Why Retention is the New Growth

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Siddharth Sharma
Why Retention is the New Growth

Table of Content:

  1. The Shift to App Retention Strategies
  2. So How To Improve User Retention?
    • Prioritize User Onboarding
    • Personalize the User Experience
    • Boost Engagement with an Omnichannel Experience
    • Market to the Right People Using Predictive Insights
  3. Tying It All Up

Today’s tech-savvy consumers can easily find a product that perfectly fits their needs either through referrals or a simple online search. This makes life easier for brands struggling to be discovered.

But even if acquiring new users is relatively easy with the right tools and strategies, the same can't be said about increasing the time that consumers spend with your brand.

With intense competition and the ever-changing needs of your users, brands often lose customers as fast as they’re acquired. In fact, 25% of all apps are used only once before being uninstalled.

On average, mobile apps lose 77% of its Daily Active Users (DAUs) within the first 3 days after install. In the next 30 days, that number jumps to 90%. And within 90 days, it’s over 95%. 

Source: clevertap.com

Combine the above churn with the average cost per install (in 2018) at ~$4 and an average in-app purchase at $74.93. These high acquisition costs make it impossible for brands to keep adding to the top line and get new users onboard.

Marketing that’s focused entirely on acquisition doesn't align with the core tenets of a great user experience powered by brand loyalty and growth — an experience that increases customer lifetime value. Thus, the real question we have is how to improve user retention. 

The Shift to App Retention Strategies

For most businesses, it’s cheaper to get an existing customer to purchase than to acquire a new customer. Research by Harvard Business Review estimates that it is anywhere from 5 to 25 times more expensive to acquire a new customer than it is to keep a current one.

Data shows that while repeat purchases make up 8% of customers, they contribute up to 40% of all sales. So, if a brand manages an uplift in retention, it will directly increase Average Order Value and Customer Lifetime Value.

Consider the below graph: A minor improvement in retention rate results in big gains over time – the power of compounding.

Source: clevertap.com

Not focusing on churn hampers business for you as well as results in a customer experience that is not ideal for your brand.

Brands are failing to see the immediate need to engage with their current users. In fact, 44% of companies admit they “have a greater focus” on acquisition, while just 18% actually focus on retention.

And this presents a huge opportunity for brands to get started early and succeed at it.

So How To Improve User Retention?

Prioritize User Onboarding

A great start is half the battle. The first interaction your user has with the app must deliver value immediately.

A barrage of notifications asking for various permissions would not be an ideal start. A lot of apps make this mistake with new feature releases. Very few make an effort to show how the feature can actually benefit the user. The apps that are successful have been the ones who were able to empower their users to improve their circumstances.

It is all about understanding why the user downloaded your app in the first place and then following it up with a journey that meets that expectation in the least amount of time. This helps to increase user engagement.

User onboarding journey. Source: clevertap.com

Personalize the User Experience

So how to increase app engagement? With a limited attention span and a lot of noise in the market, users tune out quickly if they don’t see something useful in your app.

And that’s where personalizing the user experience comes in.

If you educate users about your app and provide value through relevant content without making them search for it themselves, then you’re on track to retain those users for life.

Source: clevertap.com

Boost Engagement with an Omnichannel Experience

These days, user journeys have transcended beyond the experience of a user on the app. With push notifications, text messages, email, and WhatsApp, you can get them to come back to your app.

However, there’s a thin line between being helpful and bombarding your users with too many messages. The latter can lead to user churn. You need to deliver the right message at the right time to the right person.

Doing this at scale may seem impossible. But that’s where Cohort Analysis comes in handy to increase app engagement.

Cohort Analysis. Source: clevertap.com

Cohort Analysis helps you understand everything about your users and groups them based on similarities. These cohorts not only tell you the best methods of engagement but help you identify what is currently working (and not working) within your app.

Market to the Right People Using Predictive Insights

Automated user segmentation. Source: clevertap.com

One of the best ways to prevent churn is to understand where your users lie on the Recency-Frequency-Monetization grid. Understanding who your champions are, who are at risk of churning, and who your loyal customers are gives you predictive insights for your marketing campaigns and user retention.

Once you know where your users are, you can create personalized marketing campaigns that help you reduce churn and create more champions and evangelists for your brand. Best of all, knowing these separate groups allows you to achieve better ROI by focusing your efforts on those most likely to convert.

Tying It All Up

While customer retention doesn’t improve overnight, having these four app retention strategies in place will help reduce your churn and help you retain app users on any app store:

  1. Understand your customer and their pain points
  2. Provide your users with a great first-time experience and try new app engaging ideas
  3. Maximize engagement with a relevant message at the right time
  4. Use data and app engagement analytics to map your users’ stage and nudge them appropriately

This blog is not meant to pit acquisition against the app retention rate. Understanding what makes your users thrive within your app (and what doesn’t), can help build an even stronger acquisition strategy that focuses on the right users and boosts customer lifetime value.

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