# How to Optimize Marketing Spend Through Activation Rate Calculations

Contributors: Manjusha Karkera
Published: January 9, 2023

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Every start-up or established business constantly looks for ways to improve its business, generate revenue, and measure progress. For any online business, active customers are the key to success. However, companies will only understand how well their marketing and customer success efforts are working once they track their customers.

One such metric that businesses should be tracking is activation rates. Activation rates is a crucial step in the users’ journey and is one of the most critical metrics that help companies determine their long-term success.

## What Does The Activation Rate Mean?

The activation rate is said to be the key financial metric that measures the number of new customers that have reached the activation milestone. For any business to succeed in the long term, they need to convert trial users to customers as much as possible. A company can track its acquisition rate by monitoring the number of new users signed up for the service.

The activation rate is a great way to determine the success of a campaign. It indicates the percentage of users who have engaged with the campaign upon seeing it (i.e. have either clicked on the URL or scanned a printed QR code). Activation rate is sure to differ from company to company, business model, and available products. It can also be used to compare various products and services. Companies and businesses need to focus on tracking the metrics that are most relevant to their business or team. Companies can as well tailor their metrics depending on the specific customer journey.

## How To Calculate The User Activation Rate?

User activation rate, also known as product activation rate, determines the number of users who have the activation milestone or point.

The activation rate formula can be obtained by dividing the number of users who have reached the activation point or milestone by the number of users who have signed up. The result obtained should then be multiplied by 100.

Activation Rate = (# number of users who have reached the activation point / # number of users who have signed up) x 100

### Example To Calculate Activation Rate:

For a team management SaaS company, the activation point is set to be: when the user invites their teammates to the software.

Say, 600 users have signed up for the service or product last month. Out of them, 300 have completed the activation point during that month. So, the activation rate will now become:

Number of users who completed the milestone point = 300

Number of users who have signed up = 600

Activation Rate = 300/600 x 100

= 0.5 x 100 = 50%

### Optimizing Activation Rate Calculations

Calculating the activation rates becomes easy once the primary information is known. An activation rate which is between 25% – 30% is a good amount as this means that out of the total signed users, 25% – 30% have achieved the milestone point.

Website and product analytics tools help businesses monitor their set milestone point. Activation rate helps companies understand the effectiveness of their marketing campaigns. Maintaining quality campaigns will surely deliver the right results to any business.

Businesses must understand their customer inside out, so they have a clear idea of the type of offers and messages they should be offering to retain the customers and increase metric activation rates.

Businesses work and grow best when their goals are specified and time-bound. So setting measurable and relevant goals goes a long way in optimizing marketing spends.

## Final Takeaway

Being of the activation rates is a great metric to track down the insights of well is the product or the service doing and in what areas improvement is required. Keeping an eye on this number will ensure the healthy growth of the business. The best way to look at business growth from a more significant point of view is to combine various metrics with granular user insights to create and maintain greater customer value.

## FAQs

What’s a good activation rate?

The average activation rate for SaaS products and services is 36%, and the median activation rate is 25%. Activation rates vary from business to business depending on the milestone definition and the efforts required to reach the desired point.

B2C freemium products and services tend to have the lowest activation rates as they define their activation point by the first transaction.

How do you measure activation success?

Below mentioned is a simple five-step framework that can be used to measure activation success:

1. To start tracking customer behavior in the right way.
2. The next step is to develop hypotheses about the activation metric.
3. Next is to analyze the impact of the activation metric.
4. Experiment with what might improve the activation metric and test them to measure the results.
5. The last step is to reevaluate the activation metric periodically to ensure that the business is driving the right behaviors for the right customers or users.