I’ve written about retention before. How it is The One Growth Metric that Moves Acquisition, Monetization, and Virality.
In the same way, it can move all the metrics in the right direction. It can also kill you, silently. If you ignore it.
Growing fast and finding that coveted hockey-stick growth chart is not enough.
Just ask Fab.
Fab raised $336 million and was valued at unicorn-worthy $1 billion. Homejoy raised a $38 million round 18 months before shutting down.
There are more examples of monster flops, but there are also countless other startups we never hear about that die for the same fundamental reason.
The fundamental reason? Retention.
Retention not only does it make companies – but it also breaks them. For this reason, poor user retention has become the silent killer. This extensive post will walk you through the three key ways that companies go wrong when it comes to retention:
1. They deprioritize retention altogether
It takes time, often years, to see its impact on your company’s growth. To truly understand how it drives the health of your product, you need to take a longer-term view – at least one year, preferably multiple years.
Let’s imagine two companies.
Company A is acquiring 1 million new users per month and has a monthly retention rate of 85%.
Company B is acquiring 2 million new users per month (2X!) and has a monthly retention rate of 65%.
What happens after three years?
Company A is winning, and by a large margin too.
6.6m users vs. 5.7m.
And it only gets worse from there. Worse for company B of course.
2. They define their retention metrics incorrectly
You can choose the wrong unit of measurement or the wrong frequency.
For units of measurement, you need leading indicators, not trailing ones. Revenue is a trailing indicator. When it starts falling, it’s already too late. I wrote about it here.
If you measure MAU (monthly active users) when you really should measure DAU (daily active users,) you may be missing the clear danger signs. Until, again, it’s too late.
It depends on your product of course. Measure what makes sense and what will show you the truth before it’s too late, even if you don’t like what you see.
3 They don’t measure engagement
A healthy business is the function of breadth (retention) and depth (engagement). But teams often forego one for the other. Or worse, they forego both. It’s a fine balance. Hope you’re good at juggling 🙂
Why Retention Is The Silent Killer