Iterate AI
Dec 26, 2024
While acquiring new users often takes center stage in growth strategies, retaining them is the only sustainable way to success.
And for Product Managers, user retention is more than a metric—it's a mindset and definitely not a one-time achievement. This means PMs have to prioritise retention at every stage of the user lifecycle—from onboarding to long-term engagement.
Retention as a measure of your product's relevance and its ability to create meaningful connections with users. In this blog, learn the different ways you can improve user retention and key metrics to track it.
Why User Retention Matters
Retention reflects your product’s value proposition. Retained users are more likely to:
Engage deeply with your product, use it more frequently and explore features.
Advocate for your product, bringing in new users through referrals and word-of-mouth (something you should not underestimate)
Spend more over time, through subscriptions, in-app purchases, or upgrades.
Studies show that improving retention by just 5% can increase profits by 25% to 95%. For product managers, this means that investing in retention drives user satisfaction and delivers measurable business impact.
Key Metrics for Measuring Retention
Understanding user retention starts with tracking the right metrics. Here are the essentials:
Retention rate
The percentage of users who continue to engage with your product over a specific period. You can look at retention rate for different time periods, age, geography, etc., to get insights
Formula: (Number of active users at end of period / Number of active users at start of period) x 100
Churn rate
The inverse of retention rate, showing the percentage of users who stop engaging. You can try to segment the churn by looking at it in stages.
Formula: (Number of users lost during the period / Total users at start of period) x 100
Cohort analysis
Groups users based on shared characteristics (e.g., sign-up date, location, device) to analyze their behavior over time and find patterns. It is also useful for running tests and seeing the impact of changes on specific user groups.
Customer Lifetime Value (CLV)
The total revenue you can expect from a user throughout their relationship with your product. You can also identify how long you have to retain users for them to become paying users. By improving retention strategies you can increase their lifetime spend.
Net Promoter Score (NPS)
It is a survey that measures user satisfaction and likelihood to recommend your product. You can embed this survey in your product or send it separately over an email or any channel that works for you. High NPS means your users are more likely to have strong retention.
Common Strategies for Improving User Retention
User retention strategies revolve around making your product engaging and value-driven experience for your users to be invested in your product. Here are the common ways to increase retention:
Value-first onboarding
Focus on providing value in a short time to your users to impress users and set the tone for their journey with your product. Show only necessary steps and features and guide them to not overwhelm.
Here’s an inspiring story about how refining onboarding increased user retention by 20%
The reason behind churn
Analyzing exit feedback and identifying patterns across user groups can show you the room for improvement. The key is to combine different data in cohorts and find patterns that could be a reason for churn. Once you identify that, you can address it by making the necessary change of A/B test with your Daily Active Users.
Personalization is a powerful tool to make users feel seen and valued. By analyzing user behavior and preferences, you can tailor recommendations, communications, and features to individual needs. Dynamic messaging ensures users receive information relevant to their journey, whether it’s through a well-timed push notification or an email tailored to their interests. Crafting these experiences demonstrates a deep commitment to user satisfaction.
Build a relationship using your product
By releasing updates that reflect user feedback, providing practical tips and educational content, and celebrating user milestones, you build an ongoing relationship that is mutually beneficial.
Listening to users through session replays and in-app surveys or support interactions allows you to align your product with user needs.
Lastly, rewarding loyalty through exclusive perks for long-term engagement, gamifying the experience with points or badges, and incentivizing referrals reinforce a cycle of positive interactions. These strategies, when applied consistently, can turn casual users into devoted champions of your brand.
Retention in Different Product Stages
Retention strategies should evolve as your product matures:
Early stage: Focus on onboarding and gathering feedback. Your goal is to validate your value proposition and create a seamless first experience.
Growth stage: Scale personalization and community-building efforts. Start experimenting with loyalty programs and advanced engagement tactics.
Mature stage: Deepen user relationships through innovation and sustained value delivery. Focus on retaining power users and converting detractors.
Track User Retention With Iterate AI
Most Product Managers (PM) use Mixpanel, or Amplitude for tracking user behavior. However, analytics take a back seat when the developers are focused on building the product and features.
Now, PMs can easily set up analytics with Iterate AI without developers' bandwidth. You can open your product and click on all the actions you want to track to create events and label them. Iterate AI will create the code for you based on the events.
To see how Iterate AI works, schedule a demo.