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What’s a Good Retention Rate?

First of all, let’s define what retention is:

Retention refers to the ability of a company or a product to retain its customers or users over a time period. Then metric, retention rate, can be calculated based on three different formulas:

1)   Classic Retention 2) Range Retention 3) Rolling or Return Retention

To learn more about how to calculate retention rate based on each of the definitions, check our article “All about Retention.”

A high retention rate means users of the product or business tend to return to and continue to use it. Since retention is usually cheaper than acquisition and the fact that returned users tend to spend around 30% more than new users, as a business owner or a marketer you should definitely consider increasing this number.

“With mobile apps, the percentage of new users coming back on Day 0 and Day 1 (the first 48 hours after download) are the most important for getting users hooked on the app. This is also where the steepest drop off occurs. In fact, 25% of all apps are only used once.” — CleverTap claims.

Taking this data into consideration, we can see that most of the marketing budget is being spent on users that don’t return to the app anymore. In addition, the costs of marketing acts are increasing and people are also becoming more aware of what is an add (which makes them pay less attention or ignore them immediately). With all this taken into account, seems like a good idea to focus more on retaining the users we have already attained.

As we have talked about in our “Retention Marketing” article, there are a handful of reasons to focus on increasing the retention rate. Click here to learn more.

Focusing on retention has huge impacts on return on investments (ROI). Loyal customers spend 33% more than new customers, on average, and it is also far easier to convince them to buy something from you. However, keep in mind that this is a longterm plan and you cannot expect your revenues to grow immediately after you have implemented a retention marketing strategy.

What’s a good retention rate?

The reality is that there is not a single global answer to this question. Every product is unique and has its own definition of “good retention rate.” A rough estimate can be made by the comparison with similar companies and apps.

There are two ways for product teams to benchmark retention: against themselves, and against other companies.

  • Measuring against their own: 

This method contains retention analysis, reveals trends, and performance measurement week after week and month after month. For example, if the retention rate is decreasing, the probable causes should be determined and solved. If otherwise, they should determine the correlated feature changes, marketing campaigns, and cohort behaviors that may have led to it, and take advantage of them.

  • Measuring against other companies: 

Competitors’ performance statistics are very helpful, however, they are usually not available to the public. There are estimates and statistics available through other resources that can be used in cases that there is no direct access to competitors’ statistics.

⭐️For most industries, average eight-week retention is below 20 percent.

⭐️For products in the media or finance industry, an eight-week retention rate over 25 percent is considered elite.

⭐️For the SaaS and e-commerce industries, over 35 percent of retention is considered elite.

Product teams can compare their own retention rate, compare it to the “good retention rate” of their industry, and try to take actions to improve their numbers if performing lower than normal.

Steps to user retention

User retention is not a one-time thing or a magic thing you do to make your users stick around forever. Actually, on the way to acquiring retention, different steps should be considered.

1. Make your onboarding journey smooth

User onboarding is the process of improving a person’s success with a product or service. This term is often used in reference to software products.

After one installs an app, he or she tries to sign-up with an account and starting to use the product. However, there are different things that can drive them away:

  • The sign-up process is too long and boring.
  • They cannot figure out the core features and values of the app easily.
  • They don’t see the point in using your app.
  • They start using the app, but find it too difficult or not interesting anymore after a while.

You must help new users experience your app’s unique value as soon as possible. Make it very easy to use and understand, and give them something that makes them keep coming back. If your app doesn’t make a good first impression, you are probably a loser in this retention game and other efforts tend to be not effective.

2. Look after your users

It’s not enough to create an app that looks cool and is easy to use. You actually need to make users create a habit of using the app.

A great way to create habits of using the app is sending push notifications. By monitoring how users are behaving, the right message can be sent to them at the right time, trying to persuade them to continue using the app. By sending them push notification messages you can remind or urge them to take an action within the app, and eventually creating the habit for using it regularly. This can be done automatically with the help of smart tools that are available in the market. Click here to learn more about hengam, a smart user engagement tool.

3. Take a step back

Go back to developing your product further. Now that users are somehow connected to your app, keep making it better and better every day so that users think of it as a must-have in their daily lives.

Ask your users for feedback. On a regular basis keep adding new features to the app. Improve the user experience by personalizing every interaction users have with your app.

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