The Key to Building a Winning Product

The best companies don’t just create useful products — they build solutions that users can’t imagine working or living without. 

That’s why tracking user engagement (or customer engagement) isn’t just about analytics; it’s about understanding whether your product is driving real value.

If your users are engaged, they’re more likely to stick around, renew their subscriptions, and even advocate for your product. If they’re not, you could be on the path to churn. But here’s the catch: many companies measure engagement the wrong way.

Let’s break it down.

What Is User Engagement?

User engagement (also called product engagement) is a broad term that covers any interaction a user has with your product. This can be as simple as logging in or as specific as completing a key action within your platform.

Because engagement looks different across products (e.g., Slack is used daily, while TurboTax is seasonal), there’s no universal engagement metric. Instead, the goal is to track leading indicators that show whether users find ongoing value in your product.

Why User Engagement Matters

Think about your own digital habits. With endless apps, platforms, and distractions competing for attention, users will only spend time on products that provide real, lasting value.

Tracking engagement isn’t just about numbers—it’s about understanding:

• Product value: High engagement indicates your product is useful and sticky.

• Retention & churn: Engaged users renew, upgrade, and refer others. Disengaged users leave.

• Customer experience: Engagement metrics help pinpoint friction points and opportunities to enhance UX.

In short: engagement fuels growth. The more value users find, the more likely they are to stick around.

The Problem with Basic Engagement Metrics

Most companies measure engagement using time-based active user metrics (e.g., Daily Active Users [DAU], Monthly Active Users [MAU]). While useful, these numbers often lack depth.

For example, what actually makes a user "active"? Many companies set the bar too low, defining an active user as someone who simply logs in within a given timeframe. But is logging in the same as engaging with your product? Not really.

Instead, engagement should be tied to meaningful product interactions—actions that indicate real usage and value.

A Better Approach: The Engagement Funnel

To get a deeper understanding of user engagement, break your users into three tiers:

1. Total users – All users, regardless of activity.

2. Active users – Users meeting a basic engagement threshold (e.g., logged in within 30 days).

3. Engaged users – Users who meet a higher product-specific engagement threshold (e.g., completing key actions frequently).

For example, if you run a flashcard app:

• Active user: Logged in within the last month.

• Engaged user: Completed at least 100 flashcards in a month.

This segmentation helps you:
✔️ Identify where engagement is dropping off.
✔️ Set clear goals to improve engagement.
✔️ Focus efforts on moving users deeper into engagement.

How Product Teams Can Use the Engagement Funnel

Many companies focus on growing total users, but this doesn’t necessarily improve engagement or reduce churn. Instead, product teams should prioritize increasing the percentage of active and engaged users—because that’s what drives retention and revenue.

Example: Measuring Engagement Growth

Let’s say you have:

• 10,000 total users

• 1,000 active users (10%)

• 100 engaged users (1%)

Simply adding more total users won’t improve these percentages. But if you focus on increasing engagement—by improving onboarding, refining UX, or driving feature adoption—you’ll grow the number of deeply engaged users.

The Bottom Line

User engagement isn’t just about tracking logins—it’s about measuring real product value and ensuring users stay engaged long-term.

By implementing an Engagement Funnel, product teams can move beyond vanity metrics and take action where it matters most.

Want to dive deeper? Check out our Ultimate Guide to User Engagement to learn how to track engagement, identify weak spots, and drive retention like never before.