Currently, there are over 3 billion users on the Internet, and their number is growing by 10% annually. Unfortunately, this means that it is becoming increasingly hard for companies to stand out from competitors and keep users interested in their products. This trend also significantly affects the mobile application industry. The Apple App Store and Google Play already have over 4 million apps. So how to create a product that can not only attract users but also retain them? In other words, how do you maintain constant growth? It begins by understanding why retention is so important to growth.

Why is user retention important?

Retention is a metric of how many users return to your app over time. Even the best apps lose most of their users in just a few days. But if you make retention your key goal of growth, you can change the development path of your company. Increasing user retention and minimizing their churn is the key to creating a base of loyal, interested users and ensuring their sustainable growth.

A business that retains its users increases its revenue and becomes profitable faster than one that does not. Studies show that improving customer service and retention by just 5% leads to a 25% to 95% profit increase. Retention affects all-important business indicators, such as the number of active users, involvement, user life cycle, payback period, and much more. So here are the key reasons why user retention is crucial for your app.

1. Leads to viral user acquisition

According to a study by Harvard Business Review, if you increase customer retention rates by 5%, your profits can go up to 95%. Therefore, if you want to make your app go doubly viral, retention is what you need to focus on. When you make an effort to add more value and retain your users, they are more likely to take the key actions that accelerate your acquisition. This could be by actively participating in your referral programs, word-of-mouth recommendation, or even creating content on social media.

More retention -> Greater word-of-mouth -> Viral loop of acquisition

For example, Castle Cats uses Activity Feeds to keep their users engaged. This builds an in-app community and creates a sense of belonging for the players.

But apart from a greater number of app sessions, it also led to higher participation from the players in the referral program. By using Smart Invites, the game actually saw 25% conversions on referrals from engaged players. This, in turn, increased their day 30 user retention by 2.5x.

2. Improves user monetization

When you retain a user for a longer period, they see more value in what your app does or what it might have to offer. This gives you the opportunity to turn this user into a paying customer. With a retention strategy in place, you focus on increasing the app session lengths of your user cohorts, driving them to explore more about you and thereby increasing the LTV.

Higher retention -> Longer app sessions -> Greater monetization

Higher retention leads to longer app sessions, indicating how engaged the players are in the game. According to Facebook, creating a community of these players can drive higher monetization. The players are nudged to make an in-app conversion, driven by how other players are performing in the game and wanting to compete with them.

As stated in the Reforge blog, here are a few apps that used the freemium model to hook their users, create a community, and actually start driving their monetization:

3. Gives you a competitive edge

According to research by Small Business Trends, a 10% increase in customer retention levels leads to a 30% increase in the company value. Hooking a user to your app means keeping them away from churning when fads like PokemonGo step in. Keeping the user engaged with your app leaves little room for your competitors to target them or their circles. This actually creates an all-new, unobtrusive channel of user acquisition for your app!

Higher retention -> Greater user loyalty -> Higher acquisition

For example, Slack focused on getting more users to sign up for their beta by introducing their features before the launch. Their focus on soft launch was to understand how their users would interact with the app before taking it to a larger market. Focusing on a smaller cohort, they were able to retain all their initial users with a great in-app experience, which led to a greater word of mouth promotion.

4. Accelerates your payback period

It often takes apps months to breakeven on their initial cost of user acquisition. The payback period determines how soon you can start reinvesting in acquisition to fuel your growth, without losing out on your organic growth channel. For example, when you retain more users, more from their circle join your app too. As a result, you get a community that drives your monetization alongside! Now using this money to acquire and retain more users is what the growth hack is all about. By the way, as stated by Esteban Kolsky, CEO of thinkJar, it’s 6-7 times more expensive for companies to attract new customers than to keep existing ones.

