Chapter 3

Why ‘Activation’ is The First Step to Retention

Retention doesn’t start after people signup for a free trial. It starts before.

The tactics, behavior, and activities that come before an opt-in has a huge bearing on how long they end up sticking around.

The trouble is that there are no right answers.

You’d think, for instance, that maximizing signups on a PPC landing page would be the best approach. However, it’s not always that straight forward.

Marketing software company, Moz, discovered that their most valuable customers were not the ones who instantly converted. They were those that visited the site several times before eventually pulling the trigger.

Moz founder, Rand Fishkin, admitted that “many, many [website visits] visits are often correlated with high purchase prices.”

In their experience, that meant at least eight website visits before signup. This is the same reason why singular A/B tests often fail. Too often, you’re not testing the right things, for long enough, with enough statistical significance to prove they will stick around.

That’s why WordStream founder, Larry Kim, refers to A/B testing as “moving deck chairs around the Titanic.”

He saw an inverse correlation between A/B tests and the conversion rates that matter: sales.

The top performing companies in their analysis across millions in ad spend weren’t just A/B testing, but focusing on something inherently bigger.

Before 500 Startups, Dave McClure led marketing at PayPal as one of the original members of the PayPal Mafia, he also used to blog. A lot.

Over a decade ago in 2007, before The Lean Startup and before growth hacking became a thing, he published a post on Startup Metrics. Or, as it’s affectionately known today, Pirate Metrics.

His premise was to simplify startup dashboards to only focus on a few, key metrics at each stage of the funnel.

You might be doing different activities at each. But ultimately you should be laser-focused on one or two principal ones per category to drive sustainable success.

The secondary benefit of Pirate Metrics was that it illustrated how changes in one funnel stage, like Acquisition, commonly affect changes in the one below it, like Retention.

The trick to improving Retention, then, is to move up to address the Activation stage, first. In other words, without a positive first app experience, users aren’t going to stick around -- no matter how many automated emails you fire off.

The problem is that Activation is among the most misunderstood steps in the funnel.

Activation does not mean maximizing signups.

Instead, it involves a lot of intangible activities designed to increase ‘engagement’ to produce a warm and fuzzy feeling in new signups. That way, they give you a second or third shot at winning their business.

Fraser Deans of Nickelled explains Activation by separating it into three distinct steps:

  • Step #1:

    Pre-Signup: Messaging that introduces a reader to the end result they’ll get after signing up.

  • Step #2:

    First User Experience: The utility-delivering actions required to get someone hooked.

  • Step #3:

    Post-Sign-up: All of the stuff that takes place afterward to get new people to stick around like glue, paving the way for your retention-building activities.

Let’s explore each one in detail.

Step #1

Studies have illustrated how expectations can determine results.

When used correctly, it can create a self-fulfilling prophecy that delivers the action you want.

For example, give someone the word “yellow,” and then ask them to pick a fruit. They’re more likely to pick a banana.

This same phenomenon works the other way, too.

You can give people the wrong clues or cues, and it will take them longer to select the right answer in a subsequent test.

Pop psychology refers to this as priming, where “exposure to a stimulus influences response to a later stimulus.” It gives you the power to train someone positively, or negatively, without them even consciously realizing it.

Online, priming can start even before signup, during the Acquisition stage.

A customer searches for “skis” in Google, sees “free shipping” plastered all over the ad text in the search engine results (SERPs), and they become more likely to click through to your site.

In other words, you’re laying the groundwork here, long before signup, to properly set someone’s expectation.

But it goes even deeper. Zero-in on one of the results that look promising and click:

It takes you to that exact product page for the same make, model, and year.

They even use additional incentives like a “Deep Winter Sale” price and a “Buy Now, Pay Later” installment feature. (In addition to the “Free Shipping” that caught your eye earlier.)

Your expectations were initially set with the first stimulus (the ad). And now the promise is being fulfilled perfectly with the rest of the page.

Message match might seem obvious, except that 98% of advertisers in one informal study got it wrong.

Beyond being better for the consumer, message match can also drive your acquisition costs down, too.

WordStream’s Larry Kim analyzed accounts with over $100 million in annual ad spend.

He found that a one point increase or decrease in your Quality Score (which measures, among other things, message match) can swing costs by as much as 16%.

Your Cost Per Acquisition, then, increases or decreases by 16% as well.

Similar findings came from Jacob at Disruptive Advertising.

They audited hundreds of millions in ad spend, finding a 13% correlation between Quality Score and your Cost Per Acquisition.

