The Mobile Marketer’s Guide to Mastering User Retention

Last updated on August 19, 2020

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The Mobile Marketer’s Guide to Mastering User Retention

Forget awareness. Forget traffic. Forget leads.

How would you like to grow your business without adding another dime to your budget?

A 10% increase in user retention can increase the value of a business by more than 30%.*

Simply keep 10% more of your existing users — the people who already like you — coming back to your mobile app. Your value will essentially increase by a third.

We’re going to turn the topic of user retention inside out to teach you everything you need to know to get users flocking back to your app.

What is User Retention?Why Retention is Essential for GrowthThree Phases of User RetentionTactics to Improve RetentionHow to Build a Retention StrategyUser Retention FAQsAdditional Resources on Retention

 

What is User Retention?

In the simplest sense, user retention is about keeping people coming back to your app.

App Store optimization, paid ads, influencer marketing, and a host of other user acquisition tactics can all bring new users to your app. 

But a good product plus an effective customer retention plan? That’s what keeps users engaged, active, and profitable over the long term.

Retention is measured by comparing the number of users you have at the beginning of a certain time period with the number of users you have at the end of that time period.

Use our retention rate calculator to quickly measure your app’s retention and churn rates. 

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

User Retention Curve

 

Why Retention is Essential to Growth

Retention is notoriously low for mobile apps — and it’s getting worse.

In 2019, just 32% of users launched an app more than 11 times. That’s down from 38% in 2018.

Average cost per install in 2018 was $4.08. And that’s just for an install — cost per in-app purchase is $74.93, and cost per subscription is as high as $148.* 

A lot of dollars are being wasted acquiring users who churn in a matter of hours. 

This begs the question: why are businesses so focused on acquiring new users if they can’t keep the ones they already have?

Retention Over Acquisition

Obviously, acquisition is important. You need to add new users each month to grow. But in most cases, too much emphasis is placed on acquisition vs retention.

Rookie mobile teams often get preoccupied with tracking new users and DAUs/MAUs— without paying enough attention to retention. And that can be a fatal mistake.

Here’s an example:

What would it look like if a mobile app was adding 10,000 new users a month?

That looks pretty solid, right? Our new user total is up 120% in a single year!

But there’s a problem with aggregate numbers like these: they don’t show the whole picture.

To get a clearer idea of how churn affects growth, it’s necessary to break this graph down into cohorts. This is how the same graph would look with users segmented into groups based on the month they were acquired. 

Each color represents a different user cohort. By looking at the first purple cohort, we can see that 10,000 new users joined in February. But only 500 are still using the app after 3 months.

You may think: total active users is still growing each month. Surely 67% yearly growth is a win?

In the short-term, that might be true. The problem is it’s not sustainable growth.

By extending this out another 2 years, we can see how average user retention plays out:

Within two years, over 92% of users are lost.

We’re maintaining our acquisition numbers to continue overall growth, sure. But that growth rate will plateau as our churn rate catches up with us.

And those 10,000 new users every month are still just as expensive to acquire.

Without solid retention, our ROI actually decreases over time.

Now compare with a great growth curve. Notice that while there is still some churn, a significant part of each cohort stays over time, creating a stacking effect of steady growth.

Good retention drives revenue and profits. So how do these charts translate to dollars and cents?

Let’s extrapolate the poor growth curve into a revenue curve.

You might look at this chart and think, “Hey, that doesn’t look so bad.”

But don’t be deceived by short-term results. Fast forward a couple of years and see where we end up.

With each additional year, revenue growth drops — but expenses remain the same.

Now compare to revenue with a good retention rate:

With a solid retention rate, revenue compounds with time. This is the coveted “hockey stick” curve you’re used to seeing.

Think of your users like a fine wine: they get better with age. The longer you keep them, the more valuable they are to your business.

When retention is strong, so is revenue.

The Retention Curve: Understanding the Three Phases of Churn

Any discussion about user retention is incomplete without understanding cohort analysis.

Cohort analysis sounds like a big and complicated concept, but it’s not. “Cohort” is just a fancy word for a group of people who have something in common.

Acquisition cohorts track users who all joined on a certain day, or from the same channel or campaign. Behavioral cohorts track users based on specific actions, like feature use or purchased products.

So what do cohorts have to do with user retention?

Visualizing cohorts as a user retention curve makes it really easy to pinpoint when users are leaving your app.

Retention curves will do one of two things:

  • Continue declining until it hits zero (bad retention)
  • Stabilize over time (good retention)

The key to improving user retention is stabilizing the curve as fast as possible — and at the highest possible percentage of acquired users.

So how do you do that?

Phase by phase.

