What Is User Retention? How to Measure & Improve It (2023)
User retention rates for digital products are notoriously low. One month after downloading a mobile app, the average retention rate is just over 40% — and it drops down to around 30% by month three. Keeping those users invested in your product is a tough thing to get right, but it’s important that you do so.
User retention is a critical metric for any product. It goes beyond sales or subscriptions, which can both temporarily spike — user retention paints a picture of how well your product is at capturing attention and guiding them to their “aha!” moment.
Building a product that delivers real value in an effortless, delightful way is the recipe for retaining loyal users and earning long-term subscriptions, renewals, and referrals. You must know your user retention rate, how to measure it, and what strategies can be implemented to improve it.
What Is User Retention?
User retention is the number of users who continue to interact with your product over a given time period. We’ll discuss how to measure user retention in depth below, but understand two things:
You calculate user retention over a defined period that you determine. For example, you can audit your user retention rate based on a recurring schedule, like monthly or quarterly, or you can choose a specific time period to examine.
You can calculate user retention for your app at large, or you can focus on specific features. If you’re measuring user retention for your overall product, you can look at the number of logins over a period of time. For specifics, focus on the number of users who interacted with a certain feature over your timeframe.
User retention is not the same as customer retention or churn — those are distinct customer retention metrics with their own uses.
User Retention vs. Customer Retention
While user retention looks at anyone who regularly interacts with your product, customer retention only measures people who regularly pay for it. Retained customers regularly re-up a paid monthly subscription, for example.
If you offer a paid subscription service, you’ll measure customer retention instead of user retention. It’s also crucial to look at if you’re working off a freemium model — comparing your user retention rate with your customer retention rate can offer insights into which features are the most engaging and are worth paying for.
User Retention vs. Churn
Your churn rate shows the number of users you’ve lost over a given period of time — essentially, it’s the opposite of your user retention rate. This could include customers who have canceled their subscriptions (or decided not to renew) or users who have deleted your app.
A high churn rate indicates your users don’t see the value in your product. High churn is also a red flag for vulnerability — it means that your product isn’t meeting users’ needs, which shows there is an opportunity for a competitor to encroach into your customer base.
What Are the 3 User Journey Phases That Drive Retention?
More than 70% of app users churn within the first three months. During that time, users go through three phases: onboarding, activation, and habitual use.
These three phases are significant barriers to user retention because they ask something from your users — they must take action to progress to the next phase. Maintain a high percentage of retained users by ensuring each phase offers a streamlined, pleasant product experience.
1. User Onboarding
During onboarding, first-time users sign up and acclimate to your product. Creating a smooth and simple new user onboarding experience can lead users to the next phase more quickly, while a complicated or confusing process will lose their interest. Onboarding is also your opportunity to point users toward your most important features — those that are most likely to motivate them to use your product regularly.
User activation is the phase when your users see your product’s value. This is their “aha!” moment — the moment when everything clicks, and they see how your product can play a beneficial role in their day-to-day tasks. The amount of time it takes a user to reach this moment is the time-to-value (TTV). Activated users feel positively toward your product, and they’re much more likely to stay retained.
3. Habit Forming
In the third phase, users form a habit involving your product, and they make regular usage a part of their routine. Users in this phase feel they need your product, and getting more people into the habit-forming stage will mean better user retention rates. Offering ongoing guidance with in-app messaging can help your users continue to discover new features and functionality as they move into this stage, create more sticky products, and drive overall product adoption.
What Is a Good User Retention Rate?
User retention rates for apps vary significantly depending on the industry, but the average is around 5.6% user retention after 30 days.
A “good” retention rate for your product will depend on the maturity of your company and your application. While your goal is to keep your rate as high as possible, companies that are trying to scale need higher user retention rates than those that are testing the waters with a new offering.
For a good starting point, track your rate against industry benchmarks to see how you compare to the average.
Here are the average 30-day user retention rates for different industries:
- 5% for business apps
- 6% for communication apps
- 10.2% for digital banking apps
- 5.6% for eCommerce apps
- 2.5% for education apps
- 4% for health and fitness apps
- 4.1% for productivity apps
- 3.9% for social apps
How Do You Calculate User Retention?