Why does this matter?

It’s important because Activation starts the minute someone sees your ads, offers, or messaging on other platforms before they even hit your site.

And it matters because Activation is the ‘priming’ step for Retention down the road. So you can’t accurately retain people until they’ve been properly activated.

Ty at Appcues calls Acquisition the “upstream bottleneck.”

Appcues pegs the benchmark Activation rate at only 30% based on their data, meaning 70% of your visitors won’t activate at all.

Appcues also found that a “25% lift in activation increased MRR by 9.3% more than the same percentage increase in acquisition and 3.3% more than the same percentage increase in retention.”

The trick is to start with setting the proper expectations before people hit your site, based on:

  • 1

    Who they are

  • 2

    What they’re looking for

  • 3

    And what they’re willing to do next

Search is based on intent.

People type in exactly what they’re looking for. So they’re often closer to buying. The trick is to figure out what people want. Then, you know how to plan each step of their path through your site to Activation.

Someone Googling “top CRM products” is evaluating their options, while another doing a brand search (like “Base CRM”) is expressing purchasing intent.

Your job is to use techniques like content mapping to make sure what they find lines up properly. That might sound trite, but it’s not in reality. Let’s perform this actual example to see how most get it wrong.

Type in “top CRM products” and look at the copy used by the first three ads.

Each one is about their own product. Except, that’s the wrong user intent.

If you’re evaluating options, you want to see a side-by-side comparison -- not an overt advertisement. Now, contrast that with the Capterra example on the bottom of the page.

If you’re looking to compare the “top CRM products,” which result will you click? The one giving you the comparison. We haven’t even gotten to the company’s website or messaging, but it’s already off the mark.

Capterra’s page content, on the other hand, answers the query the best.

Yes, your site’s homepage is important. But it’s not always the most popular path to conversion. People will create their own informal funnels on your site (if you don’t do it for them).

Building and optimizing these ‘user flows’ can help transport the right people, to the right pages, at the right time.

For example, The New Yorker uses three separate subscription call-outs in just the header alone.

The first is a graphic on the far-left, the second is a highlighted word, and the third is a subtle link on the upper right to link your subscription (to keep reading). The different visual styles keep them from being overly repetitive, but also ensure that at least one catches your eye.

Clicking through, you’re met with three simple price tiers that mimic other most other pricing pages online.

The hierarchy is easy to discern, with an unmissable “Best Value” callout for the one they want you to click. That’s reiterated with the special introductory pricing across all three options. So no matter which one you choose, the small initial investment is too good to pass up.

Select any button and the page scrolls you down to the next step.

The sign-up form collects just the necessary information, which provides the added benefit of being able to send you direct mail to make sure you end up subscribing later on.

The flow is both simple and intuitive.

By the time you start entering your personal info, everything’s been introduced.

Now, your odds of a successful activation go up because they’re presenting the right information and context before signing up.


Maximizing sign-ups isn’t the goal. Maximizing the right sign-ups, is.

Lincoln Murphy refers to these as customer-centric success milestones.

They’re like guideposts that transport people, step-by-step, into eventually having that elusive ‘happy first experience.’

The trick is to match up your product’s milestones (to activate a customer) with the ones of your customers (that delivers some value).

And that often happens the minute someone starts the onboarding process.

Step #2
First User Experience

Social commerce company, Yotpo, was able to increase new user retention by 50% in the first week and 60% in the second by testing different onboarding sequences.

They started by deconstructing a customer’s first experience with their product, to identify the biggest activation bottlenecks.

The first problem was that new users were sent straight to a generic admin page. There was no signal or cue as to what they should do next.

The second was that people weren’t using the critical features enough. They either weren’t getting to that point in the first place or didn’t understand the value of each one.

These problems often illustrate a problem with customer success milestones. They either don’t exist, or they don’t align with the user’s expectations, which Lincoln refers to as their Desired Outcome:

“Proper onboarding isn't done to prevent churn; it's done to ensure the customer achieves their Desired Outcome. Retention comes from that.”

Lincoln uses an online store example to show how it works.

The first step is that someone decides to sign up for the trial and create a new e-commerce store. But it’s not until they add a theme that they experience the wow or aha moment.

At this point, everything clicks all of a sudden. They’re starting to realize the value, and they’re making your product their own.

The success milestones are painstakingly designed to get people to this intended destination, one ‘micro conversion’ or small commitment at a time.

Only when these are outlined visually like this can you see where people are experiencing problems.

Patrick McKenzie’s Bingo Card Creator is a good example because it’s simplistic.