Mastering Mobile App Engagement & Retention

Mastering Mobile App Engagement & Retention

Explore the various lifecycle stages of a mobile app user and learn engagement (and re-engagement) strategies via push notifications, deep linking, in-app messaging, and more.

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The 3 Phases of User Retention

User retention can be broken down into three distinct phases: the onboarding stage, the nurture stage, and the attrition stage. Each of these stages needs to be analyzed and optimized differently.

Phase 1: Onboarding

All retention phases are important — but they’re not all equal.

At the end of the day, the onboarding phase is the most critical.

How you engage users in this initial phase will have a far greater impact on overall retention than anything else.

If you fail in Phase 1, there’s very little you can do in the next stages to make up for it.

What makes onboarding so important?

Simply put, this is where users get their first impression of your app and your brand.

But a lot can go wrong.

They might download and launch the app, get annoyed by a poor onboarding process, and never come back. They might start poking around, but never use the features that make the app a favorite for champion users. They might even use the app a few times, but then lose interest and uninstall.

You must help new users experience your app’s unique value as soon as possible.

A great example is MyFitnessPal: its value lies in the simple user interface and vast food/calorie database. So the onboarding process is specifically designed to get users to log a food they’ve eaten. They immediately experience how easy it is to accurately count calories using the app.

Phase 2: The Nurture Stage 

The second phase of retention is all about nurturing user habits.

No matter how exciting a user’s first experience with an app is, the novelty will wear off.

Too many app teams believe a successful “aha moment” in phase 1 will automatically make phase 2 a success.

By helping users create new habits around the app, eventually they won’t need a reminder to use it. They’ll keep coming back all on their own.

To continue with the MyFitnessPal example, the app encourages user habits by sending a push notification to remind users when they’ve forgotten to log a meal.


Learn more about building user habits in our interview with bestselling author Nir Eyal.

Phase 3: The Attrition Stage

The first two retention phases are mostly focused on onboarding and behavioral psychology. But the final phase is about building a great product and continuously improving it.

If you look at any app with a history of successful growth, you’ll find a long history of consistent software updates. MyFitnessPal is regularly updated twice a month.*

You can’t sit back and relax. You have to keep refreshing users’ perception of your app as a must have in their daily lives.

So ask for user feedback. Continue adding new features and enhancing the UI. Improve the user experience by personalizing every interaction users have with your app and your brand.

That’s what keeps customers coming back.

Strategies to Improve Retention Rates

How do you actually improve retention rates for each phase?

Shift The Curve Up

In phase 1, the goal is to shift the entire retention curve up by retaining more users in the first days of use. And the best way to improve initial retention is to focus on the onboarding experience.

Onboarding is a vast topic that we’ve covered in-depth, and a lot goes into getting it right. An intuitive onboarding experience means users spend less time figuring out the how of your app and get right to the why — that aha moment that hooks them on your app.

If you have a super simple app with an intuitive UI, you might get away with leaving users to their own devices. But many apps benefit from thoughtful UI overlays, simple walkthroughs, and visual hints to help users quickly experience the key benefit of the app.

Flatten The Curve

As mentioned earlier, good retention curves even out. Bad ones trend towards zero.

Your goal in phase 2 is to stabilize your retention curve. That means encouraging users to develop habits that keep them engaged past the first few days of use.

How do you do that?

Use cohort analysis to find out how the app is being used by those who have already made it a part of their day-to-day lives.

What features do they use? What times of day are they most active? What do they do in the first 48 hours after install?

If you don’t have that type of user yet, there are still a number of things you can do:

These improvements can help flatten retention curves and build a stable user base.

Increase Your Baseline

Flattening your retention curve might seem like the final step. But you can’t stop there if you want to keep your hard-won users for the long haul.

Technology changes. Your users’ habits, needs, and expectations change. Continue to improve your app, solve common user problems, and fix bugs. 

Current users are priceless sources of information. If you ask, they’ll tell you what they need from your app for it to remain a staple in their lives.

The better you know your users, the better you can retain them.

The Cure for Churn: Building Retention Strategies That Work

There’s no shortcut to improving user retention. Creating an effective strategy requires more than a collection of quick tips and growth hacks. It takes planning and precision.

The Importance of Smart User Segmentation

No matter what type of app you have, every single one of your users is unique – and each one will react differently to your marketing campaigns.

Too many apps waste valuable resources targeting users who are unlikely to respond. Plus, blasting users with generic messaging is a leading cause of uninstalls.

By segmenting users, mobile marketers can make the most of their campaign budgets by targeting the right audiences. You can speak directly to those who are most likely to convert, without wasting money on impressions or users who aren’t ready to buy. And you can personalize marketing messages to more effectively nurture prospects down the funnel and provide a memorable experience that keeps users coming back.

