Why Retention MattersRetention is crucial for a business's long-term success, as it is more cost-effective to retain existing customers than acquire new ones. Retention also leads to increased revenue, customer loyalty, and positive word-of-mouth marketing.
- The Best Metric for Determining Quantitative Product Market FitCohort retention rate is the best metric to determine product market fit for subscription products. It measures the percentage of users from a cohort who remain long term users. It minimizes false positives and negatives because it tracks actual user behavior over time, instead of Surveys. As product improvements are made, newer cohorts will have higher retention rates, showing progress towards Product Market Fit. Once several cohorts level off at a benchmark retention rate for comparable products, Product Market Fit has been achieved.
How to Measure Retention and Set BenchmarksMeasuring retention requires analyzing customer behavior and setting benchmarks based on industry standards. Metrics such as churn rate, customer lifetime value, and repeat purchase rate can provide insights into retention performance.
- Measuring User RetentionTomer highlights the importance of accurately defining usage and the benefits of measuring retention, such as indicating Product Market Fit and analyzing user sub-populations. Common mistakes in retention measurement are discussed, including only focusing on churn and using inappropriate time frames. The article introduces three retention metrics: retention rate, upgrade rate, and mean time to churn. Tomer also recommends actionable steps to take based on retention data, such as identifying user values, understanding reasons for churn, and solving top churn reasons.
- What is good retention?Lenny worked with Casey Winters to reach out to twenty of the most experienced growth practitioners and had them two questions: • What do you consider GOOD and GREAT user retention (at 6 months)? • What do you consider GOOD and GREAT net revenue retention (at 12 months)?
How to Improve RetentionImproving retention involves understanding customer needs and preferences, providing exceptional Customer Service, personalizing communication, offering loyalty programs, and continuously evaluating and adjusting retention strategies. Building a strong brand and creating a positive customer experience are also essential for improving retention.
- How to Systematically Improve your User RetentionDannie breaks down improving retention into a process: • How understand your user retention by cohort • Learn from your retained users, using User Research and behavioral data • Run multiple experiments to rapidly iterate and invest in leading indicators that correlate with long-term retention