When running a business, it’s crucial to focus on the retention rate. Retaining customers is much cheaper and more accessible than acquiring new ones. In this post, we’ll explain why retention rate is so important and share tips for improving yours.
What Is Retention Rate?
The Retention Rate is a measure of how many people continue using your app over time. It’s usually expressed as a percentage, the inverse of user churn. In other words, if your 90-day Retention Rate is 25%, your churn is 75%.
You can also measure the Retention Rate by doing a cohort analysis. This involves comparing groups of users (cohorts) who downloaded your app around the same time. This helps you see how well different users retain over time.
A high retention rate means people find value in your app and stick with it over time. A low retention rate could indicate that people are using your app less and less, which could be due to various factors.
Overall, Retention Rate is a helpful metric for understanding how well your app performs and whether users stick with it over time.
Why Is Retention Rate Important?
When it comes to thinking about success for a business, there are a lot of different metrics that come into play. You want to increase your customer base and your profits, of course. But you also need to think about your retention rate – in other words, how many of your customers stick around over time.
There are a lot of reasons why retention rate is so important. First, it’s cheaper to keep a customer than to acquire a new one. It costs five times as much to bring in a new customer than it does to keep an existing one, so it’s more efficient to focus on retention.
What’s more, loyal customers are also some of your best advocates. They’re the ones who will tell their friends and family about your product or service and recommend you to others. Word-of-mouth is the most potent form of marketing, and it’s free. So if you can keep your customers happy and engaged, they’ll do a lot of the work for you to spread the word.
Finally, the retention rate is essential because it’s a good indicator of customer satisfaction. If people are sticking around, they’re generally happy with what you’re offering. If they’re not, it’s a sign that something needs to change. Maybe your product isn’t meeting their needs, or maybe your customer service could be better. In any case, paying attention to your retention rate can help you pinpoint areas that need improvement to make changes that will keep more people coming back in the future.
As you can see, there are many good reasons to focus on retention rate. By keeping your existing customers happy and engaged, you can boost your bottom line while also sustainably growing your business. So don’t overlook the importance of retention – it could be key to making your business more successful than ever before.
How Do You Calculate the Retention Rate?
Aggregate Retention Rate:
#) Monthly active users / (#) Installs = (%) Aggregate Retention Rate
The aggregate retention rate is calculated by dividing Monthly Active Users by Installs, giving you a measure of how many users are sticking with your app over time. For example, if you had 500 installs and 300 Monthly Active Users, your aggregate retention rate would be 60%.
Cohort Analysis:
(#) Users retained at the end of time period / (#) installs at start of time period = (%) Retention Rate for Cohort
Cohort analysis allows you to measure retention rates for specific segments of users, such as those who signed up on a particular day or interacted with specific features. Cohort analysis looks at the number of users retained at the end of a given period and divides that by the total number of installs at the start of the cohort. This gives you the retention rate for that specific cohort. For example, if your app has 500 installs and 350 were retained after seven days, your retention rate would be 70%.
Retention rates can also be calculated daily or weekly to track how users interact with your app over time. By looking at these metrics, you can identify user behaviors that lead to lower or higher retention rates, giving insight into what changes may be necessary to improve user engagement and loyalty.
What Factors Affect Retention Rate
The retention rate is affected by several different factors. Let’s take a look at those in more detail:
Product Quality:
The most important factor when it comes to retention rate is the quality of your product or service. People won’t stick around if your offer is up to par. Ensure your product or service meets customer needs and is easy to use.
User Experience:
The user experience of your app or website also influences the retention rate. If the navigation needs to be clearer or it takes too long to load pages, users may get frustrated and stop using your product. Make sure the user experience is intuitive and smooth.
Customer Service:
Good customer service is essential to keeping customers happy and returning for more. Make sure you have a team who can answer questions, solve problems, and provide helpful advice quickly and efficiently.
Marketing Strategies:
Your marketing strategies can also affect the retention rate. They won’t stick around for long if you’re targeting the wrong audience or using tactics that don’t connect with users. Make sure your strategies are well-thought-out and targeted to the right people.
By considering these factors, you can pinpoint areas where you need to improve in order to boost your retention rate. By paying attention to these details and making the necessary changes, you can ensure that more customers stick around in the long run.
Advice From Mobile App Experts
It is essential to track your app’s retention rate as it can reveal much about customer engagement and retention strategies. According to Todd Grennan, Senior Content Producer at Appboy, the average one-day retention for mobile apps is less than 25%, demonstrating how difficult it can be to keep new users engaged. By understanding this benchmark and how it relates to your vertical, you can gain valuable insights into creating effective strategies that will ensure customer loyalty.
Understanding your customer retention is key to determining the success of your mobile app. While you may have a high number of downloads, it is essential to understand how many people are using it on an ongoing basis. Alex Walz, Head of Growth at Lighter Capital, recommends assessing this aspect to gain better insights into your customer base.
What Is A Good Retention Rate?
The average Retention Rate for mobile apps over 30 days is 42%, while the figure drops to 25% after 90 days. However, depending on the industry, this rate can range from 27-66%. For higher-performing applications, users tend to stay within the 32-43% range in the first 30 days.
