Make Your Retention Great Again: A Growth Hacker’s Guide to Retention Optimization

RETENTION
GREATAGAIN
MAKEYOUR
A GROWTH HACKER’SGUIDE
TO RETENTION OPTIMIZATION

Make Your Retention Great Again
A Growth Hacker’s Guide to Retention
Optimization

Offered by

Table of Contents

1. The way you report user retention is critical to optimizing it
Scenario #1: Reporting retention on signups
Scenario #2: Reporting retention for onboarded users
2. The Retention Optimization Guide
Step #1: Check how many users are returning
1. Take Off Retention Curve
2. Cliff Falling Retention Curve
3. Highway to Zero Retention Curve
4. 99 problems but retention ain’t one!
5. Drop it like it’s hot
Step #2: Learn why users are returning
Reach out to your customers
Customer Feedback
Experiment with freebies
Step #3: Find out why the users who aren’t returning missed the thing that
kept the other users returning
Step #4: Develop and implement the features and actions needed to reduce
the amount of users churned at step #3
How SideKick Experiments With Retention Optimization
3. Habit formation – Why it’s essential for your app
1. How relevant is the problem you are fixing for your user?
2. How do I make the user understand how relevant the need is for him?
3. How well does your app solve the issue?

“Make your retention great again” by InnerTrends.com 2 / 23

It’s Monday morning. You have a coffee on your desk in
your favourite mug. You’re feeling refreshed and ready
for a great new week but then the whole lot comes
crashing down with just one sentence from your CEO:
“For the next month we’re going to be focusing exclusively
on our web app’s retention rate.”
Your pulse quickens and if you weren’t a grown up you know
you’d almost certainly burst into tears! But then, just when
you think it can’t get any worse, he offers you the unique
responsibility of optimizing it. Disaster! Quick, where’s the
nearest exit?!?


Chapter 1
The way you report user retention
is critical in optimizing it

Seriously though, been there, done that. I’ve struggled for years to find the
magic bullet that will make retention optimization painless.
While I still don’t have a quick and easy answer, I’ve come to realise that if
you change the way you look at retention, breaking it down into multiple
stages, it becomes a much less scary beast.
So if you’re ready to turn your scary monster into a cute little kitten,
something that even the most non-technical business owner can pet, stick
around, because this one’s for you.
We’re going to be talking about weekly
retention rates as we tickle our pet under the
chin but it’s worth remembering that these
principles apply just the same to daily, monthly
or annual reports.
Before we get into that
though, it’s really
important to first establish,
very clearly, what figures
you’re reporting on.

Specifically, are you looking at the retention rate of new signups or new
signups who have finished your onboarding process?
It might sound like a tiny and insignificant detail but get it wrong and you run
the risk of skewing your data.
If you said “new signups who finished the onboarding process” give yourself
a gold star and go to the top of the class. Here’s why:


Scenario #1: Reporting retention on signups
Let’s say you want to find out how many of your visitors stick around one
week after they decide to sign up.
You already know that your product had 3000 new sign ups and your report
shows a first week retention rate of 10%. That means that just 300 users
come back to your product after the first week.

Scenario #2: Reporting retention for onboarded
users
Instead you decide to look at how many onboarded users stick around after
one week.
You check the report again and, this time, see that out of the 3000 sign ups,
600 users successfully completed the onboarding process and 300 of them
returned after the first week.
That is a first week retention rate of 50%. Not too shabby!


The way you view the data has a huge influence on your decision
making process.
Look again at the data from scenario #1. With a first week retention rate of
just 10%, the obvious solution would be to create a campaign to increase
first week retention.
Maybe send a series of emails in a bid to persuade users to return. Some
users might return to the app but if this is you and your company, count
yourself lucky if you increase your retention rate to eleven or twelve per
cent!

But what if you were in charge of the company from scenario 2? With this set
of data it would quickly become obvious that retention isn’t really the issue
here.
The real problem is getting people to finish the onboarding process.
Users who finish onboarding during the first week have a high retention rate
so the most obvious solution would be to start an onboarding optimization
campaign (using data from your InnerTrends1
dashboard.)
This could increase your number of onboarded users from 600 to 900 or
even 1200 which in turn would mean that anywhere between 450 to 600
users will return to the app every week.


