Mastering Customer Retention Strategy
You've invested time and money into acquiring new users—but are you keeping them? With a deliberate focus on customer retention, you can improve retention at all stages of the user lifecycle to reduce churn and boost lifetime value.
What to do next
By now you understand—user retention is vital to product growth. No matter how much you invest on top of the funnel acquisition, if you have a leaky bucket, you won’t experience real growth.
With your new knowledge of each part of the Retention Lifecycle, you’re equipped with proven concepts and frameworks to help shape your long-term retention strategy. It’s time to start putting this playbook into action.
Next steps: your retention diagnostic
Benchmarking your retention
There's only one product you need to benchmark your retention against: your own. To uncover trigger points and implement retention strategies, you must measure baseline retention metrics for your current, new, and resurrected users.
After determining your critical event and product usage interval, decide which type of retention calculation works best for you. We covered the three ways of measuring retention—Return On retention, Return On or After retention, and Return On (Custom) retention—and different use cases for each in Chapter 3.
Then, based on your usage interval, create new, current, and resurrected user cohorts and create a retention curve for each user group. We recommend collecting at least three months of data before completing this step.
Recall from Chapter 1 that the shape of these retention curves gives a high-level indication of how your retention trends for each user group. First, look at the shape of the current user retention curve—is it going straight to zero? Is it flattening off? How many users come back at certain time intervals? Do you need to focus on shifting up or flattening the curve?
Next, you should compare your new and resurrected user retention curves to your current users to give a high-level idea of what's happening.
Once you benchmark your retention metrics and diagnose any problems, it's time to set retention goals.
Explore Amplitude customers' retention benchmarks across industries, regions, and by company size.
Setting concrete retention goals
Brian Balfour, CEO of Reforge and previously VP of Growth at Hubspot, likens the retention building process to constructing a machine. If you can set up the right processes and incentives, then growth will run itself. That's why it's critical to set retention goals for you and your team.
We recommend using a goal-setting system called OKRs—Objectives and Key Results. Your retention plan could look like this:
- State your goals.
- Set a timeframe (30 to 90 days).
- Assign three key results related to retention that you want to achieve. Each needs to be an objective you can measure:
- Improve retention by 20%
- Improve retention by 2x
- Improve retention by 10x
4. Brainstorm actionable objectives you’ll use to hit your key results.
Balfour recommends coming up with three key results separated in terms of the likelihood of success. You should have a 90% chance of achieving the first and a 50% and 10% chance of achieving the second and third, respectively. This ensures you have short-term goals that keep morale high and “reach” goals that drive your team to go above and beyond.
There are lots of different retention tactics and strategies that you can experiment with. Using a framework like OKR lets you stay laser-focused on your retention goals.
The importance of monitoring key metrics
Once you’ve defined your goals and the metrics you'll use to track progress, you need to ensure they’re easily visible to everyone on your team. Displaying these metrics on a big dashboard in your office is a great way to keep goals top of mind and keep your team aligned.
A survey showed that companies who set and track key metrics are more likely to reach their goals and that teams who track these metrics in real-time are 2x as likely to reach those goals versus those who don't.
Of course, the metrics you track over time depend on your goals. We'll provide some recommendations to choose from or adapt; the best metrics will be those custom to your business.
Real-life example: FunCraft improves retention by keeping analytics front and center
FunCraft is a mobile gaming app that aims to create new genres and make mobile games that are daily rituals in players’ lives. Analytics is the lifeblood of learning how to make a game better, to hear from players, and to see the actions that they're taking in each game. Everyone—from the product team to the CEO—uses Amplitude Analytics for high-level KPI dashboards to see how the business is trending daily and dive into specific user actions.
With Analytics, the FunCraft team set up custom reports in a templated way for easy re-use. This has become increasingly important as FunCraft iterates on its product experience.
Experimentation is core to FunCraft’s product improvement. One experiment examined how many letters players placed on their first turn in their crossword puzzle game. Insights from Analytics enabled the team to make product changes, improving Day 1 retention by 10%.
Monitoring and sharing data is critical to forming a data-informed company. That’s why we make it easy to pin Amplitude charts to dashboards and share them with your team. You can also share dashboards with teams and set up regular email reports to send to stakeholders.
Retention lifecycle breakdown—Lifecycle and Pulse
Any company will benefit from measuring its active user makeup using Lifecycle or a similar framework, which we discussed in Chapter 3.
We recommend graphing your lifecycle breakdown and pulse metric every period and comparing how each user stage changes to help you quickly course-correct if you notice concerns, like an increase in dormant users or a dip in current users. You can also track the overall health of your user base as you implement new retention strategies.
As you work on the goals of the Retention Lifecycle Framework, Lifecycle shows you how you're doing:
- Activating new users ➔ current users
- Retaining current users
- Resurrecting dormant users
- Reactivating resurrected users ➔ current users
Retention lifecycle metrics to track over time
At the end of Chapters 5 to 7, we recommended metrics to track the improvement of current, new, and resurrected user retention.
After working through all the chapters of the playbook, you'll have lots of insights and tactical ideas to help you improve retention. How do you decide what to do first?
Prioritizing your growth ideas is critical to making progress toward your goals.
There are some great existing resources and frameworks for prioritizing growth experiments. In particular, Brian Balfour and Sean Ellis, the founder of GrowthHackers.com, have shared their processes, and we highly recommend checking out their work for more details.
Ultimately, you need to pick a process that works for your company and use it to drive accountability. As Balfour puts it: “There is no one right or perfect growth process. The important part is just to have one, stick to it, and improve it over time.”
1. Brainstorm and keep a backlog of ideas
First, start with a central place to keep a backlog of all your ideas. A simple spreadsheet will work great.
