The Product Manager’s Guide to App Retention

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While acquiring new users is great, it’s not the be-all and end-all of app performance.

High installs mean nothing if you can't retain your new users in the long term. In fact, according to AppsFlyer, American app users uninstall 43% of the apps they download on their phone within 30 days. 

Indeed, app retention isn't something you have direct control over. After all, you can't physically stop people from deleting their apps. But, with the right strategy and tactics in mind, you can still minimize the effects of churn to increase retention and revenue.

What Is App Retention? 

App retention measures how many people keep using your app over time. It's a key metric you can use to monitor user loyalty.

A low retention rate could be a sign that your current product either doesn't meet the needs of your target user or that the competition is offering something better than you. On the other hand, a high retention rate shows that customers are satisfied with your mobile app and value your product.

It's important to note that app retention is different from user acquisition. User acquisition is simply the process of getting new users to your app, and while you can have a high acquisition rate, you could also have low retention at the same time. 

Why Is App Retention So Important? 

As a product manager, there are many reasons why getting the best app retention rate possible must be one of your priorities.

The first reason is that retention increases your company's revenue. Your retention rate is a solid indicator of business growth: the more users you retain, the more opportunities you have for monetization.

Second, it's cheaper to retain users than to acquire new ones. According to Harvard Business Review, getting a new customer is 5 to 25 times more expensive than keeping an existing one.

Lastly (and most importantly), retention gives a more accurate picture of your business's success. It's possible to have lots of people download your app, but if 99% of them delete it within a few days, you're only acquiring a small number of users.

Businesses that focus on downloads rather than retention can end up in trouble because they think they're performing better than they actually are.

What Is the Average App Retention Rate? 

The average retention rate for apps depends on their industry. For example, according to data from Liftoff:

IndustryRetention Rate After 30 Days of App Installment
News13.3%
Shopping (marketplace)8.7%
Finance (investment)7.1%
Education2.5%
Productivity4.1%
Dating5.1%
Books 6%
Health & Fitness4%

How To Calculate App Retention

You can use the following formula to measure your app retention rate:

Daily Active Users (DAU) / Monthly Active Users (MAU) = App retention rate

Calculating your churn rate or the number of users you lose across a certain time is also important. You can calculate your app churn rate with the formula below:

(Number of Churned Customers ÷ Total Number of Customers at Start of Time Period) × 100

6 Tactics To Increase Your App Retention

Now that we covered app retention, it's time to understand what you can do to improve it. Use these tactics to keep customers engaged during their app use:

1. Attract the Right Users

To improve your retention, you must focus on attracting the right users in the first place. Customers who aren't the right fit will uninstall your app once they find out it's not for them.

It all comes down to your marketing strategy --- are you getting the right message to the right people? A high churn rate within the first few hours of downloading suggests you send the wrong signals.

To determine who your ideal user is, you can look into your product data and identify the common patterns between these two personas:

  • Loyal customers: What common denominators do your best users share? For example, what demographics or social platforms do they use the most?    

  • Churned customers: What attributes do churned users have in common? Where do users tend to drop off in their app journey?

To uncover this data, you can use product data analysis software such as Mixpanel, Amplitude, or UXCam. Next, you can use the data as a guideline to improve your marketing campaigns and attract better users. 

2. Optimize Onboarding

Onboarding creates the first impression of your mobile app in the user's mind. If users can't see the value of your app during onboarding, then they'll be more likely to churn and uninstall your product. Follow these four steps to optimize your onboarding:

Reduce the Number of Steps as Much as Possible During Onboarding

Effective onboarding needs to be straight to the point. If the customer has to go through too many steps before seeing your app's value, it will make onboarding less efficient. 

Customize the Onboarding Process Based on the User's Goals

Your mobile app may serve different audiences with various needs. You want to ask the user questions at the beginning of their product journey about what they want from your app so that you can personalize their onboarding. 

Lead the User to Their "Aha" Moment

The "aha" moment is when the user starts to see the value of your product and how it helps them meet their goals. 

For example, Uber's "aha" moment is when a user books their first ride with the platform. For Dropbox, it's when the user saves one file in a folder on one device. 

During onboarding, you must aim to lead the user to their "aha" moment as soon as possible. The sooner they can see the value of your product, the more likely they are to stick to your app. 

