Let's get straight to the point, put simply, if you don't aren't keeping users, the fact is your business will struggle to survive and grow. Poor user retention is probably the best way to kill your early traction and bring growth to a screeching halt.
"If you have poor retention, NOTHING else matters." (Brian Balfour, VP Growth @Hubspot, Investor, Founder, Growth Advisor)
Retention is a MULTIPLIER of Growth
Retaining more users for longer means a lot of good news for your business growth:
Higher Lifetime Value (LTV): you can make more money per customer (if a customer is worth $X per month to you, then a customer who stays for 10 months is worth DOUBLE a customer who only stays for 5 months.
Acquire Customers Faster: for every $1 you spend on acquiring customers, if instead of making $2 you make $4 you will have more dollars to spend acquiring new customers.
Afford Higher Customer Acquisition Cost CAC: given you make make per customer, you can afford to pay more to acquire customers. This may open up new channels that were previously too expensive.
More Referrals, more Word of Mouth (WOM): given your customers stay with you longer, you will have more opportunity for those customers to invite new users, or recommend your product to other potential customers (and WOM is a very strong channel).
More Up-Sell, More Cross-Sell: as your customers stay with you longer, you will also have more opportunity to upsell higher plans (as their business grows) or to cross sell other related products.
If you don't have good retention, fact is your business will struggle to survive and grow.
There are many ways to look at retention, and yuo need a strategy in thinking about retention. I've written before about Customer Retention Strategies to Increase Growth with a 5 step approach to retention thinking.
You should also use Cohort Analysis to measure your retention and track how it improves over time.
Of course measuring user retention is only a part of your growth strategy and needs a good marketing analytics tool stack. If you want to set up an essential stack with key tools covering acquisition channels, conversion funnels & retention, and automated customer messaging read our 7 Essentials of Marketing Analytics - a Beginners Guide.
I hope this has been useful to you, and if you’ve struggled with understanding user retention I’d love you to tell me how you tackled it in the comments below.
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