"Adoption" is a critical step when it comes to analyze the customer lifecycle journey. The customer adoption step is still at the very beginning at the relationship you are establishing with your customers. It helps predict who among your customers will be engaged from those who will be single users. Adoption rate measurement also gives precious information about the quality of your customer retention and lifecycle management.
What is customer adoption and how to define it?
The typical customer lifecycle is made of the following five steps:
Adoption is different from sign-up as adoption is happening just after the first successful purchase (activation step). Adoption is how will behave your customer once he/she had the first impressions and interactions with your organization. This early definition of customer adoption is very broad, on purpose. Why? Because customer adoption can mean different things depending on the very nature of the business and it can be up to each organization to define it.
Let's see some examples of what could be adoption in different industries.
Customer adoption for eCommerce or brick and mortar company
For traditionnal business, customer adoption will be defined as the number of repeat transactions during the first few months after the first purchase. This is very simple as a definition but works quite well. If you have an online shoe business, you might want to define an "adopting" customer as a customer who made a second purchase within the first six months after its first purchase. It's up to you to define:
- the amount of purchases
- the lenght of the period analyzed
Customer adoption if you are a social network
Let's imagine now that you run a social network and actually make your money out of your most engaged customers. Here, members who subscribe will be monetized via advertising. They don't buy directly from you. So an adopting customer will have those showing the following characteristics and behaviours:
Datainsightout helps small and medium companies crunching their data. What about yours?
After their account creation...:
- Validated their email address via the magic link sent
- Added a picture profile which is a true one (no fake picture or default icon)
- Posted at least 3 messages
- Connected with at least 20 people
- Share 2 pictures or 1 video or 4 weblinks
- Sent at least 1 private message
... all of it within the first 3 months after registering.
What is adoption for a service company?
E.g. your company is about food delivery and you want to understand who are your customers adopting your services. An adopting customer can be "a customer who ordered food at least 1 weekend per month during their first 3 months after first food delivery order and spent at least in $100 in ordered in 2 different restaurants".
How to measure customer adoption?
Here is the formula to calculate customer adoption rate:
Adoption rate (%) = Number of customers engaging on months M+1 to M+4 / number of customer new activations in month M (cohort)
You can understand it and this is important if you want to understand some actionable insight: you need to calculate adoption with a cohort-like kind of approach.
Why using a cohort approach?
Imagine you run in january a special partnership and the outcome of it is a positive increase in the number of customer activations in January (customers who make their first purchase at your organization). How can you judge that this partnership was good, from a customer database standpoint? Well, If you isolate the cohort of users who activated in january and calculate, among these users, the percentage of customers purchasing again in February until April, you will get not only a pretty good idea about the quality of the partnership, but also be able to assess the performance of your general marketing actions.
Adoption rate can also be split into multiple timing phases:
- customer adoption rate at 30 days
- customer adoption rate at 90 days
- customer adoption rate at 180 days
By splitting customer adoption into multiple timeframes, this might drive better actions.
Each time frame can also either have the same definition of engagement or you can tweak it. For instance, defining adoption at 180 days by including a criteria like "redeemed at least one voucher". But, most of the time, this is not useful and things are already complicated enough to get very elaborated definitions. Also, KPIs and metrics need to be understood throughout the company, so keep it simple if possible.
Why monitoring the number of adopting customers and adoption rate?
Reasons are obvious here. You might want to course correct quickly the following:
- Take actions in case the quality of your new activating customers is not great: did you get a new acquisition channel which tends to get a lot of single purchasers?
- Build a better product to make sure users will keep engaging into the relationship with your organization
- Influence the behaviour during the first months of the relationship: push for a second purchase and have a clear goal on what your marketing team needs to drive.
Adoption rates tells you that the newly onboarded customers are behaving the way you want them to behave (repeat purchase, key actions, ...).
The cohort approach will make it possible for you to relate adoption rate with the latest marketing actions and understand which performed and which didn't. Imagine that you have an online business and establish a one shot sale with a large deal company like Veepee (Ventes Privées). You will expect to have a burst in sales over a limited number of days, the time the deal will last. Once the deal is over, you will want to know what is the percentage of customers which only came for this deal versus those customers who re-purchased after.
Build a better product
By monitoring if newly activated customers are actually engaging, this will give you insight. You might want to target these non-adopting customers and engage conversation with them to understand what, in the current product or service set-up, is preventing them from purchasing again.
Adoption can be broken down by acquisition channel, sign-up product or activation cohort at daily level. You can change its granularity in order to quick get insight about your newly activated customers.
Influence the behaviour to drive customer adoption
... and drive actions. This might be the most interesting part. Now, let's imagine you are not just passive in front of the evolution of the customer adoption rate but that you are active and see adoption as a goal. The question will be: what are the actions you will put in place for each newly activating customer to make him an adoptant.
You will want, via marketing action or product feature, to actively drive the behaviour and encourage the direction which the relationship should take.
- design pop-ups explaining where to click next
- send emails explaining the product
- present new active customer your loyalty program
- offer a welcome deal for the next purchase
- ask your call center to reach out directly to some of them to chat with them
- link users together if they have the same profile (community effect)