          Higher retention -> Greater word-of-mouth -> Optimized user acquisition costs

Read more: 3 Hacks for Lowering Customer Acquisition Costs for Your Mobile App

User retention metrics

How do we measure retention? Here are the key retention metrics:

  • Retention rate and churn rate. Retention rate is the percentage of users that you have retained over time. How to calculate retention rate? You need to divide the number of users at the beginning of a specific period by the number of users at the end of the same period. For instance, if on January 1 you had 100 users, and by February 1, 60 of those users remained with your app, then your retention rate is 60%. Your churn rate in this example would be 40%. To clarify, if during that time period of January 1 to 31, you got 10 new users, they are left out of the retention rate calculation for January.
  • Upgrade rate. This is the percentage of users that have upgraded to a newer version of your app. To calculate it, you need two figures: the number of users who upgraded during a certain period and the total number of users. Just divide the first figure by the second one. For example, if during January, 10 users chose to upgrade, and by January 31 there was a total of 100 users, then the upgrade rate for January was 10%.

How to calculate retention

Day X retention is N% percent of users who will return to the app on day X. In other words, if on a certain day (day 0) 100 new users arrived, and on day 1, 15 returned, then the Day 1 Retention will be 15/100 = 15%. Most often, Retention days 1, 3, 7, and 30 are distinguished as the most descriptive product metrics.

Day 1 retention is the number of users of your app on the first day after the first visit. This metric tells about the reaction of users to their first session, whether they enjoy the experience and are interested enough to further study the app. Day 7 retention is the number of users opening the app seven days after the first visit. These users are already familiar with the app and understand how to use it. Day 30 retention – these users have already passed the test of time; they understand the essence of the app and plan to use it in the future.

Except for the classic retention rate, there is also the so-called rolling retention. When calculating it, you should consider all subsequent days in addition to day X. Thus, the rolling retention of the 1st day is the number of users who returned on the 1st and subsequent days.

What is a retention curve?

A retention curve is a good way to visualize the retention rate. In the first days (weeks, months) the curve drops sharply: the users do not have time to undergo onboarding and do not remain with the app. Then those who nevertheless remained churn little by little, but not at the same speed as at the very beginning. Finally, when the user base is already formed, the graph goes into a plateau, which is only barely decreasing. The more time has passed, the more the curve is flattened. A user retention curve can look like this:

According to a study by Brian Balfour, there are two ways to modify the curve and thus improve user retention:

  • Shifting the curve up. Optimize your user experience in their first use of your product and clearly demonstrate the core value of your product. Then the users will most likely want to use your app further, and not leave in the first few days.
  • Flattening the curve. Increase your basic user retention level by consistently ensuring reliable product experience. Your task is to make sure that the curve does not fall over time, but remains more or less flat.

The tactical goal of improving the customer retention curve is its steady upward movement. To achieve this, at the first stage of customer retention, you need to focus on the following:

  • Improvements: eliminate all existing drawbacks of your product – everything that confuses your users or does not function properly.
  • Retention mechanisms: use mechanisms that force users to return to your product again and again. Example: Emails by Linkedin about who viewed your profile are great tactics to get users to return to the app.
  • Product quality: constantly improve your app. To do this, communicate with your users because they will always be happy to tell you about the shortcomings of your product.
  • Return of lost customers. Example: Evernote does an excellent job of returning customers by constantly reminding them of the product value. This encourages users to reload the app each time they change devices.

What is a good user retention rate?

Obviously the user retention rate can be either high or low. The difference is that you either start to make a profit over time, or you lose both money and users. A low retention rate is when the percentage of user churn is equal to the percentage of user retention. A high retention rate means that the number of attracted customers exceeds the number of customers who have left, resulting in a stable growth in the user base. With a high retention rate, your users will bring you more profit over time.

6 ways to improve user retention

So how can you improve your user retention? By becoming a part of your user’s break time! Here are a few tactics that the top-grossing games and apps swear by:

1. Customize your onboarding experience

One of the first steps to boost your retention rate is to customize and personalize the onboarding for your users. The better they understand what your app has to offer, the more engaged they remain right from the point of acquisition.