You set the variables for how you calculate your user retention rate. You can tweak the time frame by measuring across a regular time period (think monthly or quarterly) or measuring during specific moments in time (like right after your product’s onboarding period).
You also get the freedom to define what “retention” means. That term could translate directly to downloads or subscriptions, or you could choose to track how many users interact with a specific feature of your product.
You have even more flexibility in the way you calculate your user retention rate. There are four methods for measuring user retention:
1. Full Retention
Full retention looks at the users who returned to your app daily over a certain time period. This is a very specific method for measuring user retention — and it makes the most sense for daily-use products. The equation for full retention rate is:
Full retention rate = Number of users who used your product every day during your time period / Number of users who first used your product on Day 0 of your time period
2. Classic Retention
Classic retention measures users who come back daily on a certain day of the time period. For example, if you’re measuring over a 30-day period, this method only tracks users who returned to your product on Day 30.
It doesn’t measure how many users came back on any other day in between their starting date and the measure date, but it is a semi-reliable way to measure whether people are re-engaging regularly with your product. You measure classic retention rate by:
Classic retention rate = Number of users who used your product on a specific day / Number of users who first used your product on Day 0 of your time period
3. Rolling Retention
Rolling retention tracks users who return on a certain day or on any day after that within your time period. This offers a more flexible approach than classic or full retention. This method is easy to use, but it will view your active daily users the same as someone who only returns to your app once during your time period. The equation for rolling retention rate is:
Rolling retention rate = Number of users who used your product on or after a specific day / Number of users who first used your product on Day 0 of your time period
4. Return Retention
The most flexible method for measuring is return retention. This approach looks at users who return at least once within the time period. That return date can happen at any point during your chosen timeframe and still count toward your user retention rate. Return retention rate is calculated by:
Return retention rate = Number of users who returned to your product at least once during your time period / Number of users who first used your product on Day 0 of your time period
8 Tips to Improve User Retention
Achieving an above-average user retention rate is all about creating a product that adds value – while reducing friction for your users. Your goal should be to showcase to your users the value of your product as soon as possible.
1. Create a Simple Onboarding Experience
The goal of customer onboarding is to make your users feel knowledgeable about your product without making them go through a complicated process. An information-rich, iterative process creates a great first impression — and that goes a long way toward retaining engaged users.
For a successful onboarding experience, try:
- Including in-app demos and tutorials
- Using informative tooltips to explain product features
- Creating interactive walkthroughs
- Offering personalization options upfront
- Linking to an in-app knowledge base or customer support
Utilizing a user adoption platform like Whatfix can help make this process simple for you, too.
2. Use Cohort Analysis to Understand Your App’s Value
Cohort analysis is a data-driven way to compare the behavior of users belonging to different “cohorts,” or user segmentations, such as acquisition date or demographic data. Looking at cohorts shows you which features and user characteristics correlate with retention so you can double down on them. As with user retention rate calculations, you have some flexibility here in how you define your cohorts, though you should segment your users based on criteria important to your product.
This type of user analysis lets you draw conclusions between your users’ behavior and your product’s retention rates, which should inform your product development going forward.
Above: Example of a cohort analysis in Google Analytics
For instance, if users who spend more time in your app are better retained, you should focus your development efforts on keeping users engaged longer. If you find that users who interact with a specific feature tend to stick around, be sure your marketing and onboarding efforts showcase that specific component of your product.
3. Design a Simple, Intuitive UI
Users are looking for a UI that offers clear, accessible benefits. If you’re noticing problems with your retention rate, audit your UI to ensure it’s designed to work well for your specific customers.
Potential UI elements to audit include:
- Make sure buttons and supported gestures are tuned to your audience (apps aimed at children or the elderly may need to allow for less dexterity)
- Emphasizing your product’s important features without overloading users with extra clutter
- Organizing your app so users can get where they’re trying to go with the fewest steps possible
- Checking to see that your app is responsive and fast — users won’t stick around for slow-loading products
Above: Example of a user flow map.
If you’ve noticed a drop-off in your user retention and you’re unsure which UI feature is causing it, try A/B variant testing. A/B testing calls for creating multiple versions of different features and serving them to specific segments of your audience. This allows you to gather feedback on different UI components — meaning you can pinpoint which features resonate with your users and which ones are driving down your retention rates.