User onboarding is
critical, but it’s only one
piece of the pie.
If we then went back to the reporting method
in scenario 1 and reported retention to
signups, the rate has increased to 15-20%.
When a user begins to onboard your product, he is looking to fulfill and
satisfy the promises and expectations the landing pageand ads have made
to him. He will try to test your product and validate those promises.
Once he finishes the onboardingprocess he is either satisfied or dissatisfied
by the way the app solved his problem.
The onboarding experience itself is less relevant in influencing his decision to
come back, compared with how often the user needs to solve his problem,
and how important the problem was for him to begin with.
Here’s what serial entrepreneur turned VC David Skok had to say when we
asked him about customer retention:
One of the strongest indications of whether you will retain your
customer will be the score indicating how happy they were with the
product at the end of your onboarding process.
The second crucial indicator that we have seen is that if your
executive sponsor leaves the company, you are at much higher risk
of churn.
To derisk that, either make sure you have broader executive
sponsorship, or find a new champion fast.

David Skok
Serial entrepreneur turned VC @MatrixPartners


Onboarding is crucial because if the user doesn’t manage to validate the
expectations set by the landing page, he won’t be able to create a bond, and
there’s no reason for him to return to the product ever again.
But, implementing a good onboarding strategydoesn’t mean that he’ll keep
returning forever. The app must help the user build a habit if he is to return
on a regular basis.
Having established that reporting user retention based on the
onboarding rate will give you a better overall picture, it’s now time to
begin the actual process of retention optimization.
In preparation, we chatted with Internet entrepreneur and SaaS investor
Christoph Janz about which metric to focus our efforts on.
Specifically, we wanted to know if he agreed with us that first week retention
is the metric with the highest influence on optimizing overall retention (and
therefore a great place to start.)
I agree with that statement, but I would go a step further. Many
companies find that retention within the first days and even
activity within the first hours correlates very highly with
conversion and retention.
Why? People don’t have a large attention span and are
bombarded with information, products and ads all day long.
That’s why „time to wow“ is critical!

Christoph Janz
Internet entrepreneur, SaaS investor, partner at
@pointninecap


Chapter 2
The Retention Optimization
Guide

Here at InnerTrends we believe that breaking things down into smaller parts
gives us a much easier way to tackle the challenges we face.
This is the step-by-step framework we use to fix issues related to user
retention. We’ll show you how to make use of this framework by running
through the most common retention scenarios.
Step #1: Check how many users are returning
First things first: Check your analytics and see how many users are
currently returning to the app.
You will find yourself looking at one of the following graphs:
1. Take Off Retention Curve

This is how the graph looks for apps where people love to come back (except
Facebook. We’ll get to that graph in a moment.)
You’ll lose some in the first week, maybe they found a competitor’s product
that they decided to try. You’ll lose some more in the second and third weeks
as some people who didn’t really need your app drop off but it stabilizes
after that.


Great growth can come from this retention curve.
2. Cliff Falling Retention Curve

If you happen to come across this situation, you might notice that only a
small amount of users are returning during the first week, but those that do
will stick around for a long time.
Could this be related to habit formation? Are you selling an aspirin or a
vitamin?
Aspirin solves an Existing Pain.
If you have a headache, you will go swiftly to your nearest
pharmacy and buy some Aspirin. You won’t discuss it for
long, you won’t haggle on price (not that you can anyway
in a pharmacy, but you get the point).
You have a pain, it impacts you, and you want to get rid of
it as soon as possible.
Vaccine prevents a Potential Pain.
Now, while you’re at the pharmacy, the pharmacist might
want to sell you a Vaccine. Using FUD (fear, uncertainty
and doubt), he will try to convince you that you need to buy
the vaccine now, so as to avoid getting sick this winter.
You are not sick right now, but you MIGHT be in the future,
and the vaccine is the solution to prevent this Potential
Pain.


Vitamin provides a Potential Gain.
This pushy pharmacist might also try to sell you some
Vitamins. While you feel good right now, the pharmacist
tells you that with vitamins, you will potentially feel better.
A better, stronger you. Obviously he can’t guarantee it; you
have to trust him.

Nicolas Deville (via LinkedIn)
Managing Director at Maestrano
How often are you making users experience the core value of your product?
3. Highway to Zero Retention Curve

In this scenario, the retention rate is really high during the first couple of
weeks. The sad part: it’s slowly but surely going down.
4. 99 problems but retention ain’t one


If you happen to come across this scenario where your retention rate is
constantly really high, it could be because of any one of three things:
1. Your tracking is bugged. (Take a deep breath, check your tracking code,
make sure everything is reported properly.)
2. You work at Facebook. (Good job! Ask Mark for a raise.)
3. You own the next unicorn. (Congratulations. Profit!)
5. Drop it like it’s hot

If your product’s retention resembles what you see in the report above, it
might be that there’s something fishy going on within the product.
It looks like you are able to convince your users to finish the onboarding, but
once they get to experience the product they leave, never to return again.
Make sure you break it down step by step and see exactly what makes your
users act this way. I’m sorry to have to be the one to break it to you but this
is about as bad as it gets.
Neither of the following options are an easy fix since they require radical
changes and iterations to your product:
● The problem you’re already trying to fix isn’t an actual problem (see
aspirin vs. vitamin)
● Your product fixes the problem, but not in the way people expect it to.


