User retention

Why is user retention important?

User retention is a key measure of success because it shows the product or service has provided value. When a product achieves high product stickiness and retention rates, it can lead to long-term growth and profits.

Industry data shows why retention matters. Many digital products struggle to keep users. For example, in 2023, only 9% of news app users and 4% of shopping app users stayed active after 30 days. These differences highlight the challenges in keeping users engaged, depending on the app’s content or service. 

All businesses need to keep their clients. A Gartner study found that 34% of tech and service companies struggle with this.

Good retention leads to multiple benefits: easier upselling opportunities and increased recommendations from satisfied customers.

What are the goals of user retention?

Keeping users helps businesses succeed. The main goals are to build loyalty, keep users from leaving, and increase how much they spend over time. Achieving these goals helps businesses build strong, lasting relationships with their customers and remain profitable over time. Let’s examine these goals in more detail:

Increasing customer loyalty

• Builds stronger brand connections
• Drives repeat usage
• Creates product advocates
• Maintains user satisfaction

Reducing churn

• Keeps users from leaving the service or unsubscribing
• Lowers the cost of acquiring new users
• Helps businesses maintain a stable user base
• Identifies and addresses pain points that cause users to disengage

Maximizing customer lifetime value (CLV)

• Increases revenue from existing users over time
• Drives repeat sales, renewals, or subscription upgrades
• Encourages users to explore additional products or features
• Supports the overall profitability and growth of the business

Who is involved in user retention?

Both company teams and outside partners help keep users happy. They work together to build loyalty and prevent users from leaving.

To maximize your own user retention, gain a thorough understanding of these groups by reading on.

Internal stakeholders

• Product managers: Guide product development to meet user needs.
• Marketing team: Create campaigns to keep users engaged and attract them back.
• Customer support: Help users resolve issues and improve satisfaction.
• Data analysts: Track and analyze retention data to find areas for improvement.
• UX/UI designers: Make the product easy to use and enjoyable.
• Sales team: Build and maintain relationships with users, offering relevant solutions.

External stakeholders

• Users/customers: Share feedback and influence product changes based on their experience.
• Third-party vendors: Provide tools and services that improve user experience, like analytics or CRM systems.
• Partners and affiliates: Help promote the product and offer rewards or incentives to retain users.

Investors: Support business decisions with a focus on growth and user retention.

What is required for user retention success?

Successful user retention requires focusing on three key areas that help keep users engaged and satisfied:

Provide exceptional customer service

Give quick, helpful support to build user trust. Offer help through chat, email, and phone to solve problems fast. Ensure users feel valued by addressing concerns promptly and professionally. Use customer service as a tool to foster trust and loyalty, encouraging users to stay engaged with your product long-term.

Simplify onboarding and user experience

Make it easy for new users to start. Give them simple guides that show the product’s value right away. Provide clear instructions and tutorials to help users get started without confusion. Design a simple, intuitive user interface that enhances the overall experience. A clean, responsive design will make navigation effortless, ensuring users feel confident in their decision to use the product and are encouraged to engage regularly.

Drive engagement and collect feedback

Enhance digital engagement by using engagement hooks, such as reminders or personalized notifications. Encourage users to continue interacting with your product by offering value at every step. Collect feedback from both active and churned users to identify pain points and areas for improvement. Regularly send progress reports to keep users informed and motivated. Build product-focused communities to strengthen user relationships and increase loyalty.

Why do user retention projects fail?

User retention projects often face various challenges that hinder their success. 

The below obstacles can prevent organizations from building strong, lasting relationships with their users, ultimately leading to high churn rates and reduced customer loyalty:

Lack of clear strategy or goals

Projects often fail when companies lack clear goals. Specific targets are needed to track what works and what needs fixing. A scattered approach may lead to inconsistent efforts and wasted resources. 

Retention strategies need clear objectives, such as reducing churn by a certain percentage or improving engagement with a particular feature. Without these focused targets, it’s hard to prioritize initiatives or measure success, leading to ineffective retention efforts.

Poor onboarding experience

A good first experience helps keep new users. If users find your product confusing at first, they might leave before seeing its benefits. 

It’s essential to create an intuitive, straightforward onboarding process that helps users quickly grasp how to use the product and why it’s beneficial. Failing to provide a smooth onboarding experience can severely impact retention from the outset.

Ignoring user feedback

Listen to what users tell you. Their feedback shows what works and what needs to change. Without this feedback, businesses may overlook common pain points or areas where users are experiencing friction, which can lead to frustration and disengagement. 

If users feel their concerns are not being addressed, they may feel undervalued and look for alternatives. Continuously gathering feedback, whether through surveys, user interviews, or analyzing support tickets, is crucial to improving the product and maintaining user retention.

User retention use cases

User retention plays a crucial role in the success of businesses across different industries. By keeping customers engaged and satisfied, companies can reduce costs related to acquiring new users while boosting long-term growth. 

Here are a few examples of how user retention strategies work in different business contexts.

E-commerce 

Scenario: An online store launches a loyalty program to reward customers for repeat purchases.

Method: The store introduces a points-based system where customers earn rewards with each purchase. The program is promoted through personalized emails and in-app notifications.

Outcome: Repeat purchase rates rise as customers feel more valued, leading to higher engagement and increased sales from existing customers.

Software-as-a-Service (SaaS) 

Scenario: A SaaS company faces high churn, with users canceling subscriptions after the trial period.

Method: The company provides new users with custom guides, and support staff checks in often to help users succeed.

Outcome: More users continue using the service after the trial, resulting in lower churn rates and higher customer retention over time.

Mobile app

Scenario: A mobile gaming app struggles to keep users active after the initial download.

Method: The app adds in-app challenges, rewards, and personalized notifications to encourage users to return. It also tracks user behavior to identify where users tend to drop off.

Outcome: More players stay engaged with the app, increasing daily active users (DAUs) and improving overall retention.