100

    Knowing where most of your customers churn can show you what about your onboarding process or value communication of your product needs improving.

    6. Net Promoter Score

    Your Net Promoter Score (NPS) is a metric that literally measures how popular your app is - how many loyal fans you have compared to your haters, out of all of the people who have used your app.

    NPS = (Promoters - Detractors)/Total Responses x 100

    You can gauge your NPS from feedback survey responses that measure how satisfied your customers are with your product and how likely they will recommend it to their friends or network. Promoters are positive, and detractors are negative.

    Your NPS will show you how many of your new users like your product. Consider it more of how much your customer like your product, rather than how likely they are to adopt it. You can then use that insight to improve your customer experience.

    7. Product Retention

    Getting your customers to try your product is one thing, but getting them to keep using it repeatedly is another. Product retention measures how many users continue to use your product or app for an extended period of time after they’ve moved through the onboarding process and adopted it. Product retention is measured in:

    Customer retention = Number of customers at the end of a time period / Number of customers at the beginning of the same time period x 100

    8. Customer Lifetime Value (CLV)

    At the end of the day, your product adoption metrics need to tell you if your product is making your business money. Your customer lifetime value tells you how much a single customer is worth and how much average revenue a customer brings in while they continue to use your product.

    CLV is measured with the formula:

    Customer lifetime value = Total purchases during customer lifetime – cost to acquire and service customer

    9. Usage Frequency

    Your customers might get excited and hyped when they first start using your app, but do they continue to engage with it after the fact, or does their enthusiasm for your product die down after a while?

    Your usage frequency is an indicator of how often users keep coming back to your product after they first adopt it. Rather than seeing if customers use your product only once and then never again, average usage frequency shows you how often they use a product or feature. That knowledge can show you what users need additional onboarding or support so they continue to use your product.

    10. Average Session Duration

    Your product or app is meant to be used, and the longer users spend time interacting with it, the more revenue they’re likely to generate. Your product’s marketing strategy shouldn’t just get your users to adopt your app, but to spend as much time on it as possible.

    Average session duration measures how long your average customer spends on your product or app. A convenient formula for this is:

    Average session duration = Total Duration of All Sessions / Total Number of Sessions

    11. Customer Engagement Score (CAS)

    This metric is a little less straightforward and the parameters that factor into it are largely up to you.

    Your customer engagement score shows you how much your customer engages with your product. First, you have to define your engagement event, what you define as an engagement activity in the context of your app and your customer journey. This could mean likes and comments on social media, reviews of your product, or store page visits.

    Measuring your customer engagement is most useful if you define engagement events that are specific to your product and it’s use case. For a food delivery app, an engagement metric would be pickup or takeout orders. In a dating app, an engagement event might be whenever two matching profiles message one another.

    CES is most valuable when it tracks how much your customers engage with your core features. You can summarize it in the formula:

    Customer Engagement Score = (e1*n1) + (e2 * n2) + … + (e# + n#)

    Where e is the relative importance of an engagement event, and n is the number of times it happened. Then, you can attribute individual users with a CES score, and find ways to increase your user engagement by nurturing your customers with the lowest score.

    12. Customer Acquisition Cost (CAC)

    Product adoption costs money, as does any and all forms of marketing. Every customer you onboard takes resources and money to acquire. Customer acquisition cost shows you how much it costs for your business to acquire one new customer.

    CAC is the cost of acquiring new customers after the amount you need to dedicate to marketing and sales before acquiring them, or:

    Customer Acquisition Cost (CAC = Total cost (marketing + sales)/Number of new customers)

    13. Customer Feedback and Product Reviews

    Reviews of your product or app are a qualitative score that isn’t easily measured in numbers, but they are nevertheless useful KPI.

    Getting feedback from your customers can help you find all sorts of ways to improve your product adoption. You may even learn things about how customers use the product that you hadn’t even considered before.

    Numbers and graphs are useful in their own way, but sometimes it’s best to talk to your customers and ask them what they want from your product.

    14. New Monthly Recurring Revenue (MRR)

    Obviously, you want as many customers as possible to adopt your product, but how much money do they bring in once they’ve done so? Improving your product adoption rate is only valuable if those users then continue to generate revenue.

    New monthly recurring revenue shows you how much revenue your users generate after adopting your product, or:

    Monthly recurring revenue = New users in a month x Average revenue per user

    15. Product-Specific Behavioral Metrics

    Your user adoption does not exist in a vacuum or a silo, and no two SaaS companies will measure product adoption the same way. As you go about measuring your product adoption, you may need to configure many of the above metrics or come up with one of your own to find the information you need to get more users to try your product or feature.

    As with all things in marketing, the most important rule is to understand your audience - who they are, what they want from your product, and what your product can offer your customers that your competitors can’t.

    Consider using session recordings to analyze your customers' behavior. That can give you insight into why potential customers reject your product or make them drop out before adoption.

    Adapt Your Marketing Strategy to your Product Adoption

    Which metrics you use to measure your product adoption and what information you need depends on what your product does and who it’s meant for. Making higher-level decisions about what data you need and why needs to come before what metrics you choose to measure it.

    More often than not, the best approach is to just talk to your customers and ask them what they need from you before they commit to your product.

    With CometChat, you can develop in-app chat solutions that let you talk to your customers, get their feedback, and use that info to make it the best it can possibly be. Give CometChat a try, and you’ll know exactly what you need for your product to grow and thrive!

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