After you check your analytics and find out how many users are coming
back, it’s time to move on to Step #2 and find out exactly why those users
are returning.
Step #2: Learn why users are returning
Identifying the type of user that is coming back to your app on a consistent
basis won’t be enough to help you reduce churn. You also need to find out
what makes them come back.
Figuring out what makes them return is the secret ingredient you’re going to
use to optimize retention
Reach out to your customers
A good way to find out what makes user return is to get your customers on
the phone. It doesn’t matter how big you are, they will appreciate it and you
will learn critical information about what makes them love your product.
Make sure every interaction and mention is addressed. Whether it’s
Facebook, Twitter, or email, leave no stone unturned when it comes to
interacting with your customers.
One of the easiest things that you can do to improve your
customer retention is adopt a policy in your company that no
customer engagement is ignored.

Justin Butlion (via YotPo),
Director of Business Performance


Providing customer support can actually help you set yourself apart from the
other apps in your marketplace. Customers will appreciate your willingness
to go that extra mile in order to solve their issue.
Customer Feedback
The second best approach is to send out surveyswith open-ended
questions. They will help you gather data from a large amount of users.
The survey’s purpose is to help you find out which feature of your product
the customers find most valuable.
Go ahead and ask your customers about their experience with your product.
You will either end up with a piece that can be used as a testimonial, or with
some honest feedback which will help you identify pain points which you can
fix.
This in turn will ultimately improve retention for other customers as well.
Experiment with freebies
The third way would be to offerfree stuffto your users and see what piques
their interest.
Since you’re not really sure what it
takes to make them get back to the
app, experimenting with freebies can
help you identify new retention
drivers.
People normally use free stuff
because it’s helpful. Otherwise they
will just install it because it’s free,
but never re-use it.

The idea behind freebies is to see what features or benefits people would be
interested in using.


After you learn what works, you can put a price on it and add it to a bundle
for your new users.
These are only a few ways to learn why your users love the app. Once you
find out what influences their behavior, it’s time to move on to the next step.
Step #3: Find out why the users who aren’t
returning missed the thing that kept the other
users returning
The next step is to see why a specific feature is making a difference for only
some of the users instead of all of them.
Is the featurenot relevant for them? Maybe they’re not perceiving it the
same way? Or were they not able to discover it?
The actions you’re going to
implement in order to optimize
retention will be completely
different depending on the issues
you discover.
The answer to these questions will
define the strategy that will help you
increase retention. It’s very likely that
you will discover an issue related to
the audience of your product, or the
UX.
Having learned from your happy customers what makes your app awesome,
the next step is to find out why the users who churned weren’t able to go
through the same path.


Step #4: Develop and implement the features and
actions needed to reduce the amount of users
churned at step #3
Once you’ve identified exactly what’s missing and what steered the churned
users the wrong way, go ahead and implement the features and actions
needed to help them get back on track.
The problem with retention is that it takes a bit of time to measure the
impact of any actions on it, but if you discovered the problem and fixed it,
the impact will be easy to spot.
How SideKick Experiments With Retention Optimization
Having looked together at how retention rate should be reported and
broken down the steps needed to optimise your retention rate, we’re
delighted to share with you a brilliant case study from Brian Balfour showing
exactly what he and his team did to optimise the retention issues they
encountered at SideKick.
Hold your horses, the video is coming very soon. First we need to dig into
one more very important aspect of retention:


Chapter 3
Habit formation – Why it’s
essential for your app

Increasing user retention basically comes down to influencing the behavior
of your users through habit creation.
One of the simplest (but not easy!) ways to increase the retention rate of
your app is to help your user get into the habit of using your app regularly. If
users are in the habit of returning, you need never again worry about your
retention rate. Simple!
But, helping your user to develop a habit is not easy. Although common
Internet wisdom says that it takes just 21 days to form a habit, a study
published by Phillippa Lally in the European Journal of Social Psychology
disagrees. She found that it takes, on average, 66 days for a habit to become
automatic.
And how long it takes a new habit to form can vary widely depending
on the behavior, the person, and the circumstances. In Lally’s study, it
took anywhere from 18 days to 254 days for people to form a new habit.
In other words, if you want to set your expectations appropriately, the
truth is that it will probably take you anywhere from two months to
eight months to build a new behavior into your life — not 21 days.
Interestingly, the researchers also found that “missing one opportunity
to perform the behavior did not materially affect the habit formation
process.”
In other words, it doesn’t matter if you mess up every now and then.
Building better habits is not an allornothing process.

