A 10% increase in user retention can increase the value of a business by more than 30%.
Forget awareness. Forget traffic. Forget leads.
How would you like to grow your business without adding another dime to your budget?
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.
Here’s what we’ll cover:
Ready or not, here we go.
Before diving into the why and how of app retention, we need to understand what it is.
So what is the definition of user retention?
In the simplest sense, user retention is about keeping people coming back to your app.
Marketing, advertising, and direct sales can bring users to your app. But a good product plus an effective user retention strategy? That’s what keeps users engaged, active, and profitable over the long term.
The most common method of measuring retention is N Day Retention. This measures how many users come back to an app on a given day.
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 — and also where the steepest drop off occurs.
Retention is notoriously low for mobile apps.
The average app loses 77% of its daily active users (DAUs) within the first 3 days after install.
Within 30 days, it’s lost 90% of its DAUs.
And by 90 days, that number jumps to over 95%.
According to Ankit Jain, this trend is driven by user experimentation. People like to try out different apps, and delete the ones they don’t like.
“Users try out a lot of apps but decide which ones they want to stop using within the first 3-7 days. For ‘decent’ apps, the majority of users retained for 7 days stick around much longer. The key to success is to get users hooked during that critical first 3-7 day period.”
Mobile Engagement & Retention
In other words, acquiring a new app user isn’t as permanent as it sounds.
It’s really more like a qualified lead — like getting a free trial user for a SaaS product.
They’ve expressed interest and are giving you a chance to prove yourself… nothing more.
This begs the question:
Why are businesses so focused on acquiring new users if they can’t keep the ones they already have?
Acquisition is necessary for growth. Obviously, we need to add new users each month to grow anything.
But in most cases, acquisition is overemphasized over retention.
Rookie mobile teams often get preoccupied with tracking new users and total monthly users — without paying much 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?
If we’re only looking at acquisition stats like new users and total active users, this graph looks great.
We’re adding 10,000 new users per month, and 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 retention factors into this equation, it’s necessary to break this graph down into cohorts (users grouped by the month they were acquired).
This is how the same graph would look if with users segmented into monthly cohorts while maintaining the average retention rate mentioned above.
Each color represents a different user cohort.
By looking at the bottom red cohort, we can see that 10,000 new users joined in February. But only 500 are still using the app after 3 months.
Suddenly, the problem is crystal clear.
But isn’t some churn expected?
We’re still increasing our total active user base each month. Surely 67% yearly growth is a win?
In the short-term, that might appear to be true. The problem is, it’s not sustainable growth.
By extending this out another 2 years, we can see how average user retention would play out:
Take a look at an individual cohort. Notice how users drop off significantly and consistently over time.
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, instead of our ROI increasing with time, it actually decreases.
Now, compare with a great growth curve.
Notice how a significant part of each cohort stays over time, creating a stacking effect of steady growth.
Users drive 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.
Mobile Engagement & Retention
This is why some of today’s biggest businesses spent so much time perfecting user experience and retention strategies — at the expense of immediate profits.
It’s why Amazon reinvested every dollar into business development on its way to being the 5th most valuable company in the world.
And to put the icing on the cake, good retention significantly reduces acquisition costs.
According to Fiksu, as of January 2016, cost per install in the US App Store and Google Play was $1.64 for iOS and $1.91 for Android.
If 77% of new users disappear after 3 days, that means 77% of acquisition investments are effectively wasted.
Say you’re spending the average $2 per user.
At 1,000 new users per month, you’re wasting $1,500 out of your $2,000 budget.
At 10,000 new users per month, you’re losing over $15,000 every month to poor retention. Not to mention lost revenue discussed above.
Any way you look at it, retention is the foundation of successful apps.
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. Behavioral cohorts track users based on specific behaviors.
So what do cohorts have to do with user retention?
Cohort analysis measures user engagement over time, pinpointing exactly where you’re losing users.
