Whether you’re at a small startup focused on attracting users or a large company with a base of existing customers, the mantra is the same: retention is the new growth. Customer retention measures how many of your users return to your product, or are retained, versus how many abandon it and have churned. Increasing retention offsets your new customer acquisition costs and increases users’ lifetime value. That’s why customer retention is the crucial metric for business growth. Without it, your product is a leaky bucket. Pouring new users in will never fill it up.
Most resources out there focus on “hacks” that don’t deliver long-term results, so we’ve compiled a list of 40+ quality articles based on Amplitude’s experience and expertise to help you master customer retention and drive growth.
Customer Retention: a Primer
Customer retention, at its core, is a measure of how many customers or users keep coming back to your product over time. You need a solid foundation of understanding when, why, and how your customers are either retained or churned before you can start figuring out how to improve your retention.
You define retention first by determining your product’s critical event: the action a user takes that shows that they retained. You also need to decide on an appropriate product-usage interval, or how often you expect people to use your product. It’s going to be unique to your business, so setting these numbers correctly first is integral to finding your customer retention rate.
Retention is all about making sure users come back to your company’s product. This work isn’t owned by one team, though. Design, data science, marketing, customer succes teams and more are responsible for making decisions that drive retention. Not everyone has the same foundation in retention knowledge, though. That’s why this introductory course—composed of 5-minute lessons delivered by email—explains the basics in easy installments.
Customer Retention 101
Each lesson, delivered via email, covers a building block of retention and includes optional extra credit to accelerate your learning.
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There are three levels of retention that you need to grasp: what is your retention rate, when are your users dropping off, and why are your users not being retained. Going deeper at these levels will help you learn how to ask the right questions about your users’ behavior.
How do you define whether a user is retained or not? Many people think it’s when a user simply opens an app, but that’s not enough. The user should take a meaningful action that is related to your core business function to be considered retained. This is your critical event. This article walks you through some examples of companies’ critical events and offers questions to ask to determine your own.
After you determine your product’s critical event, you need to define your product-usage interval: the frequency with which people naturally use your product. That could be daily, weekly, or monthly, depending on your type of product. Getting this metric wrong could skew your retention data and lead you down the wrong path.
Measuring Customer Retention
Retention analysis requires context. You have to know what, exactly, you are measuring and then choose the parameters that are most relevant to your business.
The three most common ways to measure retention are N Day, Unbounded, and Bracket. N Day Retention measures retention on a set day, looking at how many users performed an action on Day 1, Day 7, etc. But if daily engagement isn’t the right metric for your product, you can track Unbounded Retention, capturing what percentage of users engaged on a specific day or on any day after. Bracket retention is a blend, letting you define retention within a custom window.
We offer several frameworks for approaching retention analysis to give you the context you need to set the right goals for your business.
This article goes deeper into three types of retention (N Day, Unbounded, and Bracket) to help you choose which metric is right for your business.
N Day Retention is often the most informative retention metric for mobile games because these apps rely on daily usage. Other types of retention, like Unbounded Retention, can be misleading in this context. But even when looking at N Day Retention, you need to be aware of the differences between calculating it using strict calendar dates or rolling 24-hour windows.
You need goals and actionable objectives to measure your user retention. You prove that you have the right goals and objectives through scientific experimentation at three fundamental stages of churn: short, medium, and long term.
Spoiler: the only retention rate you should measure yourself against is your own. It’s about improvement, not setting yourself up against an arbitrary statistic. When you do wade into the comparison waters, only look at comparable metrics. Your N Day Retention against a competitor’s Unbounded Retention is not going to give you valuable intel.
Churn is the flip side of retention—it’s a measure of how many users leave your product (as opposed to how many people stay). While churn and retention are related, they are not the same; addressing the reasons people leave your product does not always mean they will still have a positive reason to stay. Some strategies will overlap, but you need to measure and test both.
Improving Customer Retention
Retention rates reflect whether your customers are experiencing your core value and getting to that “aha” moment. It’s tempting to just dive in and start making customer experience (CX) and product changes right away. But for long-term success, you need a robust system of analytics and experimentation. You’ll need both a high-level strategy and granular-level tactics.
For strategy, start with an audit of your analytics. To make sure you are tracking data that will give you good information on retention, take a close look at your events and cohorts. Next, build a framework for testing that has specific goals and actionable objectives, channeling your customers at each stage of their product journey toward becoming power users.
When it comes to tactics, there’s no shortage of places to start experimenting. The onboarding experience is particularly ripe for optimization because the sharpest decline in app users typically happens within the first week. Making early tweaks that align with product value and improve CX are important areas to test for customer retention as well.
Start your audit with a close look at your event data, which is any action associated with a user (e.g., making a purchase or receiving a push notification). Track events that are aligned with your business goals. Next, set a baseline for your user behavior so you know what to measure yourself against. Look at patterns, demographics, cohorts, events, and existing retention levels.
Amplitude developed the Retention Lifecycle Framework to give companies the structure they need to continuously iterate and improve retention. In this framework, we break your active users into three groups that reflect the product journey: new users, current users, and resurrected users. From there, you design strategies and run experiments for each group, with the goal of turning them into highly engaged power users.
