Customer Retention

The Importance of Retaining Your Users and Continuously Adding Value

What is customer retention? And why is it so important?

Understanding Retention

Once you’ve brought a customer or user into your product, service or ecosystem, retention is about keeping them satisfied with their decision. It’s about turning them into a repeat or expanded buyer, a loyal customer, and an engaged user.

Why is that important? Customer acquisition can be expensive. If you spend significant time and money acquiring customers, only to have them leave shortly after they’ve started using your product, then you will fail.

According to the marketing firm Alexa,

  • Brands have a 60% to 70% chance of selling to an existing customer versus only a 5% to 20% chance of selling to a new customer.

  • It can cost up to 5X more to acquire a new customer than to keep an existing one.

  • Existing customers may spend up to 67% more on their purchases than new customers.

“The point is, every improvement that you make to retention also improves all of these other things — virality, LTV, payback period. It is literally the foundation to all of growth, and that’s really why retention is the king.” - Brian Balfour, VP Growth, Hubspot

In a great article, Why Retention is King of Growth Strategy, we get the discussion Brian did on retention. A couple of takeaways:

There are three phases of retention.

  1. Week One Retention (onboarding) - I like to think of this as getting to the initial value. How can we help our users and customers get to their first value faster? Brian calls this the “aha” moment.

  2. Mid-Term Retention (core value) - Now that users are in, how can we help them see the core value of the product? Just because they’ve been here for a while, that doesn’t mean they’ll stay. We need to help them build habits and actually solve the core problems they came for.

  3. Long-Term Retention (keeping the spark alive) - How can we help users come back to the core value over and over to flatten the retention curve? We will have users drop off over time, usually quickly at the beginning. But how can we flatten the tail sooner? And keep it flat for a long time?

In another great article, Is Retention Like Teenage Sex, Amplitude Analytics breaks down the idea that everyone is talking about retention but no one is really doing it (get it?). But with acquisition costs of apps, and the low retention, the difference between a profitable app and an unprofitable one is slim.

Retention is the key. Getting more new users will be fruitless if we can’t keep them.

What To Do?

First, we need to understand where the problems are. This is where product thinking is critical.

Dig into the data

It is important to understand your product and where things currently stand for your business and your users. What data do you have? What changes are you seeing? Where in the user journey are you seeing drop off?

We did this exercise in a previous company and found that a huge percent of users were dropping off in our onboarding process right at the end. They almost completed but then stopped. So that gave us a starting point.

Talk to users

The data can give you a significant starting point, but you will need to talk to users to flesh out detail.

While we saw users were dropping off in our onboarding, we didn’t know why. So we went out and talked to them. We did some surveys. We got feedback and found out exactly why they weren’t completing the onboarding. It turned out the options confused them and were going through the process to try to understand, but weren’t comfortable completing it.


It’s critical to segment users as well, based on the jobs they are completing. Not every user is completing the same task or using your app in the same way. This will be different for each business and product, but will yield much better insights than having a single cohort for everyone.

Run Experiments

Once you’ve gathered data, it’s time to form some hypotheses about what to do and run experiments to improve your retention. It will be critical to have the right metrics in place so you can monitor changes and see if you’re making an impact or need to pivot.

User retention is the key to successful growth. Acquiring new users is expensive and fruitless if you can’t keep them. But turning your existing users into loyal, long-term customers is a powerful winning strategy.

Additional Reading and Listens

Will Mobile Stay Mobile? The Future of Productivity in A Post-Covid World (panel discussion) - I’ll be doing a panel discussion Wednesday, May 5 along with a few other participants from across a variety of industries. It will be a great discussion, so join us!

User Retention is Product Management (podcast) - Blinkist transitioned to mission teams, focused on solving specific problems. When they improved conversion, it hurt retention, so they needed to shift focus to solve problems for users and increase engagement and improve retention.

Amplitude’s Guide to Customer Retention - A great resource with additional links for customer retention resources.

Renewal is not Retention (podcast) - The simple act of renewing is part of retention, but retention is all the choices that a user or customer makes every day to come back to your product or service. Conflating the two is a mistake.

What is Good Retention (article) - What does good retention look like? This post inspects different industries and gives us an idea of what good and great retention looks like for different products and services.