Effective Onboarding Campaigns for New Users

Successfully activating new users is an essential piece of the retention puzzle. Here are a few best practices for optimizing the onboarding process:

  • Extend a Warm Welcome. Display a welcome in-app message for a personalized first-time user experience, and follow up with a welcome email within 24 hours.
  • Get to the Aha Moment ASAP. What key features, content, or products do new users need to know about to experience your app’s value?
  • Send Gentle Reminders. What drew new users to your app in the first place? Convenience? Savings? Entertainment? Bring them back to the app frequently to show value early and often.
  • Go Omnichannel. Users interact with your brand through a variety of digital touchpoints. Engage new users with a mix of emails, push notifications, in-app messages, etc. to make an impact and deliver a consistent user experience across channels.

Retention Marketing Campaigns for Champion Users

Give your long-term users the attention they deserve — and keep earning their loyalty — with targeted engagement campaigns that help them become brand advocates. Here’s a few ideas on how:

  • Promote Referral Programs. Prompt long-time users to join loyalty or referral programs by highlighting what they have to gain, whether it’s reward points, virtual currency, in-app perks, or exclusive access to premium content or features.
  • Ask for Feedback. Let loyal users know you appreciate them and are working hard to keep improving their experience with your app.
  • Nurture Your Community. Creating an active, passionate community of users who share a common interest can be a powerful way to keep them engaged with your app.

Winback Campaigns to Woo Inactive Users

Not every new user will immediately fall in love with your app — but that doesn’t mean they’re a lost cause. An effective winback campaign can reengage inactive users and rekindle their interest in your app.

  • Use RFM Analysis to identify inactive users. It will help you quickly spot dips in engagement so you can act fast to draw inactive users back in and prevent them from churning.
  • Extend a Generous Offer. Use push notifications and emails to send a tempting discount to sway users to give your app another chance.
  • Highlight App Updates. Tell hibernating users how you’ve improved the app since they last launched. What features, products, or content have you added?

A Smarter Way to Boost Retention

Can you fix a high churn rate? Absolutely. But only with a strategy based on the right data.

With a customer retention platform like CleverTap, you’ll be able to see what users are doing in your app and which behaviors lead to greater retention. You’ll be able to segment users based on factors like behavior, location, and lifecycle stage. You’ll be able to engage them with automated, personalized messages that enhance the user experience. And you’ll be able to test, measure, and improve your campaigns to optimize ROI and revenue.

User Retention FAQs

What is churn?

Churn measures how many users stop using an app in a given time period. Short for churn rate, churn is the inverse of an app’s user retention.

A basic formula for measuring retention and calculating churn is to divide the number of users lost during the period by the number of users at the start of the period.

As an example, an app that started the month with 100,000 users and lost 5,000 users would have a churn rate of 5%.

For more details on how to measure user retention, read Churn Rate: Calculations and Strategies for Reducing Mobile App Attrition. For an easy way to calculate churn, check out our Retention Rate Calculator

What is user retention rate?

Retention is the percentage of users who stay with an app over a certain period of time.

The most popular way to calculate retention is N Day retention, also known as classic retention. It measures the percent of new users who come back on a specific day.

User Retention Curve

What is an active user?

An active user is a user that engages in some way with the app. In most cases, a user is considered active if they launch the app on a given day. Many apps track their Daily Active Users, Weekly Active Users, and Monthly Active Users

Different apps define what constitutes an active user differently, based on its specific business and monetization model. For some, it’s a user who simply launches the app. For others, it’s users who complete a specific in-app action. Because active users are one of the primary user retention metrics for growth, it’s important to tie the definition of active user to actions that are linked to user retention.

What is frequency?

Session frequency refers to how often a user is active in the app. Active users are often segmented by frequency: daily, weekly, monthly, etc.

What does DAU stand for?

DAU stands for Daily Active User. DAU measures how many unique users are active on the app on a daily basis. It is one of the key KPIs for measuring user engagement and growth for mobile apps.

What does WAU stand for?

WAU stands for Weekly Active User, and measures how many unique users are active on the app on a weekly basis. It is one of the key KPIs for measuring user engagement and growth for mobile apps.

What does MAU stand for?

MAU, or Monthly Active User, measures how many unique users are active on the app on a monthly basis. It is one of the key KPIs for measuring user engagement and growth for mobile apps.

Additional Resources for Improving App Retention

Books:

Blogs:

Tools:

Case Studies:

  • How BookMyShow increased user retention 25% with smarter push notifications
  • How Streamago improved user retention 49% with personalized onboarding emails
  • How DealsPlus used personalized push notifications to increase CTRs

See how today’s top brands use CleverTap to drive long-term growth and retention

Schedule a Demo Now!