In eight chapters and 156 pages,the Amplitude team provides you with everything you need to know about improving customer retention—regardless of whether you’re at a five-person startup or a Fortune 500 company. Explore this playbook to learn how to create lifecycle cohorts, identify behavioral personas, set concrete goals, and implement proven concepts and frameworks that shape your long-term retention strategy.
PLAYBOOK
Mastering Retention
Your go-to guide to leveraging user behavior in order to understand and improve retention.
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One of the basic building blocks of retention analysis is cohorts—groups of users who share a common characteristic, typically acquisition date or a behavioral trait. Acquisition cohorts let you look at the “when” of retention; behavioral cohorts let you look at the “why” by analyzing which actions drive retention. Once you have found the right cohorts, you can start to run experiments to see how your retention tactics are succeeding or failing with different groups.
The title says it all. We look closer at 20 different tactics, such as setting up behavioral drip emails, instituting single sign-on (SSO), and curing feature blindness that you can use to improve retention in your mobile app. We divide these tactics into four categories: onboarding, product, support, and communication.
User onboarding is a critical moment for customer retention—the steepest drop typically happens in the first three days. Onboarding is more than just your product tour, so we take a close look at a number of tools to improve your entire stack. This includes segmenting users for better customization, creating optimal product tours, mastering one-on-one communication, and setting up sound documentation protocols.
The IKEA effect stands for the idea that getting your users to put in a bit of effort up front (say, assembling furniture) leads them to put more value on that product and be reluctant to abandon it. Outside of this context, friction is typically viewed as a bad thing, causing users to churn when they encounter minor obstacles. But deployed thoughtfully, friction can lead your users straight to your product’s core value. Once there, they feel more invested and less inclined to leave due to loss aversion.
Observation is more than passive looking—it’s closely recording, analyzing, and experimenting with user behavior. There are three fundamental research tools that you need in order to scientifically observe your customer behavior: self-reporting, user testing, and behavioral analytics. Mastering these research tactics will lead you to an observation and retention framework that is methodical and objective.
Customer Retention Case Studies
See how businesses have used Amplitude to discover insights on user behavior and make an impact on retention.
When Microsoft launched Workplace Analytics, a productivity product within Office 365, Amplitude helped them identify user personas and determine what surfaces each one engaged with most. Then, Microsoft made strategic changes to emphasize the most engaging features that drove retention.
Calm, the daily meditation app, switched to Amplitude to go deep into their user behavior data. The result: a 3x increase in retention. Using Amplitude’s behavioral cohorting feature, Calm discovered that a tiny percentage of users were using the then-hard-to-find reminders feature, and they had a much higher retention rate than average. After running some experiments to determine a causal relationship, Calm made reminders a prominent feature and boosted their retention rate by an order of three.
French newspaper Le Monde used Amplitude to inform their decision-making on a website redesign and to boost their online subscriptions, ultimately raising them by 20%. But that was only half the journey; to keep subscribers renewing, Le Monde used our retention analysis tools to understand why readers engage and to continue optimizing their experience for retention.
Leading Southeast Asian entertainment service iflix searched for ways to keep users coming back. With Amplitude, iflix instituted behavioral cohorting to target users not only on their demographics, but also on their individual behavior to create customized onboarding and retention campaigns. The speed with which Amplitude delivers insights allowed iflix to foster a data-informed culture, where the entire team could quickly test ideas and make changes to improve customer experience and retention.
Ellation used Amplitude to make data-based decisions as they optimized their products, including anime brand and fan community Crunchyroll. In one experiment, they used our cohort feature to A/B test partnership campaigns. Ellation saw that while both partners had equal activation rates, six weeks later, one had a retention rate eight times higher. This showed them what partnerships drove long-term value.
When it comes to retention, Latin American shopping and delivery app Rappi tracked the long-term impact of their new Prime feature and discovered that these users had a 2.5x retention rate compared with non-Prime users. Rappi also used Amplitude to set an ambitious goal to increase the number of orders a new user makes in their first 20 days. They chose this goal because Amplitude revealed that every additional order a customer makes in their first few weeks raises their retention rate.
The product team at Dave, a personal finance app, used Amplitude to home in on product-market fit and find their key retention drivers. With this intel, Dave revamped the onboarding process to emphasize adding recurring expenses during onboarding. Three months later, these users had 5.7x higher retention.
Showmax is a subscription video service that reaches underserved markets across Africa and Eastern Europe. They used Amplitude to find out what content keeps users interested and coming back over time. After they released a Polish director’s film, Showmax saw that new users were coming to the platform just for this show. Therefore, they decided to develop more content with this director, which continued to drive engagement and retention in the Polish market.
Amplitude empowered Morocco-based Avito, a Craigslist-style mobile app and website, to discover user behavior and insights within minutes; it used to take weeks. Increasing customer retention was one of the growth team’s primary goals, and, with Amplitude, they quickly identified user behaviors that boosted retention 100%.
More Resources
Below, we’ve compiled a list of other important voices and resources we trust on the topic of customer retention.
Books:
For even more recommended books, check out these posts:
Blogs:
Podcasts:
Videos:
See:Â Growth Clinic: Retain or Die – Retention Panel (Brian Balfour, Julia Lipton, Fareed Mosavat)
Retention as the new conversion from Web Summit on Vimeo.
See:Â Customer retention is the new conversion