Andrew Chen’s blog is always a very clever, interesting read.
In one of his latests posts he cites a discussion with Matt Humphrey of Bumba Labs, reminding that seemingly small differences in retention rates have a big impact, actually:
Having month-to-month user retention of 92%, 96%, and 97.3% will get you on average 1, 2, and 3 user-years respectively per user that ever signs up on the site.
Okay, in English? If each month you lose 8% of your existing users (92% retention) from the previous month, the average use will stay for 12 months. If you can hold just 4% more of your users (96% retention), then they will stick around for 2 years. If you can hold only 1.3% more than that (97.3% retention), they will be in for 3 years.
The multiplicative effects are just enormous over time. And, 90%+ seems a rather unrealistically high number.
Retention-focused features are very powerful
The point of all of the above is that retention-focused features are very powerful because they let you create dramatic improvements in all the important metrics, across the board – be it pageviews, total time usage, revenue, etc.
In real life, it seems to me that this mindset to focus on features that increase user retention is difficult to grasp for people coming from a retail history. They tend to follow a “big bang” mentality in terms of feature scope for launch, marketing, launch dates, etc., rather than
[...] put a tremendous amount of time into a whole host of retention-driven features like:
- A great product and value proposition
- Targeted notifications
- Fresh news and content on every return
- Desktop app-integration (which has a much lower rate of uninstall)
- The number of friends on the site (the more that are there, the more notifications can be generated)
All of the above contribute meaningfully to this user retention number.