Onboarding is arguably the most important period in your customer's journey with you. You've made promises to your customers through your marketing and sales efforts. They've been pitched on the benefits your product can bring them, and they've decided to give it a shot.
When your customers say 'yes' to your product, they're taking a risk, either by paying you or by investing their time in a free trial. Onboarding is where you begin to deliver on your promises and show your customers that your product really can change their lives for the better.
But how can you tell if your onboarding is any good? In this article, we'll discuss 5 important customer onboarding metrics that can tell you exactly that.
Top 5 Customer Onboarding Metrics
- Time to First Value
- Customer Churn Rate
- Free Trial Conversion Rate
- Customer Effort Score
- Onboarding Completion Rate
Have you ever stood in the middle of your local grocery store and felt overwhelmed by choices? When you have thirty-eight varieties of peanut butter, how do you know which one is the best fit for you?
Talking about metrics can feel like that. There are dozens of options — and even more acronyms — and it's not always easy to understand what will work best for your business.
To help cut through the confusion, we've included the most important customer onboarding metrics in the image below. These metrics are well-tested and have proven to be helpful tools you can use to gauge the impact and success of your onboarding efforts.
Keep in mind, it's easier to meet your onboarding KPIs when you're well versed in customer onboarding best practices.
OK, time to review the top five customer onboarding metrics in more detail.
1. Time to First Value (TTFV)
Your customers buy your product because they have a job to do.
That job might be to send email newsletters, automate repetitive tasks, or organize customer data. It can take a thousand different forms. But at the end of the day, your customers buy your product because they think it will help them accomplish some kind of task that will add value to their lives. If your product fails to deliver that value, they won't be happy.
Time to First Value (TTFV) is a metric that measures how long it takes your customers to first see value from your product. It's ultimately a subjective metric because you're going to have to define what 'first value' means for your customers.
If you sell email marketing software, first value could mean a few things:
- Is it when they send their first email?
- Is it after they've uploaded and segmented their list?
- Is it when they first try designing an email?
The best way to understand what first value looks like for your customers is to talk to them. Ask questions to understand when the value of your product really clicked for them. What was the big 'aha' moment when they saw how much better your product would make their lives?
The other thing to note about TTFV is that it's a goal for your customers. When you pick a TTFV target, you're saying, 'We want customers to see value within X days.' Some customers will hit that goal, some won't. And that's okay, because simply having a goal enables you to orient your team and processes in a way that will make it more likely you'll succeed.
Typically, the lower you can make your time to first value, the better. The best way to use TTFV is to set an internal goal, then create a process that helps most of your customers achieve that goal. As you improve your product and onboarding processes, lower your TTFV goal to deliver that value to new customers faster.
2. Customer Churn Rate
The longer customers stick around, the more money you make from them. Effective onboarding helps new customers understand what they've purchased and how they can get the highest possible ROI from their investment with your company. This means that your onboarding process should help reduce your churn rate over time.
A smart way to analyze onboarding's impact on churn is to separate your customers into monthly or quarterly cohorts.
As you're improving your onboarding process over time, you can compare the churn rates from each cohort to gauge the impact. For example, say you made some big onboarding changes in June. Comparing the May cohort's churn versus the July cohort can help you understand the impact those changes made on retention.
One thing to remember is that when your customers cancel, they're unlikely to list 'poor onboarding' as the reason (unless you really dropped the ball). Poor onboarding shows up in things like low adoption or usage rates, a lack of engagement, or a higher than normal volume of support tickets submitted.
All these things are signals that your customer doesn't know how to use your product or why they should. When you're analyzing onboarding's impact on churn, you'll need to take these things into account.
3. Free Trial Conversion Rate
If free trials are a part of your go-to-market strategy, then you should definitely make free trial conversion rate a key customer onboarding metric.
The whole point of a free trial is to help potential customers see the value in your product. Trials are a tool to remove friction up front (since customers don't have to pay), and they work best when you can deliver value quickly. Better onboarding and lower time to first value should result in higher trial conversion rates.
Measuring your free trial conversion rate is straightforward using the calculation below:
(Number of users who converted from free to paid during time period) / (total number of trial users during that period
For example, if you had 100 users convert to paid subscriptions last month and 1000 free trial users, your conversion rate would be 10% (100 conversions / 1000 users).
Benchmarking your conversion rate versus industry standards depends on a few different factors, such as trial length and type. Whatever your conversion rate is today, your goal should be to increase that over time through better onboarding and delivering more value to your trial users.
4. Customer Effort Score (CES)
Customer Effort Score (CES) is a metric that measures how easy you make things for your customers. Onboarding is meant to smoothly introduce new customers to your product, making it a natural place to measure CES. Typically, the more effort customers need to expend, the lower their loyalty will be.
In other words, making life easier on your customers pays off. This is especially true during onboarding, since you're trying to make a great first impression and deliver on all the promises your sales and marketing teams have made.
Here's an example of a customer effort score survey:
To calculate your average CES, you only need to ask this one question. You'll then add up all of the scores and divide by the total number of responses to get the average.
Customer Effort Score = (Sum of customer effort ratings) / (Total number of survey responses)
Another helpful way to use CES during onboarding is to trigger a notification to your customer success team if a customer rates their onboarding experience poorly. A low score may mean they've had a hard time understanding how to use your product, and it's a great chance for a customer success manager to get involved and turn things around before it's too late.
5. Onboarding Completion Rate
If you take the time to build out an onboarding process, you probably want to know how many new customers are actually completing it. That's where onboarding completion rate comes in handy.
Say your onboarding process has five steps:
- User sign up
- In-app guided flow to introduce key features
- Offer training webinar via email
- Prompt to add team members
- One-on-one call with an implementation specialist to handle technical aspects
By tracking how many steps new users complete, you can uncover areas of improvement. Is there a step where most users drop off? Maybe webinar signups are very low and you need to try a different approach to deliver that info. Or maybe no one finishes the whole process, indicating that five steps is too many, and you need to find ways to simplify your process.
Asking questions and analyzing your data is the key to finding value from this metric. But there's one other thing you can do to make it even more powerful: compare onboarding completion rate and churn rate.
Hypothetically, if a user completes your onboarding they should be set up for success with your product. That means they should be less likely to churn. But is that actually the case for your business?
Comparing your onboarding completion rate for new users with your churn rate can help uncover issues. If you're seeing high churn from users who complete onboarding, you probably need to make some adjustments.
On the other hand, if you're seeing low churn from many users who don't complete onboarding, then maybe your onboarding is more complex than necessary and should be scaled back.
Great Onboarding Evolves Over Time
Customer onboarding metrics aren't rocket science, but they are a crucial piece of setting new customers up for success and reducing churn in your business.
The most important thing to do is pick a few key metrics and start consistently measuring them over time. Try two or three of the metrics we covered above, and you'll be in good shape moving forward.
As your metrics reveal opportunities for improvement, evolving your process and adopting onboarding best practices will help you realize the positive impact you've been hoping for.