Based on the source the players have come from, use deep linking to take them to a relevant piece of content in the app. This will ensure that your messaging remains consistent and will not overwhelm the first time player.

While onboarding the player, remember to ask only for information that will help you create their custom journey in the game.

Slack is a great example of perfect user onboarding. They make it a point to run the user through all the features before asking them to log in or sign up with the app. 

Read more: 7 Tips for Creating Better App Onboarding Experiences

2. Implement an Activity Feed

An Activity Feed is like your social media feed, where you can see what your friends and family are doing. In a game, this is where players can see the progress of their peers and also interact with them, creating an active community. The stronger your community is, the more engaged your players remain with the game and the higher is your user retention rate. 

3. Send out timely push notifications

An Activity Feed can keep the users engaged while they are still in the game. The most effective channel to bring back your users to the game when they are not on it is push notifications.

Sometimes it takes a slight nudge to encourage a player to get back to a session in the game.  With in-app and push notifications, you can reach out to your players and re-engage them. It could be to promote a new level in your game, offer an incentive, notify of another player’s progress in the game, or more. The idea is to pique their interest in the game again and encourage them to come back.

Fancy Dogs uses push notifications to let their players know what’s new on their Activity Feed. This doesn’t just encourage another app session, but also helps to retain a user who might have forgotten about your app or has been engaged with another one.   

Read more: 7 Examples of Push Notifications That Will Bring Your Players Back to Your Game

4. Make content sharing and invites easy

If you want your players to remain loyal to your app, you need to bring in their social circle as well. Having their friends and family in the game reduces their need to switch to chat apps or social media. This increases their app session length and also keeps them hooked to the game, because ‘their circle’ is now on the app too! But for this, you need to ensure that inviting their circle is as easy as possible.

Ubisoft’s Face Up Social game uses Smart Invites to fuel their referral marketing. Their users are able to invite their friends and family via all popular social channels and chat apps easily, thus increasing their participation. 
faceup app referral marketing

5. Re-engage the users from email

Email marketing is not just for B2B eCommerce platforms. You can use the channel to re-engage your app users as well. The best example of this engagement strategy is Runtastic. It sends its users a weekly report on their progress, giving them the motivation that they need to continue using the app.

6. Leverage social media

An average smartphone user is active on at least 2 social media platforms. We end up spending at least a few hours every day on social media to catch up with what our friends are doing, what new brands have launched, and more.

Apart from posting engaging content regularly on channels like Facebook, you can also use retargeting ads to re-engage your players. Let them pick up from where they left the game instantly. You can also experiment with chatbots to keep your players engaged.

For example, Clash of Clans keeps its players engaged and motivated by sharing tips on how they can achieve something in the game.

It’s also possible to enable social sharing of milestones. A player may or may not be aware of who in their friend circle is playing your game, so enabling social sharing of milestones from your app will solve this issue. When a player shares their achievement, their friends are sure to view and comment on the same.

Those who are already on your game will engage with this player in-app as well. And those who are not playing will get interested in it because someone in their circle is. Word-of-mouth marketing and brand exposure, all done with simple sharing!

Another way to get the most out of social media is retargeting. After you have acquired a player, your marketing strategy should not end there. Initially, it takes a while to stay on top of the player’s mind. So use social media retargeting to consistently remind them of the game.

Remember not to overdo the promotions with the same message. Share different aspects of your game and what other players are doing to keep him interested. The more they see you on platforms they are active on, the more likely they are to head over for a gaming session.

Over to you

Most apps and games tend to lose 80% of their acquired users by the third month. The reason is that they do not focus on engagement and retention at the same time. This is where the implementation of the mobile growth stack comes into play.

If you want to achieve higher user retention, make sure you are focusing on it before you start acquiring more users for your app. The only way to reduce the churn rate and boost the retention rate is to keep your users engaged and increase that session frequency!