Why Smart User Acquisition Starts with User Retention

August 8, 2019
Why Smart User Acquisition Starts with User Retention
General

We’ve said it so many times, it’s basically our company mantra: Retention is the foundation for growth. 

From a sheer numbers perspective, an acquisition-focused growth model simply doesn’t make sense. 

A quarter of all apps are only used once.* 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 customers who churn in a matter of hours or days. 

When apps focus only on acquisition, they end up with high churn, even higher acquisition costs, and stalled business growth.

But when you prioritize retention, active users stack over time — driving sustainable revenue growth that builds on itself instead of petering out.

Simply put, your engine has to be working before you put gas in the car. That’s why smart user acquisition starts with user retention. 

Here are five reasons your app’s growth depends on a retention-first acquisition strategy.  

1. You Can Attract the Right Users 

More users isn’t enough — you need more of the right users to make your app profitable. The kind of users who make your app a part of their lives, convert over and over, and tell their friends. 

And you won’t know who those users are unless you learn everything you can about the loyal users you already have. 

Who are your most profitable customers? How did they find your app? What’s their demographic? What problems are they looking to solve and which features do they use most?

By using cohort analysis to learn the answers to these questions, you can find your ideal user journey to not only deepen your understanding of which audiences to target and where, but how your brand evangelists use your app. 

Cohorts simply mean a group of people who all have something in common. This could be people who all downloaded your app on the same day, or from the same acquisition channel/campaign, or who all use a certain feature or bought a certain product.  

By tracking these cohorts over time you can pinpoint: 

  • Where new users drop off, when, and even why 
  • Which in-app behaviors are associated with better retention (or increased churn) 
  • Which acquisition channels bring in users who stick around and convert 

Cohorts give you critical insights into everything from your product/market fit to your onboarding experience

By using them to learn who your ideal user is, where they come from, and what they do in your app, you can hone your acquisition campaigns to attract the right audiences on the right channels with the right messaging. 

2. You Can Find the Right Acquisition Channels 

Which acquisition channels will be most successful for your app? 

Instead of guessing (or dumping money into all of them and hoping for the best), you can use funnel analysis to find out which acquisition channels are performing the best for your app.

Note: I didn’t say find out which channels are bringing in the most new users. It’s important to focus farther down the conversion funnel to find out which channels are bringing in the most profitable users.

Here’s an example: Facebook and Google Ads are clear winners, bringing in well over half of all new users.

But what if these new users aren’t coming back, or converting into customers?

By looking further down the funnel, we can see where our most valuable customers are coming from — the ones with the highest CLTV

Facebook accounts for 40% of our paying customers, but new users acquired via Instagram are converting at a higher rate. Sure, Google Ads campaigns get us 25% of our new users, but only 6% of them become paying customers.

It’s pretty clear we should keep up our efforts on Facebook, ramp things up on Instagram, and decrease our Google Ads spend. 

By shifting our focus from pure acquisition to long-term retention, we get a much clearer strategy for successful acquisition and better ROI.

3. You Can Afford to Spend More on Acquisition 

Which leads us to our next point: when you focus on retaining and monetizing your current user base, you raise your customer lifetime value. (If you need an easy way to calculate CLTV, we’ve got a Customer Lifetime Value Calculator for you.) 

Each customer is worth more the longer they stay with your app: they’re more engaged, spend more money, and are more likely to bring in new users via word of mouth. 

And with a higher CLTV, you can afford to spend more on acquisition — meaning you can put more dollars towards new channels and larger campaigns to grow your app exponentially. 

4. You Can Optimize Your First-Time User Experience 

Once you’ve won over a new user, how do you keep them coming back to your app? By proving your app’s value and encouraging them to develop habits around it.

Go back to your cohorts. What do your most successful users 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? 

By understanding how these users interact with your app you get a deeper understanding of the ideal user experience. What’s the best path for first-time users to take to conversion, how long does it take, and where’s your golden window of opportunity?  

Now you have a clear blueprint for getting new users to follow that same path to success — boosting activation rates, app engagement, and conversions. 

5. You’ll Know Where to Focus Product Development and UX Efforts to Attract Even More New Users

The best way to attract new users is to understand what current customers love about your product. 

By learning what keeps current users coming back, you’ll be able to identify and refine your most popular features. Prioritize your roadmap and resources. Create acquisition campaigns that resonate with prospective users. Send personalized push notifications that bring first-time users back to your app to complete the actions that matter most. 

And most importantly, you’ll be able to solve your users’ most common problems, quickly fix important bugs, and keep improving your app to earn those five-star reviews and cruise to the top of the app store listings.

Why Retention Marketing is the Future for Mobile Apps

Mobile marketers understand the importance of acquisition. Obviously, you can’t grow your app if you don’t add new users. But smart marketers know that focusing solely on user acquisition is a surefire way to kill an app. 

By giving retention the proper focus, high-growth apps are able to better understand what makes their users successful, building more effective acquisition campaigns that yield higher ROI and CLTV. 

CleverTap is built to give marketers all the tools they need for success — from greater retention to successful acquisition. Learn more about our complete mobile marketing suite or schedule a personalized demo with one of our mobile marketing experts. 

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

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