Provide the User With Adequate Support

During the user's onboarding process, provide them with all the resources they need to get the most out of your app. Also, ensure to be there to answer any questions they may have during the process. 

"When it comes to onboarding, we've found that the most important thing is to always be available," says Teri Wilson, CEO at iDoneThis, a productivity tool. "Might sound like we're trying to be your significant other, but we want to be your life partner at work. We want to make sure our users know not just our tool but that we can help them implement best practices within their team."

3. Integrate Chat and In-app Messaging

In-app messaging allows you to send contextual messages to catch users' attention, engage them, and drive them toward features that meet their needs. You can use in-app messaging to improve retention with the following use cases:

Announce New Feature Updates to Users That Improve Their Experience

In-app messaging is an excellent way to inform users about any new features you've worked on behind the scenes. You can showcase new features to customers and the benefits the updates bring to their app experience. 

Celebrate Any Wins or Progress the User Makes Within Your App

A little encouragement goes a long way in keeping users engaged. You can use in-app messaging to acknowledge any progress the customer makes during their user experience to encourage them to continue using your app. 

Promote Upsell Offers

Upsell offers are any additional perks the user can access if they change to a more exclusive membership. When a specific segment of your target has shown a lot of engagement with your app, you can showcase them upsell offers via in-app messaging they can unlock if they upgrade. 

4. Collect User Feedback

When you collect user feedback about their experience and what they want from your app, you can use these insights to improve your product and increase retention. Different ways to collect user feedback include:

User Surveys

You can send users a survey via in-app messaging or email to ask them questions about their app experience. Make sure that your survey is as short and straightforward as possible: a study by SurveyMonkey shows that surveys longer than eight minutes have completion rates 5--20% lower than shorter surveys.

Customer Interviews

Another way to collect feedback is to run customer interviews where you can ask any question you may have directly to the user. Prepare the right customer discovery questions to gather the best insights about their needs and expectations.

Forums

You can establish a community forum where users can ask you and others about the problems they experience with your app. It's where you can be on the lookout for recurrent issues with your app and fix them quickly. 

For example, the vacation and short-term rental platform Airbnb has a community forum where users can ask questions about the app. It encourages discussion between users and helps Airbnb collect meaningful feedback from their users' experiences on the platform.

5. Implement a Customer Rewards Program

A rewards program is a way to reward users for their app loyalty. The program gives customers an incentive to use your app in exchange for perks. 

For example, ride-sharing and food-delivery platform Uber has a rewards program called Uber Rewards that allows users to earn points for booked rides or food they order.

Bond Brand Loyalty research shows that 81% of customers believe loyalty programs encourage them to continue doing business with a brand. Here's how you can set up your customer rewards program to increase user loyalty and retention:

  1. Choose the type of action you want to reward: Let's say you manage a daily login calendar app. You can offer points or in-app benefits if users open the app every day for each month.

  2. Identify the type of order to offer: Next, identify how you plan to reward customers for their loyalty. For example, do you want to provide discounts or exclusive access to new features? 

6. Monitor Your Product Data

Keep track of your product data as you focus on improving your retention to determine whether your efforts are going in the right direction. Here are the metrics you want to monitor:

Overall Retention Rate

The first obvious metric you want to monitor is your retention rate. Keep track of how much your efforts directly improve your retention over time. 

Overall Churn Rate

Next, to complement your retention rate, you also want to keep track of how many users you're losing now compared to before. You should see a decrease in your churn rate along with a higher retention rate.  

Net Promoter Score (NPS)

Your NPS score is a score of 0 to 11 that customers can use to rank how likely they are to recommend your mobile app to others. It's a solid customer satisfaction score directly related to retention.  

Daily Active Users (DAU)

Daily Active Users (DAU), as the name suggests, refers to the number of active users within your app daily. The higher your DAU, the better you are at engaging users. 

Monthly Active Users (DAU)

Monthly Active Users (MAU) refers to the number of users interacting with your mobile app. You should track this metric along with your Daily Active Users (DAU).

App Retention Is Key to a Successful Product

Increasing retention comes down to making your app experience as engaging as possible, which you can create with the help of responsive in-app messaging. 

To integrate chat and in-app messaging as part of your app, you can use Stream's Chat API, which is fully customizable and complies with all the online security regulations that exist, such as HIPAA and the GDPR. Explore our demos to learn more.