Visualizing cohorts as a retention curve makes it really easy to see when users are leaving your app.
Retention curves will do one of two things:
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 we actually do that?
Phase by phase.
User retention can be broken down into three distinct phases: initial, mid-term, and long-term. Each of these phases needs to be analyzed and optimized differently.
Phase 1: Initial Retention
All retention phases are important… but they’re not all equal.
At the end of the day, the initial retention 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 phases to make up for it.
What makes the initial retention phase so important?
Simply put, this is where users get their first impression of your app and your brand.
Ideally, you want new users to engage with core features and see how useful the app is as soon as possible.
But a lot can go wrong.
They might download and launch the app, get annoyed by a long onboarding process, and never come back.
They might start poking around, but never use the features that make the app a favorite for core users.
They might even use the app a few times, but then decide it’s not good enough and uninstall.
The goal is to create an immediate, immersive encounter with the app’s unique value.
A great example is MyFitnessPal, an app that helps users track calories.
The app’s unique value lies in its simple user interface and vast database of common food items.
The onboarding process encourages users to log a food they’ve eaten. They immediately experience how easy it is to count calories using the app’s database.
This feature solves a key pain point for users and provides the “aha moment’ that hooks them on the app.
Phase 2: Mid-Term Retention
The second phase of user retention is all about repetition and forming new 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.
Unfortunately, a single good experience doesn’t create a new habit.
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 push notifications to remind users when they’ve forgotten to log a meal.
Phase 3: Long-Term Retention
The first two retention phases are mostly focused on onboarding and behavioral psychology.
The final phase, however, is ultimately about building a great product and continuously improving it.
You can’t sit back and relax. You have to keep refreshing users’ perception of your app as a “must have” in their evolving daily lives.
Pulling this off is part data and part art.
But the headline is this: understand your users — and never stop looking for ways to help them solve their problems and achieve their goals.
If you look at any app with a history of successful growth, you’ll find a long list of consistent software updates. MyFitnessPal is regularly updated twice a month.
Adding new features, improving the UI, and quickly fixing bugs is what keeps users around.
If users are all clamoring for a certain improvement, that should take priority over new features or other changes.
Don’t think quantity. Think quality.
How do you actually improve retention rate for each phase?
In phase 1, the goal is to shift the entire retention curve up by retaining more users in the first days of use.
Every little bump you can drive here will have an enormous impact on the rest of the curve.
The biggest difference between the best performing apps and the rest of the crowd is in that initial curve.
How do these high performing apps keep so many more users engaged through the first 10 days?
Why do most apps lose 77% of their users within 3 days, while the top 10 apps only lose 30%?
The best way to improve initial retention is to focus on the onboarding experience.
Onboarding is a topic that could easily take an entire book to cover in-depth. But there is a basic framework that can help improve your onboarding experience right now.
That framework comes from Stanford psychologist BJ Fogg, who created a model for human behavior.
To get users to act, you need to provide 3 things:
Think of it this way: your phone rings, but it’s an unknown number. There’s no motivation to answer. Or you can hear your phone ringing somewhere, but can’t find it. No ability to answer. Or someone’s calling you, but your phone is silenced. No trigger.
What motivates someone to download an app?
Good marketing or a well-produced demo might help them understand the app’s benefits.
High ratings or an influencer testimonial might provide persuasive social proof.
It’s up to you to convince users that your app is worth their time, effort, and device space.
Ability is all about ease of use. You want to limit the friction new users experience as much as possible.
An intuitive onboarding experience means users spend less time figuring out the how of your app and get right to the why.
Triggers guide users through a satisfying first experience. Don’t assume they’ll follow a certain path.
If you have a super simple app with an intuitive UI, you might get away with leaving users to their own devices. But the vast majority of apps need to guide new users through each onboarding step.
Use UI overlays, simple walkthroughs, and visual hints to help users experience the key benefit of the app.
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.
It’s about moving from being a novelty to becoming a fixture in users’ daily lives.