A 90-day retention rate of 25% or higher in most industries is considered good. However, the average rate hovers around 20%, so aiming to reach this benchmark is realistic. As you continue to analyze your customer retention efforts, strive to exceed this goal and ensure that your customers remain engaged.
| Mobile App Industry | Average Retention Rate Benchmark for 30+ days | Average Retention Rate Benchmark for 90+ days |
| Media & Entertainment | 43% | 24% |
| eCommerce/Retail | 37% | 18% |
| Travel & Lifestyle | 36% | 18% |
| Technology | 33% | 19% |
| Gaming | 27% | 10% |
Examples Of Retention Rate
Measuring retention rate is just the first step in improving customer loyalty. To effectively reduce attrition and keep customers engaged, you must create a dedicated customer retention strategy. Fortunately, there are many companies out there that have successfully implemented effective strategies for keeping their customers satisfied. Examples of such organizations include
Fishbrain
Fishbrain, a top-tier app for sport fishing, which partnered with Phiture to devise a strategy that would improve customer retention rates. Utilizing the capabilities of Amplitude and Braze, an in-depth analysis was conducted on their existing retention framework.
Amplitude enabled Fishbrain to identify areas that required optimization, while Braze enabled them to act on the insights derived from Amplitude. Over 5 months, 40-50 experiments were conducted to bolster retention rates which ultimately culminated in a 50.6% uplift at Week 6 of the process. This remarkable result is a testament to the fruitful collaboration between Phiture and Fishbrain.
Kwit
It is a health and fitness app with the aim of helping people quit smoking and stay that way. After analyzing customer retention data, they discovered that those who used their app for one year had a 15% chance of relapsing, while those who stuck to the program for two years only had a 3% chance of picking up the habit again.
To reach this two-year retention goal, Kwit implemented personalization strategies during the onboarding process by asking users to fill out details about themselves. This data was then used to tailor the user experience and drive product adoption through UX improvements. As a result, their retention rate increased significantly.
Calm
A daily meditation app, calm wanted to increase its user retention rate. They used Amplitude to analyze the habits of users in different cohorts and see if any behaviors correlated with higher retention. It was discovered that when users set meditation reminders (a feature found in settings), they retained them more easily.
To test this further, Calm ran an experiment with a small portion of new users, prompting them to set daily meditation reminders after onboarding. This led to a significant 3x jump in the N-day retention rate. With the successful results of the experiment, Calm then rolled out the updated reminder feature across their entire user base.
Asana
Project management app Asana created an onboarding program to improve user experience and retention. Asana created a goal-oriented onboarding flow that is tailored for each user’s role and needs. The program offers personalized support with video tutorials, interactive walkthroughs, and more.
Within the first few weeks of launching the program, Asana saw a 20% increase in user retention. As the months passed, these numbers kept climbing steadily, and they now have over 50% user retention rate. This goes to show that a well-thought-out onboarding program can go a long way in improving user retention rates.
By leveraging data insights from analytics tools like Amplitude and Braze, as well as experimenting with different strategies, these companies have been able to improve their retention rates significantly. From this, we can learn that with a combination of customer data and experimentation, it’s possible to drive up user retention rates and keep customers engaged with your product for longer.
Tips To Improve Your Retention Rate
Increase Your Onboarding Efforts
A smooth and effective onboarding process can be the difference between a new customer sticking with your product or abandoning it altogether. Focus on providing personalized experiences to each user, and make sure their goals are met quickly and painlessly.
Engage Customers With Relevant Content
Use data to identify the content that resonates with customers, and tailor your communications accordingly. This may include personalized messages, emails, or notifications tailored to each user’s interests.
Leverage Product Experiments
Experimentation is key for optimizing your product experience. A/B testing can help you understand which features work best for different users and drive further engagement.
Analyze Your Retention Data
Retention data can provide invaluable insights into why customers are leaving your product, and which changes you can make to increase retention. Make sure you’re tracking the right metrics, such as feature usage and churn rate.
Focus on User Experience
The user experience should be a top priority when it comes to improving customer retention. Take time to evaluate how users interact with your product, and make sure all features are intuitive and easy to use.
Offer Incentives
Offering incentives for using your product can be a great way to increase user retention. Consider offering discounts or loyalty points for returning customers, or providing exclusive content or features only available to those who have used your product previously.
Utilize Customer Feedback
Don’t underestimate the power of customer feedback. Ask customers directly for their opinions, and be sure to listen to what they have to say. This can help you identify potential areas of improvement and uncover new opportunities for growth.
With these tactics, you can keep customers engaged with your product for more extended and drive up conversions.
Conclusion
Customer retention is essential for the success of any business. With a combination of data-driven insights and experimentation, companies can gain valuable insights into customer behaviour and drive up conversions. By leveraging personalized onboarding programs, relevant content, incentives, and product experiments, businesses can improve user retention rates significantly. Ultimately, it’s important to remember that your customers are the most powerful asset you have, so make sure to keep them engaged and satisfied with your product.