James Clear
Writer, Speaker, Entrepreneur


The dearth of this “all or nothing” idea is great news for you and your app.
Even if a user doesn’t check your app every single day, habits can still be built
and it’s totally possible for you to reverse engineer the behavior of your
users.
There are three questions you need to ask yourself as you begin this
process:
1. How relevant is the problem you are fixing for
your user?
How important is it for him to get this problem under control? How much
time, money, and energy must he invest in order to use your app? Is his need
recurrent?
If you can honestly say that you’re solving an important, recurring problem,
you have a better than average chance of helping your user develop a habit.
One quick and easy way to check just how important the problem you’re
solving really is, is to solve just one part of their problem. Having done this,
stop and see how your user reacts.
Let’s use a fitness app as an example. Instead of making bold promises like
“lose 70 lbs in 7 days”, have your user set up a small, attainable goal, that
they would feel confident achieving.
If you make it something small like 5 lbs, your app can help them with
personalized advice to reach this goal.
By the time they lose those 5 lbs they will already be well on their way of
forming the new habit. The app will fulfill the promises made, and you can
ask the users to upgrade if they want to get more help losing weight. The
friction was reduced to a minimum once they achieved their goal.


The same technique was used at PadiAct, an email collection tool. Users
were offered 70 free leads every month with the option to upgrade once
they reached this amount.
The difference between PadiAct and other similar apps was that they were
offering all of the premium features even to free accounts.
They didn’t want to put any friction between their users and the limit of 70
leads. The app was designed in such a way to give them all the available
opportunities to reach that limit.
The upgrade rate was over 90%.
2. How do I make the user understand how
relevant the need is for him?
If your user doesn’t consider the problem to be important or relevant to him,
you’re going to have a tough time creating a habit around your app.
In this instance, your only remaining option would be to sell the user on the
benefits of the solution.
This is a common practice for
B2B software where case studies
are often used but this aspect is
still largely influenced by how
important the problem is to the
user.
Here’s another example of how this
was implemented at PadiAct: they
would listen to any success story
related to the product, and do their
best to make sure all of their users
would hear about it.

They had no audience when they started out, but launching case study after
case study helped them build a following.


Not only did PadiAct get more customers, they even landed partnerships
from companies who wanted to share the benefits of the case studies with
their own customers.
3. How well does your app solve the issue?
Another factor, and arguably the one which you exercise the most control
over, is how well your app solves the user’s problem.
When a user realizes that he has a problem, he will try to find the shortest
path to the solution:

Once he begins searching for a solution, he realizes that there are multiple
ways for him to reach the desired outcome.
Your fitness app is one of the hundreds of apps available for this purpose.
He decides to download and test the three top rated apps.


The way these apps are designed can either make them an impediment in
the user’s quest to lose weight, or they can facilitate his journey and shorten
the road to his desired outcome.
This is the point where you can heavily influence his behavior through your
app’s UX. You can design his experience every step of the way: the landing
page, the signup form, the onboarding process, and how the first user
experience goes, even when there is no data inside the app (blank states).
The app that guides the user on the easiest path to the solution will be the
one that the user decides to keep on using.
Arguably the very best thing about habit formation is that, having created
one, it becomes hard to break a habit. If your app becomes part of a user’s


daily routine it will be difficult for that user to leave your app and use a
different one.
The prime example of this is iPhone users versus Android users. Both are
dedicated to their choice, probably for reasons that they would find difficult
to articulate.
And you know what they say: “Once you go Mac, you’ll never go back!”


And now you know all you need to know about habit formation and
optimizing your retention rate, it’s time for that case study we
promised you.
As Brian himself says, “growth is good but retention is forever” and this
might just be the most important thirty-five minutes you ever invested in
your business:

This ebook is part of our monthly newsletter: The Experiment.
The Experiment is a monthly digest where we break down marketing experiments and learn what
made them work. If you’re hungry for well documented experiments that you can replicate,
subscribe to The Experiment newsletter today.

Now that you have your guide to retention optimization, which steps are you going to implement
to make your users come back to your product?

Learn more about how InnerTrends can help you optimize your user onboarding based on the
actions that they take within your product.


伀瀀琀椀洀椀稀攀夀漀甀爀唀猀攀爀伀渀戀漀愀爀搀椀渀最

Make Your Retention Great Again: A Growth Hacker’s Guide to Retention Optimization

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