How to build a successful user retention strategy for your app
User acquisition Vs User retention: the eternal debate. Should you focus your resources on acquiring new customers or retaining existing ones? Most companies still make acquisition the priority, this happens despite the fact that the data tells a different story.
The importance of a user retention strategy is often undervalued, and the reason is simple: acquisition shows an effort to demonstrate quick growth (i.e. downloads, sign-ups), while retention focuses on long-term sustainability (MAU, stickiness).
Keeping users coming back will result in a greater ROI at a lower cost: acquiring new users costs 5 to 10 times more, while the average spending from current ones is almost 70% higher than what newcomers are willing to spend.
Whether you are a mobile gaming app, a luxury fashion retailer, or a software vendor, what’s the point of focusing efforts and budget on one-shot sales when you can increase profits by reducing churn? Why consider customers as strangers when you can build a competitive advantage leveraging on your community?
Track relevant data
User retention is one of the most critical metrics for digital businesses, and it will give you a perspective on how strong your customer loyalty is over time. It ultimately indicates how good you are at building a community of loyal fans rather than a simple customer base.
The formula to calculate your user retention rate is simple:
(Total # of Customers at the end of the Period - # of New Customers Acquired in the same period)/Customers at the Start of the Period
To complete the picture, there are also other metrics connected to a user retention strategy:
- Churn Rate
- Average User Spending
- User Revenue Growth Rate
- User Lifetime Value
Using data, you can begin to understand the value that you bring to your customers, and on a quantitative level, adjust your strategy to fit your new objectives. Tracking also allows you to make sure that you won’t commit the same mistake twice – if you know that a part of your app is not optimized properly or isn’t user-friendly, you can attribute your newfound rates to these specific sections and address them properly to bump the number of people that engage on daily basis.
Important note: retention and loyalty are not the same. While user retention is a prerequisite to work on brand loyalty, it is a more general term used to describe a business’s ability to engage and maintain customers, while the latter refers to customers who engage with a brand because they have an emotional connection to it, a strong bond that turns these individuals into perfect advocates.
Therefore, metrics should also help you to target the right people: It’s important to figure out who your most loyal users are in the first place and with what frequency they engage with different parts of your app. This will help guide you to target the correct people and further develop existing areas of engagement.
Now that you know what to measure, you can start drafting your loyalty strategy, knowing that there’s not a one-fits-all recipe for success. The key pillars are the Brand’s values and deep knowledge of your customers. If you master both, then you’ll be able to create an emotional relationship with your community.
Stick to your strengths
In a world dominated by thousands of applications and platforms, it can be hard to differentiate yourself from competitors or even companies doing business in the same industry as yours. Thinking objectively can save you a lot of time here:
What do customers come for when they open your platform? What is different about your products and services than what your competitors offer? In simple terms, knowing what you’re good at saves a lot of time and resources when attempting to retain the maximum number of customers.
Take a classic, high-powered brand competition between Mac and PC. If you’ve been around for some time, you’ve probably heard of the “Get a Mac” campaign, a series of videos made by Apple to unofficially affirm the company’s self-proclaimed and popularly accepted superiority.
This was, and still continues to be, one of the best examples of how a company can focus on its strengths and offerings while still distancing itself, albeit quite curtly, from its competitors. And the results speak for themselves: Apple ended up making 66 different TV spots for the campaign in three years.
When you know your strengths, whether that’s a good user experience or an innovative product, you ultimately attract the right people to your brand who will be more than glad to interact and engage on a daily basis. In other words, they know what you have to offer and they come for the experience which, given the tight market today, should stand apart from industry competitors.
Build an in-app community
We all know that people thrive and live better when they are surrounded by like-minded people. That’s why to truly improve your user retention strategy, you need to establish communities in your app or platform. Research shows, for example, that 98% of people who belong to an online group or community say they feel a sense of belonging to that group. It comes as no surprise therefore that communities are a way for your users to become more engaged with each other and to your products.
Aside from the general benefits of online communities, companies can also opt to integrate social features into their platforms such as Groups, Feeds, and Chats that empower users to connect and share ideas with others. Groups, for example, can give a chance for users to connect over common interests, and this only increases their chances of returning and becoming regular customers.
Finally, the next logical step in integrating communities to improve your user retention strategy is to actively encourage UGC. Having users create and publish their own content is paramount to a successful retention strategy. Why? Because the more they are able to express themselves and voice their opinions, the more likely they are to see a brand from a trustful perspective that genuinely cares about its audience.
A business that listens to its customers and lets them speak for themselves is also a business that cultivates healthy and long-lasting relationships. By establishing these connections through a diversity of product and service offerings, companies can also expect reduced churn rates.
Reward & incentivize repeat users
Customers, and most importantly, people, love to feel appreciated. One way you can show your users that you care and value them is to offer them incentives and rewards for their engagement.
If your company provides a specific service or a product, you can use this as an opportunity to provide discounts or promotions together with a message of how users can use these benefits to their advantage. You may also use gamification, as it has the potential to further engage users and get them to come back for more incentives.
A great example of this user retention strategy was utilized by Perxhealth, a chronic condition management program, that offered a reward system by customizing its own gamification so that patients could share their achievements in feeds. By encouraging others to be resilient in their health journeys, patients created an emotional bond with each other and with the company, causing them to become loyal users and supporters of the platform and program. This personalized approach to user retention also goes hand in hand with the value that a company provides to its customers–uncovering this variable will therefore allow you to significantly shift the way people interact on your platform, turning spotty users into brand advocates!
User retention starts with a solid and sustainable plan
Once you’ve gone through the above steps and incorporated a pathway to generate greater engagement, it’s only a matter of time before you start experiencing the benefits of greater user retention. What matters most here is not only the results that you’ll get from the strategies you put in place but the way in which you go about doing so–there is no success in the competitive app market without a solid and sustainable growth plan!
Furthermore, by retaining users, companies can also derive more value from their products by obtaining feedback from customers and allowing them to be a part of an app’s growth process. The secret to scaling fast is not only a great product but a great, sticky audience that will gladly act as your brand advocates!