As product managers, we play a key role in the success of our products and services.
User retention is a caliber that measures our success. It shows whether we are satisfying our customers, or if more work needs to be done.
Unfortunately, user retention isn’t always straightforward to measure due to the nature of each industry, platform, and user goal.
In this article, we’ll define, measure, and dive into user retention to paint a clear picture of what your platform should focus on for your platform.
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What is user retention?
Simply put, user retention is the measure of how many users come back to use a product or service over a period of time.
User retention is an indicator of how valuable a user perceives a product, the “stickiness” of features, and how much engagement a platform receives.
It is measured as a percentage, with higher percentages being indicative of successful engagement.
As product managers, we must track user retention to understand the success of our products and services in engaging customers.
Measuring user retention can help businesses identify areas for improvement and determine whether they are achieving their goals. We can use this data to compare our products and services against competitors and see how well we are doing.
Pssst… Take a peek: 6 User Onboarding Metrics You Need to Keep An Eye On
What’s the difference between user retention and user churn?
User retention is the measure of how many users are returning to use a product or service over a period of time.
User churn is the opposite. Churn is the number of users who have stopped using a product or service over a given period.
While user retention indicates customer satisfaction and loyalty, user churn is a sign that your product is not meeting expectations.
Methods for measuring user retention
You can approach measuring user retention in several different ways. Your user retention will depend on your own product functionality and features. However, there are two factors to consider:
- Time: What time frame will you use to measure user retention?
Remember, some platforms will automatically have more active users as users open and engage with your platform daily. For example, a weather app.
Other platforms are more situational. For example, Airbnb might have a high user retention rate thanks to its loyal customer base. But users only interact with the app a couple of times a year when it’s time for a vacation.
In this case, using time as a retention variable will work for the weather app but not for Airbnb. Because weather apps are used daily, retention is only affected by the app’s performance, not circumstances.
- Product Behavior: Define what you will use to measure retention. Will it be users interacting with a certain app feature, subscribing to the platform, or filling out a survey?
Be sure to merge the user’s goal with your platform’s value propositions to see if this influences the measured action.
Once you have defined the timeframe (retention period) and action (platform behavior), choose the best approach to measuring user retention.
Here are some helpful metrics to help you get started:
User retention over a given period
If you use time as a value, you can measure the amount of active users in a given timeframe compared to the previous.
The formula is the following:
User Retention: (Active users over time / Number of active users in the previous period) x 100
Use case: This is especially helpful to analyze if new features or measures have a significant impact on retention.
This number will give you a sense of how successful your product is at engaging customers and keeping them coming back.
User retention measured through product behavior
To measure the user retention rate by product, calculate the following:
User retention by product adoption: active users for a feature/ total number of user logins during a time period, and multiply by 100.
The metric will show which features have the most user retention and value. Remember to consider user segments and cohorts, as this will impact the results.
What is a good user retention rate?
Retention rates vary from one industry to another. It depends on the nature of the product sold.
For example, user retention rates for news platforms are around 11%, while business platforms are closer to 5% in the first 30 days.
Search for your industry’s retention rate to understand what to expect. Then, continuously measure and compare monthly to see if user retention improves over time.
Why focusing on user retention is important
User retention exposes the strength or weakness of your current product and onboarding flow.
It helps teams understand what works, needs improvement, or should be removed based on hard metrics.
Due to its tangible metrics, product, development, and marketing teams can continuously align and optimize the user experience to increase retention.
Tacking user retention helps to:
- Drive informed product decisions
- Understand user behavioral patterns
- Optimize the onboarding flow
- Reduce churn
- Increase user conversion
- Improve customer loyalty:
- Understand ROI
By tracking your users’ behavior and lifetime patterns, you can continuously make product and marketing decisions that increase user retention.
How to increase user retention
Good user retention is achieved when the product and onboarding process work synergistically to enhance the user experience and keep users coming back for more.
A high retention rate is achieved because the platform fulfills the user’s goals and is seamless and educational. The user knows how to use the platform, perceives the value, and engages with its features.
You need a full onboarding ecosystem to deliver that value to your users. Product Fruits offers the tools, flows, and resources to secure user retention.
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No coding is required. Simply add an invisible and customizable layer atop your platform and convert users from day one.
Talk to our user onboarding specialists to learn more.