4. Use Engagement Hooks in Your App
Engagement hooks are built-in triggers that encourage your users to take an action. After taking that action, your users should feel rewarded in some way, which further invests them in your product. The ultimate goal is for your users to want to engage in that specific action even without you prompting them first. That’s the heart of habitual use, and it’s great for user retention.
Gamification is an example of engagement hooks at work. Turning app usage into a fun and rewarding experience encourage your users to build a habit around it. Other hooks can include:
- Offering product discounts to long-time users
- Rewarding active users with points that they can use to unlock features of your product
- Giving badges or status symbols to engaged users (if your app has a social component or forum)
5. Prompt Users to Return to Your App
Giving users a gentle nudge inviting them back into your app eventually gets them to the habitual stage. You can utilize push notifications or emails for this purpose (but be sure you’re not overwhelming users with too many messages).
The best return prompts are relevant to the user, personalized to their needs, and actionable. You should give them a specific call-to-action (CTA) if they do tap a notification or click a link in an email, such as exploring a newly launched feature, completing a step in the set-up process, or checking out a product update. Most of all, your messages need to show their value immediately. If you send push notifications your users aren’t interested in, they’re likely to change their notification settings or disable them altogether.
It’s important to target the right users with return prompt notifications. Aim for people who seem less engaged with your product than they were during a different time period. You can also reach out to users who have fully churned to announce a new product feature or redesign that they might enjoy.
6. Gather Feedback From Churned and Active Users
User feedback is extremely valuable for user retention. If you want to know the specific reasons why someone stuck with your product (or why they didn’t), asking them directly is your quickest path to actionable information.
For active users, you can build feedback opportunities into the product experience at specific times. You might want to push a notification that encourages app ratings and reviews for new users who have engaged with your product for less than a month. If they’ve been retained for several months, you push another round of notifications asking them to update their reviews.
Churned users are also valuable sources of feedback. They can point out your problem areas and give you a pathway to correct user retention problems. You can also build in natural opportunities to gather feedback from customers who are on their way out. Email unsubscribes can include a comment form where your customers can explain precisely why they’re opting out.
7. Use Product Analytics to Continuously Improve Your App
Examining product analytics means you can make strategic updates to improve your user retention rates. Product data, such as time spent in the app and feature usage rates, show which aspects of your product have the most impact on your users’ behavior.
Track your users’ typical behavior to get a baseline of how people engage with your product. Try to spot usage trends that point to areas for improvement — for example, if users don’t spend much time engaging with one of your core features, you may need to put that offering in a more obvious place or change the way it functions altogether.
Looking for anomalies is another great way to pinpoint areas where you need to improve. If you’ve recently updated or made changes to your app and you see a spike in churn, that could indicate that the changes are unpopular or that something isn’t working as intended.
Remember to weigh your improvements against your user retention rate goals. Making small or seemingly mundane changes could have a bigger impact on your users’ opinion of your product than a full-scale redesign.
8. Resolve Technical and Glaring UX Issues
Some things will drop your user retention rates immediately, such as:
- Technical problems such as app crashes, broken links, or bugs
- Slow loading times
- Intrusive pop-ups, ads, or feedback requests
App users (and customers in general) have very little patience for features that don’t work as expected. This is another area where churned user feedback becomes invaluable, as they can alert you to problems early on. If you do notice a drastic change in your user retention that seems unexplained, conduct an audit to make sure your app is functioning correctly.
While you should measure your user retention rate regularly, you also have the opportunity to gather user data on a flexible schedule. Tracking user retention at specific times in your product’s lifecycle gives you insight into what your customers are thinking.
User retention data is also helpful for evaluating the success of new marketing campaigns or user acquisition strategies. Consider tracking user retention if you:
- Update a landing page
- Change product messaging
- Target a new audience
- Make major changes to your product
Comparing your average user retention rates to your rates after an update is a great way to gauge how successful your changes are and provide you with a clear direction of where to go in the future.
Ready to improve your user retention with in-app messaging? Learn how to use Whatfix to drive user adoption and retention with in-app messaging now!