People sign up, create a bingo card, print, and download the card. That’s it.

Measuring the progress along each step can help you pinpoint which transitions are working, from those experiencing huge drop-offs.

Those drop-offs indicate underlying problems that require further testing.

Surprisingly, adding more steps or trying to force users to do too much during this process can backfire.

Leo Widrich said Buffer initially wanted to get users to share something during their onboarding process. After all, that is the entire point of their product. So it makes perfect sense. But they kept getting resistance.

Buffer simplified the process, first, to get users to connect their social accounts, add time zones, and schedule their posting times. Things started to click from there:

“So we rebuilt our onboarding process to focus on those items first and not push sharing and all other features instead. It made a huge difference in our activation!”

Claire Suellentrop breaks onboarding down into five major components:

Sign-up Form:

Collect the right amount of information to help you segment users and onboard them more effectively.

Welcome email:

Introductory information and ‘next steps’ introduced so users know what to expect.

Product tutorial:

The in-depth walkthrough and direct experience with your app. More on this in a second.

Educational emails:

Dripped content that gets people to recognize their need, find value in your product features, and decide to keep using it.

Check up calls:

Personal check-ins to monitor progress along each step.

The sign-up form and welcome email help reaffirm expectations. But the product tutorial is your first shot at onboarding them.

Claire breaks this third ‘product tutorial’ step down even further into three different methods:

  • Self-service: Tooltips and in-app messages can walk people through a series of steps designed to (a) accomplish the first few customer success milestones and (b) deliver utility as quickly as possible.

  • Group demos: Webinars and other group-led courses can interactively show people exactly how to get value out of the app, while also providing a convenient forum for live question and answers.

  • One-on-one calls: The most personal product tutorial approach is also the most cost prohibitive. So save it for customers that have expected lifetime values of well over $10,000 a year.

Once again, each approach works to a certain degree. They can even be used together. The decision usually comes back to product complexity and what your business model can afford. Which brings us back to Yotpo.

New users that signed up didn’t know what to do next. They hit the admin page and stalled after signing up. That wasn’t such a big deal for their large customers. Yotpo already had salespeople ready and willing to help.

But with a new self-service plan debuting on the horizon, they couldn’t afford to offer the same level of one-on-one care.

Yotpo started by testing different onboarding practices to see which yielded the best customer activation.

They recorded user sessions with FullStory. They could watch as drop-offs occured between each clearly outlined success milestone.

This detailed testing process also helped Yotpo define (or refine) their activation milestones. They could separate which actions led to dead ends from those that contributed to new user growth.

And they were able to use simple tools like Appcues to iterate self-service messaging to get the desired response.

Tooltips were used to walk new users through a series of simple steps, telling them to “click here,” “change this,” and “go there.”

The result was an increase in the number of people installing the review widget, which was the first critical milestone needed to get a user to stick for the long haul.

Once people experienced that features utility, they were more likely to take Yotpo’s suggestion to upgrade their plan.

Tooltips were combined with interactive videos, again timed to perfection, so new users could discover how to use the advanced tools without an instructor-led group course or personalized onboarding sequence.

Appcues reports that new user retention grew 50% in the first week, while two-week retention grew 60%. That means the detailed product tutorial had a direct influence on instantly increasing retention.

Despite the fact that it was purely focused on activation -- and not the classic retention best practices like automated emails that we’ll dig into later.

Yotpo’s experience in using Activation to increase Retention isn’t the exception, but often the rule.

Canva was also able to improve their activation rate by 10% using many of the same techniques.

Xingyi Ho, a growth manager at Canva, even admitted that they typically ignore channels that contribute only around 5% of their signups. In other words, it’s so small that it’s not worth optimizing.

But focusing on Activation has the power to influence signups by as much as 20%-30% for Canva, which made it a gamble worth taking.

Their Activation process starts at the very beginning, from segmenting people immediately once they sign-up on the homepage.

Then, they walk people through how to create their very first design.

People signed up for a reason. They didn’t want to create just any image, but a Facebook ad or a wedding invitation or a birthday card.

So Canva’s first goal is to identify that stimulus (from the last Pre-Signup step) and get them to create it within just a few minutes.

A user’s Desired Outcome is to finish a simple design as quickly and painlessly as possible.

Canva’s toolset can make that happen in just about the same time it takes to simply open up Photoshop.

That means users have their happy first experience, faster, and more consistently.

Step #3

Activation is a macro-goal, made up of several ‘micro’ ones.

