Metric sales

A new metric to measure how customers interact with the software

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One of the biggest challenges software company executives face is providing their board and investors with the right data on how customers are using the company’s software. The challenge is often that there is too much data to present.

A simplified metric – like a Net Promoter Score (NPS) for customer sentiment – ​​is needed to measure the health of a product. But unlike NPS, which measures sentiment after customers have used a product or service, this score would serve as a leading indicator for the business. Enter the Product Engagement Score (PES).

PES: a meaningful real-time metric

PES is a composite metric based on three components, all of which are easy to identify in a product analysis tool:

  • Adoption: an activation metric that measures the number of users who interact with the product. By understanding how (or if) customers are adopting and using the product, a company has a clear idea if the product is delivering the expected value. Companies can calculate the percentage of their product that is used to understand how widely their product is adopted by their customers.
  • Growth: A measure of whether the product acquires and retains new users faster than existing users abandon it. Growth means more users want to use your product, a sign of a healthy product. To measure growth, businesses can use Quick Ratio, which takes into account user growth, retention, and churn, and takes into account how efficiently the product is growing.
  • Adhesion: measurement of the frequency with which users return to the product. Adherence can be calculated in three different ways: monthly active users who return daily (DAU/MAU), weekly active users who return daily (DAU/WAU) or monthly active users who return weekly (WAU/MAU) . You can measure the percentage of monthly active users who return to your product weekly, and if you primarily serve business users, you can exclude weekends. How you choose to measure stickiness will depend on what ideal engagement with your product looks like.

The beauty of determining a PES score is that companies don’t have to ask their users to tell them if they find value in the product. With PES, data is revealed in real time.

From reactive thinking to proactive thinking

PES is an exciting step for businesses because it provides actionable insights into user behavior long before a customer renews their subscription, giving businesses the opportunity to ask customers what they could improve and to make improvements based on feedback.

For example, after a few months of measuring PES on a product and observing less than expected adhesion, a product management team could make updates to the product to give users more reason to worry. engage in it daily. It can also be a driver of innovation, providing the basis for conversations with customers, which can lead to important new features and product improvements.

Sales and customer service teams can calculate an individual product engagement score for each of their customers to understand how engaged they are with a product and help predict the likelihood of them renewing their contract. Sharing these scores with customers during quarterly sales reviews helps focus discussion around product usage. They can share insights on how to achieve better business results and celebrate areas of focus that have resulted in higher PSE over time.

Additionally, business leaders can share the PES with their board, both for the previous quarter and to show trends over time. The Product Engagement Score offers a concrete measure in the success story of a new feature or product. It can be used to effectively track whether a company’s investments in various features are paying off.

ESPs have the potential to have widespread impact as stakeholders such as CEOs, CPOs, board members, and investors attempt to gauge how users interact with their software products. Ultimately, this is what will determine the value of a business.

Todd Olson is CEO and co-founder of Pendo.

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