How do you do that?
Find out how the app is being used by those who have already made it a part of their day-to-day lives?
Do you have users who have been coming back to your app for 6 months or more? Analyze who they are and what they do in your app.
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. User habits change.
Continue to improve your app, solve common user problems, and fix bugs. That’s how you become the best solution in your app class.
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.
With the right improvements, you can even win back old users and increase engagement over time, like Evernote has famously done.
It all comes back to a deeper understanding of your users — and prioritizing what they want over your own opinions.
The better you know your users, the better you can retain them.
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, precision — and patience.
Here’s a step-by-step process for creating your own retention strategy.
The first step to getting real results is to set realistic expectations. Without setting the right benchmarks, it’s impossible to reach them.
So many factors affect an app’s performance and retention stats. Niche, category, platform, funding. Gaming apps have a much different user journey than travel booking apps, for instance.
Be careful not to compare yourself with the wrong baseline, or you’ll end up with faulty comparisons. And don’t forget to set internal benchmarks as well.
Focus on edging your own numbers up first and foremost. Use category or competitor benchmarks as ballpark figures to shoot for, and help gauge your performance.
No two apps are alike, and at the end of the day, you need to take external benchmarks with a grain of salt. But imperfect benchmarks are better than flying blind.
So what metrics should you set benchmarks for, specifically?
These 9 benchmarks are a good place to start:
Important timeframes will vary depending on app type. But 48 hours, 30 days, and 6 months are good starting places to check the health of each retention phase.
Once initial benchmarks are in place, it’s time to get specific with how you approach users.
The key? Segmentation.
But success depends on choosing the right segments to track and analyze.
In working with thousands of apps here at CleverTap, we’ve identified 3 key attributes to segment around:
These attributes will help you answer tough questions like:
Think of it this way:
What specific actions did certain users take to experience the app’s core value?
The ultimate goal here is to identify the path new users take to become loyal users, and then help others follow that same path.
Here’s an exercise that will help you get there: What, When, and Why.
What is your app’s baseline average retention rate?
What are users currently doing? Start at the highest level and try to get a bird’s eye view of user behavior.
When are users dropping off?
Go back to your cohort graphs and retention curves. When are various user segments dropping off?
The more detailed you can get, the better.
This will give you a better understanding of how long you have to engage new users, where problems lie and help answer the next question.
Why aren’t users sticking around?
This is the key question. But you won’t get the answer without going through the previous steps.
Half the battle is asking the right questions. Fixing the issues revealed in those answers is user retention in a nutshell.
You have benchmarks. You have an analysis of why things are the way they are.
Now it’s time to set goals. You can’t hold yourself accountable if there is nothing to be accountable to.
Big, vague goals are meaningless. “We’re going to improve retention 500%” is a waste of breath.
Focus on specific goals:
Knowing exactly what you’re aiming for is the first step toward accomplishing it.
What’s the difference between meeting goals and coming up short?
In the world of mobile apps, the answer is data.
There are no silver bullets for growth and retention.
You have to track and analyze users. You have to experiment and test. You have to fail, iterate, and fail again until you find the winning combinations.
You have to solve users’ problems and listen to their feedback.
Focus on the problem areas. Find out where, when, and how loyal users are getting value from the app. Then find new ways to enhance that value throughout the three phases of retention.
Retention is a marathon, not a sprint.
You might have some big wins here and there. But be prepared to go through a dozen tests that don’t work before you find something that bumps your numbers — even by a little bit. Improving retention is cumulative.
When testing new ideas, prepare to fail more often than you succeed. As long as you learn from the failures, you’re still moving in the right direction.
The best thing most tests will do is help you create a better round of follow up tests, and that’s 100% okay.
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 retention, read Churn Rate: Calculations and Strategies for Reducing Mobile App Attrition.
What is user retention rate?
User retention rate 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.
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.
Every app should define what constitutes an active user differently, based on its specific goals. 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.
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