Ultimately, you want to maximize the people that eventually cross the finish line. But the way you do that isn’t by focusing on the big picture.

Just like people don’t learn about your company for the first time and signup immediately, it usually takes awhile to get customers to activate completely. That means your goal is to focus on bite-sized chunks.

You diagram each customer success milestone, run tests and iterate to move people from A to B, first, before worrying about B to C and so on. Sometimes that all happens in a single session. But more likely, it doesn’t.

It takes several sessions over a period of the 14 to 21 to 30-day trial.

The trick is to give people a reason to come back again and again and again until their desire is solidified. That’s where automation comes into play.

Automation has the power to increase sales (by as much as 34% on its own).

But more to the point, it’s a requirement because it’s the only way to truly personalize customer experiences at scale.

It might take around a dozen touches before you finally lock down a customer to purchase.

And those touches are spread out across devices, as people jump from their phone to their iPad to their desktop at home and laptop at work.

What’s more, the best results are seen when you combine messaging across channels (as opposed to relying solely on one technique, like emails or in-app messaging).

Reach describes the number of unique people that receive your messages, while frequency refers the to the number of times each person is exposed to your message.

Reach is helpful for Acquisition, but frequency is a necessity for Activation.

Facebook and Salesforce ran an experiment across 565,000 subscribers that illustrated this point. They split the large list into three groups and tested three distinct messaging strategies on each:

  • 1

    Group one received only emails.

  • 2

    Group two received only ads.

  • 3

    And group three received both emails and ads.

Surprise, surprise. The group that saw both an email and ad were reported to be “22% more likely to purchase” than the other groups.

Linking ad messaging with email campaigns also helped to increase “email campaign reach by 77%.”

Blake Chandlee, formerly Facebook’s VP of Global Partnerships, had this to say about the experience:

“The combination of CRM (customer relationship management) data and Facebook targeting truly powers targeted reach at scale to create effective marketing campaigns. We expect to see great results as marketers continue to pair Facebook custom audiences with both email marketing and direct-mail campaigns.”

The third activation stage is where we start to move slowly into retention-based strategies.

The best techniques leverage multiple channels, at the same time, to personalize data on the fly. You can’t do any of this without a proper customer database and the technology to automate these campaigns ahead of time.

It’s virtually impossible to implement manually at scale. Instead, data points need to be collected from someone’s first visit throughout sign-up.

The right messaging at the right time depends entirely on your ability to predict what they want from who they are.

First, messaging content depends on who someone is, their problems or pain points, and their initial reason for signing up in the first place.

Think back to Canva for a second. They’re in the unenviable position of having customers that span from professional marketers to event planners and more.

The messaging triggers that work for marketers will almost certainly flop for event planners. That applies not only to their initial Acquisition ad creative, but also their first design project. Then, it extends to follow-up messaging, too.

Here’s where timing becomes a factor.

Each success milestone needs to be instrumented so you can see who did or didn’t follow through. That way, you can automate messaging to continue prodding people along.

You do that through automation features like conditional branches, or if/then statements, that can be choreographed ahead of time.

Individual messaging can be tested to see which drives the highest response rates that get people back into using your app.

And they can finally be combined across channels to increase your odds of moving the needle.

For example, if your self-service onboarding experience doesn’t cut it, you can redirect people to take a step back, into a training webinar, before going back to the next milestone on their list.

Or one-to-one calls can be used, selectively, to rescue key accounts before they’re likely to churn (after not completing your first X milestones within Y days).

“The quicker you can call someone after signup, the higher the likelihood of reaching them and being able to have them in the ‘product frame of mind,’” according to’s Steli Efti. is firmly in the camp of ‘less is more.’

They’ll require additional fields on signup, like a customer’s phone number, even though they know it might lower the total number of people who start a free trial.

But they’re OK taking that hit because they know, from testing, that the difference in paying customers is worth it.

The extra margin also helps take one-to-one support to the extreme. They even have engineers working around the clock to help customers. “It’s not uncommon for us to be answering support requests at 4 AM,” affirms Steli. is taking every step necessary to reduce churn. Unfortunately, you can’t stop churn with just a single, well-placed email a few weeks after signup.

By that time, the user might have already decided subconsciously or explicitly that your app won’t solve their problem.

That means you need to start planning to prevent churn from the get-go. You need to make sure users properly activate.

You often need to implement techniques that might be counterproductive initially, like requiring a credit card, even if it lowers total free signups.

Activation dictates churn. And churn can sabotage your product if you’re not careful. Here’s why.