Why user retention is important
Posted: Mon Jan 20, 2025 4:59 am
User retention is a key factor for the long-term success of any product or service.
When users come back again and again, it shows that they find value in what you offer, whether through consistent performance, satisfaction of their needs, or a positive experience.
High customer retention rates reduce marketing and acquisition costs as businesses don’t have chief vp compliance email list to spend as much to win back users. They also increase CLV, which means higher revenue without having to constantly chase new customers.
In short, user retention improves
customer loyalty
turning users into advocates more likely to recommend others.
User retention vs. customer churn
User retention and churn are two sides of the same coin. Retention measures how well users are retained, while churn shows how many have been lost. Here's how they compare:
Metrics User retention Customer churn
Definition Percentage of users who continue to use your product Percentage of users who stop using your product
Goal: Increase the number of returning users. Reduce the number of lost users.
Focus Improve engagement and satisfaction Identify the reasons why users abandon
Impact on growth Leads to sustainable and profitable growth Indicates the need to improve the product or service
User retention vs. churn
Key Insight:
We see our customers as guests at a party, and we are the hosts. Our daily work consists of improving every important aspect of the customer experience.
Jeff Bezos, Amazon CEO
What is considered a good retention rate?
A good customer retention rate depends on the sector and the type of product or service offered.
For example, in the SaaS industry, a retention rate of 85% or higher is considered high, while eCommerce companies may consider a good retention rate to be between 40-60%, depending on the product lifecycle.
It's essential to compare your customer retention rates to industry benchmarks, but the most important aspect is to improve your own over time.
Pro Tip: To measure SaaS customer success, focus on metrics like product adoption, frequency of use, and customer satisfaction (CSAT).
When users come back again and again, it shows that they find value in what you offer, whether through consistent performance, satisfaction of their needs, or a positive experience.
High customer retention rates reduce marketing and acquisition costs as businesses don’t have chief vp compliance email list to spend as much to win back users. They also increase CLV, which means higher revenue without having to constantly chase new customers.
In short, user retention improves
customer loyalty
turning users into advocates more likely to recommend others.
User retention vs. customer churn
User retention and churn are two sides of the same coin. Retention measures how well users are retained, while churn shows how many have been lost. Here's how they compare:
Metrics User retention Customer churn
Definition Percentage of users who continue to use your product Percentage of users who stop using your product
Goal: Increase the number of returning users. Reduce the number of lost users.
Focus Improve engagement and satisfaction Identify the reasons why users abandon
Impact on growth Leads to sustainable and profitable growth Indicates the need to improve the product or service
User retention vs. churn
Key Insight:
We see our customers as guests at a party, and we are the hosts. Our daily work consists of improving every important aspect of the customer experience.
Jeff Bezos, Amazon CEO
What is considered a good retention rate?
A good customer retention rate depends on the sector and the type of product or service offered.
For example, in the SaaS industry, a retention rate of 85% or higher is considered high, while eCommerce companies may consider a good retention rate to be between 40-60%, depending on the product lifecycle.
It's essential to compare your customer retention rates to industry benchmarks, but the most important aspect is to improve your own over time.
Pro Tip: To measure SaaS customer success, focus on metrics like product adoption, frequency of use, and customer satisfaction (CSAT).