Customer engagement may very well be one of the most important factors to ensuring your SaaS business’ success.
Simply put, highly engaged customers are a reliable source of revenue. They’re more likely to not only renew their subscription plans every month but also to upgrade them, which increases your revenue.
Disengaged customers, on the other hand, show little to no interest in your product, meaning they’re at risk of churning. Inevitably, this leads to revenue loss, which can also affect your business growth.
For this reason, you want to calculate and maximize your customer engagement score (CES), a metric that allows you to evaluate the interactions between your customers and your product.
In fact, if you want to retain your customers and grow your business, calculating your customer engagement score isn’t optional. It’s a necessity, and we’re here to tell you all about it.
In this article, we will cover:
- What Is Customer Engagement Score?
- How to Calculate Customer Engagement Score
- Customer Engagement Score Formula
- What Is a Good Customer Engagement Score?
- 3 Proven Ways to Increase Your Customer Engagement Score
- Customer Engagement Score FAQ
What Is Customer Engagement Score?
Customer engagement score (CES), or simply engagement score, is a useful SaaS metric that gauges how engaged your customers and free trial prospects are with your products and services.
Customer engagement score is typically expressed as a number on a scale from 1 to 100 for each customer individually. The higher the number, the more engaged the user is with your SaaS product.
Essentially, your customer engagement score is a great source of information that can help you:
- Detect free trial prospects whom you can convert into paying customers.
- Identify upselling and cross-selling opportunities with your existing customers.
- Spot disengaged customers, which allows you to predict and prevent customer churn.
Not to mention, disengaged customers are very likely to churn, which typically leads to revenue churn. Improving your customer engagement score, however, can increase customer retention and thus lower your churn rate.
On top of that, CSE can help you increase your monthly recurring revenue (MRR) by boosting your expansion MRR and free-to-paid conversion rate,
How to Calculate Customer Engagement Score
Calculating your customer engagement score isn’t always as straightforward as calculating other SaaS metrics.
Essentially, you want to tailor your customer engagement score calculations to your business. This means that you need to take all factors that affect your customer engagement into consideration.
If you aren’t sure where to start, here’s a step-by-step process for calculating your customer engagement score:
#1. Define Engagement Events
The first and the most important step of calculating your customer engagement score is defining your engagement events.
Essentially, you want to identify what an engagement looks like and what it means for your company. In other words, how can your customers engage with your product? The answer will largely depend on your product, revenue model, and other similar factors.
Some of the most common engagement events for SaaS companies include:
- Product usage frequency
- Subscription plan renewals and upgrades
- Engagement with key product features (e.g: sending messages, starting projects, etc.)
Again, these engagement events vary from one business to another, so the key here is to identify the engagement events that apply to your business.
If you struggle to identify these events, simply ask yourself what your customers need to do in your app to be considered active users. Better yet, open your app and use it from your customers’ perspective, writing down all actions that contribute to customer engagement.
For example, if you run an email outreach SaaS, you can count as engagement events things like:
- User logs in to the software
- User creates an outreach campaign
- User creates an outreach list of prospects
- User schedules a newsletter
#2. Track Engagement Events
Once you’ve defined your engagement events, it’s crucial to keep track of them.
Generally speaking, you want to track customer engagement with your product at every stage of your user journey.
The best and the easiest way to track engagement events is to use software that allows you to monitor product analytics.
Ideally, you want to have as much control over the process as possible, so look for an analytics software that allows you to set up and track custom engagement events.
#3. Assign Value to Every Event
Let’s be honest – not all engagement events weigh the same. Some engagement events are more valuable to your company than others.
For this reason, you want to assign value, or engagement points, to each and every engagement event you’ve identified in the first step.
This step is relatively simple. All you have to do is compare engagement events and assign them scores based on their value. The higher the value, the more points you want to give to the engagement event.
Regularly logging in to your website, for example, is considered an engagement event. However, it doesn’t necessarily mean that your users actively engage with your product just because they log in.
Inviting friends to use your product, on the other hand, shows that the user is happy with your product and probably uses it frequently.
So, in this case, you want to assign the ‘Invites a friend’ a higher customer engagement score than that of ‘Logs in’, say, 10 and 1 respectively.
Typically companies measure their customer engagement score on a scale from 1 to 100. As such, you ideally want the total possible CES to add up to 100.
