How User Onboarding Affects Your Main SaaS Metrics

How User Onboarding Affects Your Main SaaS Metrics

Okay, before we get started on how to boost your most important SaaS metrics with User Onboarding, let’s take a quick moment to remember what it really is.

It’s a process that begins with the very first interaction your users experience, and one that can span several months (depending on your product), that aims to keep your customer using your SaaS app proficiently while genuinely receiving value from it.

In our recent article the 5 mission critical SaaS KPIs, we uncovered the main metrics you must measure to know your SaaS’s health. And in this article, we’ll look at how those KPIs are affected by your awesome user onboarding.

Leading user experience (UX) consultant and onboarding aficionado, Samuel Hulick, once compared successfully onboarding a user to Mario when he receives the Power Flower. It’s not about producing the product, but rather empowering your customers by helping them understand how to use it.

This is a great metaphor for user onboarding, so let’s stick with it.

In the beginning, your user has a challenge ahead and needs help with a problem. They’re awesome, no doubt about it. But they’re perhaps feeling a little small, disempowered and in need of help to achieve their goals – help that your SaaS can provide.

new saas user

Then, they find your free trial and sign up! They’re bigger, capable of so much more, and on a journey to greatness…

saas free trial

Then, they find the “Aha!” moment when they’re truly empowered. You’ve onboarded them; guided them through your product, so they now wield the value your SaaS offers. They stroll around confidently, blasting fireballs out from their hands and getting the job done.

onboarded SaaS user

This is the process of onboarding. It’s guiding people to the value and empowering them with your SaaS app.

It’s about engaging your customers

First of all comes Customer Engagement. So let’s also take a moment to remember what the customer engagement funnel looks like.

customer engagement

User onboarding helps you improve conversion rate of your free trial users into paying customers by helping them understand the value of your product faster so they become successful, pro users.

Put another way, you’re showing them exactly where to find the mushrooms and flower power-ups in your product. Just like in the Super Mario Bros scenery above, there are a lot of components in your interface. But the real value is actually delivered in a very small handful of areas.

It’s obvious to you were those areas are, because you designed the interface. But every new customer needs to be shown where they are. By doing so, you engage your customers; you start a kind of conversation with them.

When your customer’s engaged and can use your product efficiently, they’ll stick with you longer. And that brings us to the next mission-critical metric.

User Onboarding reduces Churn

Look, we’re about to say something that deserves a block quote simply because it’s such an important concept for a SaaS owner to focus on. Here it is:

Happy, successful customers who are empowered with the value your SaaS offers means you have a lower churn rate.

As SaaS optimization legend, Lincoln Murphy has said many times on his industry-leading blog, sixteenventures.com, the seeds of churn are planted early. Not only are those seeds planted early; they’re planted deep, too. Maybe Murphy chose the seeds analogy specifically because he knows that those seeds grow into Power Flowers. Perhaps we’ll never know…

But one thing’s for sure. If your onboarding experience for new customers – even during a free trial – is terrible, it’s game over. No matter how great your interface is or how awesome your product might be.

user onboarding reduces churn

The seeds of discontent simply do not produce power flowers. And disempowered users will not stick around. And that means conversions go down and Churn goes up.

Case Studies: How these 3 SaaS products improved onboarding

Okay, so Churn is a super-important affected metric. And as we’ll see later, it has a powerful knock-on effect to the other metrics in your business. That’s why these leading SaaS companies went to great lengths to improve onboarding and reduce Churn.

Case study 1: Customer.io doubles conversion rates

Customer.io recently enrolled in this free email course on “concierge” onboarding. The basic idea is that new signups are contacted via phone and given an offer to encourage them to become paying customers. They also have a general chat about the service and how it works.

What were the results of the A/B test? Almost doubled conversion rates. Why might that be? Because speaking to a real person who can help you to that “Aha!” moment and receive the benefit the SaaS offers means the seeds planted early are those of rapport and value. And, as the results show, those seeds sprouted into power flowers all round. Churn went down accordingly.

Case study 2: Luminosity improves sign-up process

In this case study, and contrary to popular convention, Luminosity found that they had made their signup process too simple. Users poured through the open floodgates en masse but didn’t necessarily get a clear picture of the value offered.

Through constant trial and testing, the Luminosity team found that there was a sweet spot where just the right signup process would reduce churn and improve client retention significantly. It’s a fine example of trial and error in user onboarding.

Case study 3: HubSpot guides users to “Aha!” moment

To see this case study, use the link above and scroll down to the third subheading which catalogues the HubSpot team’s experience with User Onboarding.

Whether it’s the sign-up process or any other aspect of your UX, good Onboarding is about finding the key actions that must be taken by your users for them to successfully convert that big “?” block into the power flower “Aha!” moment you want them to experience.

In the case of HubSpot, it was whether or not users were:

  • Tracking leads
  • Running email campaigns
  • Engaging clients via the social media features in the UI

Once HubSpot knew these things, Onboarding became a simple matter of guiding users towards taking these actions. When they did that, they reduced churn significantly.

Moving on…

As we go deeper into SaaS KPIs, we’ll see that the improved conversions (and consequently lower churn) are those most affected by User Onboarding. And this has a great impact on every other metric you track.

So, now we know what onboarding is and how different approaches can help to reduce churn, let’s look at what impact this has on the rest of your metrics.

Monthly Recurring Revenue (MRR) goes up

Monthly Recurring Revenue (MRR) is largely dependent on the number of new paying customers and churned customers. It’s how much money you’re making on new and existing users each month.

This metric has an intimate relationship with the growth of your SaaS business, and it’s difficult to think of anything more important than that. By reducing churn, your MRR improves and you have the potential to grow your company. Enough said…

Lifetime Value (LTV) goes up

A customer’s Lifetime Value (LTV) is also largely dependent on churn. It costs a lot of money to generate those leads (a point we’ll come back to in just a moment) and so increasing the value you receive from them once they’ve converted is super important.

With onboarding improved and churn lowered, LTV increases. And with a higher LTV, your Customer Acquisition Cost (CAC) is improved, too.

Oh, you want to know more about CAC? We’re glad you asked…

Customer Acquisition Cost (CAC) goes down

Customer Acquisition Cost (CAC) is affected by the conversions between free trial users and paying customers. It’s how much cash it cost you to produce that customer in the first place.

For example, let’s say you spend Y amount of money to acquire X amount of new paying customers. The equation looks like this:

[highlight]   Amount of money spent / Amount of acquired customers = CAC   [/highlight]

There’s a great article from Popcornmetrics founder, Paul Boyce, on the subject and it’s well worth bookmarking for later consumption. But the main point is, your User Onboarding ultimately improves the efficiency of your marketing spend.

It’s time to give your users power flowers

Using Lincoln Murphy’s metaphor, solid user onboarding is a lot like planting seeds.

Every business owner knows that we reap what we sow, and sowing the fruitful seeds of an awesome user onboarding flow sets up your users for a good first impression. It gets them to the value quickly, efficiently, and empowers them for success.

The seeds must be watered and cared for. Whether that’s done by email campaigns, effective guided tutorials or an improved sign-up process, as we saw in the case studies above, it’s important to nurture the process.

When that happens, all of the key metrics for your SaaS business follow suit. Your MRR increases which has a knock-on effect on your LTV and your CAC. Simply put, you’ve got a successful SaaS.

User onboarding is an ongoing and iterative process. And just like any experienced sower of power flower seeds will tell you, your SaaS business will flourish if you ensure that this important process is done right.