The internet now has over three billion global users and counting, with the number increasing steadily by 10 percent year-over-year.
Easier online access means people are using digital products across desktop and mobile more than ever. Unfortunately, that means it’s only getting harder for software companies to stand out from the competition and keep users interested in their products.
A Look at Mobile Apps
While this trend affects all software products and digital services, it has significant impact on the mobile app industry in particular.
Over four million apps now populate the Apple App Store and Google Play Store alone.
However, mobile users spend almost all of their time in just five apps — with Facebook and Google vying for the top spots. Many apps are pretty much “dead on arrival.” In fact, because they have so few users, 90 percent of English- speaking iOS/Android apps cannot be discovered in any list, any category, or any genre.
So how do you build a product that’s not only capable of acquiring users, but also keeping them around? In other words, how do you sustain real growth? It starts with understanding why retention is so critical to growth.
Keeping Your Users Happy
Pour enough dollars into acquiring your users and you might be able to temporarily get on one of the App Store’s top charts. But attracting users is not enough. Amplitude’s* analysis of over 500 million mobile devices has shown that 80 percent of new users stop using the average app just three days after downloading it.
This doesn’t just apply to mobile. If you don’t demonstrate value to your users early and often, and turn them into habitual users, your product — be it a mobile app or otherwise — will die.
Filling the top of your funnel doesn’t matter if your product is effectively a leaky bucket; long-term growth, as well as the health of your business, depends on how well you retain users because retention ultimately is how you demonstrate real value.
At a high level, retention is a measure of how many users return to your product over time.
Even the best products lose the majority of their users in just a few days, but if you make retention your primary growth metric, you can change the trajectory of your company from one that stalls or loses users over time to one that sustains true growth.
3 Ways to Gauge Retention
So what are the primary ways to gauge how well you are retaining users? Three primary methods include:
N day retention: The percentage of users that come back on a specific day.
Unbounded retention: The percentage of users who come back on a specific day or after.
Bracket retention: A flexible version of N Day retention, where you can look at retention during custom timeframes.
There is no quick and easy answer about which type of retention to select as your metric for success; it depends on a combination of the product’s usage patterns and your business goals.
If you expect people to come back on a regular basis, like daily for a mobile game, or weekly for an exercise app, then N day retention is probably the best fit. If you notice that many of your users don’t have a steady usage pattern — for example, a food delivery app where people place orders sporadically–then unbounded retention may provide a more accurate measure of how your business is doing.
Compare the Data
Try measuring your retention via a few different methods to see which one gives you the most meaningful information. Once you determine which retention analysis gives you the best insight, dive in into the data. Get a deep understanding of how users retain at each stage of their lifecycle, and then put in place strategies to turn active users into highly engaged current users.
This is how you most effectively build a base of loyal users that drive sustainable growth. A business that retains its users increases its revenue and becomes profitable faster than one that does not. Retention impacts every important business metric that you (and your investors) care about — active user count, engagement, customer lifetime value, payback period, and more.
As Brian Balfour, former VP of Growth at HubSpot and co-founder of Reforge said, “The point is, every improvement you make to retention also improves all of these other things — virality, LTV, payback period. It is literally the foundation to all of growth, and that’s really why retention is the king.”
This post originally appeared on CMSWire.
*Denotes a Battery investment. See here for Battery’s full list of all investments and exits.
A monthly newsletter to share new ideas, insights and introductions to help entrepreneurs grow their businesses.