Retention clearly is the most crucial metric for early-stage startups. By tracking and measuring how often individuals (f.e. an ideal customer vs. a newly signed up customer), groups of users (f.e. cohorts of users sharing the same signup date) or even all customers are coming back to use your product following initial activation, you are able to get an idea of how valuable your current product and feature set really is.
Increasing retention instead of working with vanity metrics (like only focussing on the daily or overall app downloads count) almost always determines the long-term success of any software.
When defining retention by the ratio of users launching your app at least once a day in relation to all users who have downloaded it in the past, you might compare yourself with these numbers:
Less than 5% of all users are coming back daily: Houston, we have a problem.
Action: Get feedback from prospective customers and mentors who have done it before. You might consider drastic changes in your overall company strategy, substantial parts of your product or design of the most important features. Chances are, you might have build something nobody wants or likes to use. Take this as a learning and get again into protoyping and customer development.
5-10%: Go and do your homework.
Action: Your aim is not to acquire, but keep users. Even if the number of signups is low, you can learn a lot, probably more than with thousands of customers or more. Now is the chance to try things, so in a Facebook-manner “Move fast and break things”. Or, in Eric Ries’ words: “Build, measure, repeat.”
10-20% or more: Good job. Now dig deeper.
Action: Refine your analytics toolset. Try Mixpanel or KISSmetrics. And maybe Intercom to easily get in touch with specific customers. Find out why customers are coming back and why not. Improve your product, then try push notifications or e-mail marketing to reactivate passive users.
Above 20%: Go out and party. You deserve it. For now.
Action: Only very few products and services achieve that so many users are coming back each and every day. This means, you have created something people at some point in the future might not be able to live without. Try to comfort yourself with the thought of seeing your face on the cover of Forbes someday and get back to work.
Keep in mind that on the day of their first activation, each user’s 1-day retention as defined above is approximately 100% since most people launch apps they have installed at least once thereafter. So make sure your analysis time frame is set to at least 7 days, better a few months or all time since your last major release and excludes the once who have just signed up, best by taking the largest possible fraction of your user base that has installed your app before yesterday.
But not only put your numbers in perspective to the time frame underlying your benchmark. Also, retention is highly influenced by an app’s category and thus typical use case. Communication and news apps, especially those with push notifications, are used naturally more frequently, while productivity apps like to-do lists or casual games are used in specific contexts only and might show some seasonality.
EISENHOWER for example is highly frequented from Monday until Thursday, activity is then decreasing on Fridays and relatively low over the weekend. This is totally reasonable since our app is mostly used at work and primarily for managing business tasks. Tax preparation apps instead are used maybe once or twice a year—but still can possibly sport a pretty loyal following.
Check out Flurry’s 90-day retention matrix to get a better feeling where you can narrow or widen the rule of thumb’s intervals. But be careful, they are defining retention slightly differently—interpreting any app activity within a generous time frame of 90 days as defining an “active user” to better cover a broad range of categories’ use cases.
Taking this into consideration, you now understand Facebook’s valuation—when there are so many people using their service every day, some even every hour while being awake: A better daily retention rate than some other startups’ monthly retention, and a stickiness that some may even describe as addiction.