The most important metric for Customer Success
Daily Active Users – DAU is the most important metric for Customer Success and user engagement. When Facebook present their quarterly business results, it is the first metric that is being reported on their quarterly call.
source – http://files.shareholder.com/downloads/AMDA-NJ5DZ/2138285812x0x888146/484823BA-5B5D-4BC4-B872-5F239E813384/FB_Q116_Earnings_Slides.pdf
You’ll see in their presentation that the second metric that is reported is of Monthly Active Users (MAU).
On a meeting with a very large enterprise software vendor, I was pleasantly surprised to see them starting to adopt MAU as the metric for business success.
Daily Active Users counts unique users active in a given day. Monthly Active Users counts unique users active in a given month.
Although not very sophisticated, DAU is a measure of customer (user) engagement. How many people take the time to use a product or service? If they use it often it means they see value in it, if they don’t, something is missing.
DAU is CSAT and NPS in one. It counts 100% of your customers, the ones that use your product and also the ones that don’t. And, it is objective!
By taking a deeper look into DAU and MAU you can come up with many important actionable conclusions.
Making the Metrics Actionable
DAU/MAU (ratio of DAU out of MAU) – this is usage frequency metric. DAU/MAU of a given group (could be users of in specific account) determines how often your product or service is being used. DAU/MAU that is closer to one (> 0.7) reflects daily use.
MAU/Licenses (ratio of MAU out of licenses sold) – is your license utilization. If licenses represents the number of seats purchased by an account, than MAU/Licenses represents the license utilization ratio. When license utilization > 1 – it’s time to grow the account, when license utilization is < 0.5 we have an adoption problem and potential churn risk.
Many peeps in the customer success space are very uncomfortable with usage and utilization based measurements for customer success. Here are some common objections and my responses:
What if my product was not designed to be used daily?
If the product was not designed for daily use, change the frequency of measurement to the time window it was intended to – use MAU instead of DAU
What about non-interactive use? for example – website hosting service?
In some cases interactive use does not exist (really? not even admin and configuration?) – so measure utilization instead of interaction.
Isn’t business outcome the most important thing – more than usage?
Yes, value and outcome are very important, but DAU and MAU gives us great indications into that as well. There’s no single metric to measure, so if you can measure business outcome do that too.
If my customer is using my product – it does not mean they will not churn or cancel
That is true there are no guarantees, but if your customer does not use your product or service they WILL cancel eventually.
The most successful businesses in the world run on these metrics – you should do it too.