Metrics for Product Managers : Retention metrics

Metrics to keep users interested in the product

Retention metrics help understand whether your marketing and customer support efforts pay off. If you know your Customer Acquisition Cost, you know how much it takes to attract a new user. Your current clients are much more likely to try a new feature, switch to a better plan, or take part in an interview for user research, so it makes sense to focus on retaining them.

Retention rate

Customer retention rate (CRR) is the percentage of customers who stayed with the company after a certain time period. You can base your calculations on a number of downloads or first logins to the app.

Retention rate = Customers at the end of the calculated period – New customers / Customers at the start of the calculated period x 100

How to use retention rate: Based on this KPI, you can understand if and for how long you’ll be able to retain new customers when your customer retention rate is growing. In case it dropped, you can be on the lookout for a new competitor or a problem in customer service. According to the Product Benchmarks Report by Mixpanel, the average CRR for most software products is below 20 percent over 8 weeks, depending on the industry.

People are as likely to abandon SaaS apps as they are to bail on a media & entertainment ones after a week
Product Benchmarks Report by Mixpanel

You decide what type of incoming data to use for CRR calculations: what action is considered returning and over what time period you should measure retention.

Churn rate

While retention rate measures the percentage of users who stayed, the churn rate measures those you’ve lost. There are two types of churn rate: customer churn (number of users who canceled paid subscriptions) and revenue churn (amount of revenue lost due to customer churn). To measure customer churn rate, take the number of customers lost during a certain time period and divide it by the number of customers at the beginning of this time period.

Customer churn rate = Customers lost / Total customers

Average churn rate for subscription businesses
Source: Recurly Research

How to use churn rate. In terms of business success, it’s more effective to pay attention to revenue churn than to customer churn. However, customer churn rate can tell you a lot about customer satisfaction. If you measure churn rate after introducing a new subscription plan or applying a new feature, you can understand whether they were justified or not.

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