What Is User Retention, How Is It Calculated & How To Improve Your User Retention Effectively

As product usage analytics deliver a stream of data and insights into product team dashboards, user retention metrics have become an increasingly reliable KPI to measure day to day user, product, and company health. While retention information has long been useful for SaaS, it is becoming increasingly important for B2B on-premise software, too.

Customer retention is vital to the growth of your business since the cost of user acquisition is much greater than maintaining and growing an existing account. Research shows that increasing retention by 5% actually increases profits anywhere from 25% to 95%, so let’s define user retention, how to measure it, and what to do to improve it.

What is User Retention?

User Retention is the continued use of a product, feature or app by your customers. While measuring retention for feature usage is relatively straightforward (using that feature at least once in a specified period of time), measuring retention for a product or complete app requires more definition. It is important to lay out the usage factors that will be considered to be “product usage” before beginning your measurement efforts. For example, does simply running the app or using the site count as usage or is there a higher threshold based on time, number of key features used, etc.

What is User Churn?

User Churn (and churn rate) is a subset of user retention metrics that looks at the total number of users who have stopped using a product over a specific time period. Defining that retention period is important. Is your app used daily? A shorter time frame makes sense (especially where daily retention rates are critical). Is your app used monthly? A longer time frame is more appropriate. Understanding the context of how your mobile app or site is used and setting a relevant period for analysis will yield more fruitful information.

How to Measure User Retention?

Once you decide on a relevant time frame, you can measure retention by taking an active number of users back at the beginning of that period and subtracting it from the number of those users who are still using your app at the end. To make the equivalent retention rate calculation, simply divide the number by the end number.

Churn Analysis Definition in Usage Intelligence

At the most basic level, churn analysis is measuring how many users leave your application in a given time frame. Usage Intelligence provides a few options that allow you to look at churned, or lost, users from a few different angles.

Churned User Profile Report in Usage Intelligence

Get insight into the product details, OS profile, and hardware specifications of users who churn away from your product so you can begin to build the profile of what typical churned users look like and start finding out the root causes.

How to Improve Product User Retention?

Understanding the lifetime behavior patterns churned users had before they walk away from your product or app can help you identify variations from your more loyal customers. Analyzing overall product engagement and retention or drilling down into feature usage and user experience will give you a more specific picture of churned user interaction.

Once you have identified the factors leading to churn, you are in a better position to take steps to improve retention. If users are churning after the first of three steps in your “getting started” onboarding wizard, it makes sense to reexamine it and identify how and why users are getting hung up on step 1. If your user flow analysis reveals patterns leading to churn, it may make sense to focus on usability and user experience efforts to improve user engagement, and therefore increase retention.

Perhaps you are seeing that key features associated with user success and value are not being discovered or have limited use. In-application messaging can improve your overall retention efforts by educating users at risk of churning on the best ways to use those features and pointing them to how-to videos and knowledge base articles.

Instead of waiting until something goes wrong and reacting through customer support, customer success aims to ensure the user is gaining value from the product or services at every step. With product usage analytics guiding the way, both Customer Success and Product teams are well-positioned to proactively improve user lifetime value and retention by focusing on these metrics and the underlying causes.

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