Finally, you want to use a customer engagement score formula to calculate your CES.
Customer Engagement Score Formula
Once you’re done with all the above-mentioned steps, you’re all set to calculate your customer engagement score with this simple formula:
Customer Engagement Score (CES) = Total Event Value #1 + Total Event Value #2 + Total Event Value #3 + Total Event Value #4…
It’s really that easy – simply add your customer engagement score values together for each customer to get their customer engagement score.
What Is a Good Customer Engagement Score?
So, you’ve calculated your customer engagement score. But what exactly does it mean for your company? Is it good or bad?
Ideally, you want your customer engagement score to be close to or above 100.
Here’s how you can interpret your customer engagement score:
- Negative CES – high risk of customer churn
- CES between 1-40 – very disengaged customers
- CES between 41-70 – somewhat engaged customers
- CES between 71-100 – very engaged customers
- CES above 100 – power users that are highly engaged
Based on these numbers, a good customer engagement score is 71 and above.
3 Proven Ways to Increase Your Customer Engagement Score
Although low customer engagement scores can be harmful to your business, you can always take action to increase them. In turn, this can help you prevent customer churn and drive revenue growth.
So, here are 3 effective ways to optimize your customer engagement score:
#1. Use Customer Feedback
Collecting customer feedback is by far the most effective way to improve your customer engagement score.
Simply put, customer feedback can help you determine where your product succeeds and where it fails in helping your customers. From there, you can improve your product and services to increase customer satisfaction and, in turn, boost your customer engagement scores.
Consider implementing micro-surveys, such as Net Promoter Score (NPS) surveys to periodically collect user feedback from all of your customers. They’re short and simple, which increases the chances of your customers actually filling them out.
Alternatively, you can collect feedback from churning customers. This way, you’ll be able to identify the weak spots that cause customer dissatisfaction and customer churn.
#2. Develop a Gamification Strategy
Gamification is a creative and highly effective way to drive customer engagement.
In short, gamification is the process of adding game elements, such as badges, progress bars, leaderboards, and levels, to your product experience to encourage customer interaction with your product.
For example, you can create a board game-like onboarding process with multiple levels and a finish line, rewarding your customers with badges each time they complete a level (e.g.: watch a tutorial). This way, you can guide your customers through your learning resources, which can also help in reducing the risk of customer churn.
A very typical example of gamified software is Duolingo. If you have ever used the language learning platform, you must have noticed the different gamification elements like the badges, levels, skill tree, streak counts, etc…
Essentially, gamification simply rewards customers for doing certain actions. Besides being fun and engaging, gamification also helps you to direct your customers’ attention to the most important features of your product, build customer loyalty, and attract more customers to your business.
#3. Identify Engagement Drivers
If you’re looking to improve your customer engagement scores, you can learn heaps from your highly engaged customers.
Simply put, you want to first identify customers that have a high CES (71 and above). From there, you want to determine what exactly drives their engagement.
Consider asking the following questions to identify customer engagement drivers:
- What type of customers have the highest customer engagement score?
- What value do your highly engaged customers receive from your product?
- What are the main differences between your highly engaged and disengaged customers?
Such and similar questions can help you pinpoint what exactly works for your company in driving customer engagement.
Identifying engagement drivers paves the way for creating a solid customer engagement strategy that will improve your customer engagement scores. In turn, you can minimize the gap between your least and most engaged customers.
Customer Engagement Score FAQ
#1. What Is the Customer Satisfaction Score?
As the name suggests, customer satisfaction score (CSAT) is a metric that helps you gauge how satisfied your customers are with your product.
CSAT is closely related to customer loyalty as satisfied customers are less likely to churn. Ultimately, tracking and improving your CSAT can increase customer retention.
#2. How Do I Calculate the Engagement Index?
While there are multiple ways to calculate your engagement index, there’s no need to make your calculations overly complicated.
So, the easiest way to calculate your engagement index is to simply compute the following three numbers:
- The percentage of engaged customers
- The percentage of customers that are responsive to engagement
- The percentage of disengaged customers
#3. What Is Considered a Good Customer Engagement?
You can evaluate customer engagement by calculating your customer engagement score for each customer.
A customer engagement score above 70 is considered good as it shows that the customer is very engaged with your products and services.