To prioritize which ideas to work on first, you can score each idea on a few factors. Sean Ellis' ICE score is a great way to rate ideas on three key factors:
#1 Impact: What impact do you expect this experiment to have? You can use quantitative data from your playbook analysis and previous experiments to inform this or qualitative data from user feedback.
By identifying the expected outcome or value of making a change, you have something quantitative to prioritize experiments and measure your actual results against. Balfour recommends thinking about your hypotheses like this:
If successful, [variable] will increase by [impact] because of [assumptions].
For retention specifically, multiply the expected increase in retention by the number of impacted users—that gives you a sense of how much the change could impact your overall retention.
#2 Confidence: How sure are you that your hypothesis is correct? This one can be harder to determine, especially when starting out, but it gets easier as you run more experiments.
If you have a lot of data to back up the experiment, you will assign a higher confidence score. If the idea is based more on a hunch or is something completely new, you'd give it a lower score.
#3 Ease: How much work will it be to implement this experiment? Think about the time it will take for each team involved, like design, marketing, product management, and engineering.
3. Run experiments
Once you've prioritized your ideas based on impact, confidence, ease, and any other factors that might matter to you, it's time to design and run those experiments. This reference provides a template of an experiment doc based on Balfour's process, which you can use for your team.
When designing experiments, Balfour advises that you define the “minimum viable test” to understand your hypothesis. Also, consider the user sample size you'll need to see a significant result.
4. Analyze and share results
After each experiment, compare the results to your original hypothesis. How close did you get? What was the impact on retention? Most importantly, why did you get the result that you did? Record learnings and action items, like rolling out a positive experiment to the entire user base.
5. Keep up a cadence
Ellis and Balfour recommend holding a weekly growth meeting to discuss experiments, their results, and action items. They also discuss the importance of keeping up a regular cadence of experiments. Ellis is a proponent of “high-tempo testing”—the more tests you run, the more you learn. The faster you run tests, the faster you learn, adjust, and ultimately drive growth.
Evaluate experiments on a regular interval and readjust your goals as necessary.
Real-life example: Calm increases retention 3X
When Calm completed their current user retention analysis, they found that Alert Savers who set a daily reminder had around 3X the retention of users who did not set a daily reminder.
At the time, the Daily Reminder feature was buried at the bottom of the Settings page, and most users never found it. Since only 1% of their users were setting an alert, they couldn’t know whether this was a causal relationship.
It could be that the power users of their app, who would have been well-retained anyway, were digging into the Settings page and finding the Reminders feature.
Prompting more users to save a daily reminder
After discovering the high retention experienced among users who set a daily reminder, they tested whether getting more users to set a daily reminder would increase their overall retention. In the test, after a user completed their first meditation session, they were immediately shown a screen encouraging them to set a daily reminder.
There was an equal boost in retention among people who set a reminder from the new prompt, similar to the users who had previously found the reminder feature on their own. This indicated that the relationship between daily reminders was causative, not just correlative.
Additionally, 40% of users who saw the prompt went on to set a daily reminder, so the new prompt provides a significant boost to overall new user retention. Accordingly, Calm rolled out the new reminder prompt to their users.
With Amplitude’s unified approach to experimentation, teams no longer have to manage multiple point solutions to deliver experimentation at scale. Customers have instant access to run targeted experiments using the same metrics, cohorts, and user properties already available on Amplitude.
Here’s a retention graph highlighting how members of the AmpliStore loyalty program drive 10% higher retention on average. With this insight, we can run targeted experiments to drive more engagement and membership into our loyalty program to drive higher lifetime value.
Qualitative feedback matters
Building a strong-retention product is about listening to your users from a qualitative and quantitative perspective.
While this playbook emphasizes quantitative processes, qualitative feedback adds value to your analyses. To holistically understand how users engage with your product, try supplementing your analytics insights by talking directly with your users. Some ideas include:
- Conducting user interviews to understand common flows taken through the product and to identify different behavioral personas.
- Organizing focus groups to test out new features or services.
- Sending feedback surveys to current and dormant users.
- Directly talk to users who drop off at specific points in your critical path funnel to understand why.
Quantitative and qualitative data complement each other. Your behavior data can inform the type of qualitative data you seek, and your qualitative feedback can be validated or invalidated with analytics. While putting this playbook into action, you should also consider how and when to communicate directly with your customers to capture qualitative feedback.
Frequency of repeating this playbook
How often you repeat the playbook process depends on the nature of your product and how often you roll out updates or launch new features.
We recommend repeating the playbook analyses, in whole or in part, in the following scenarios:
- When you launch a significant product update or new feature or make changes to your product strategy.
- If your product has seasonality, you might run the playbook process for different times of the year. For example, if your product is used heavily during the school year and less in the summer, you could run the process for the following periods: summer, the beginning of the school year, and sometime in the middle during peak usage.
- You gain a significant new source of users and want to understand how those users behave and retain relative to others.
Without these situations, we recommend monitoring your key metrics with every product release and then running the playbook less frequently. For example, our company sets goals quarterly, so running the playbook quarterly is a good cadence for us.
Even if you don't run through the whole playbook, we recommend looking at your behavioral personas for new, current, and resurrected users at least once a quarter to ensure you’re always up to date on user behavior.
Tackle user retention today
By now, you're well-equipped to analyze your product's retention at all stages of the retention lifecycle. It's your turn to put the playbook into practice and start changing the shape of your retention curve.
You're now ready to take your product's growth to the next level! Amplitude can guide you to growth by helping you gain a deep understanding of user behavior throughout the end-to-end journey so that you can cultivate customers for life.
Learn more about how Amplitude can help.