How to Built Retention Metrics - Deepstash

How to Built Retention Metrics

  • Have enough tooling to track signups on a cohort basis, such as Google Analytics, Google Analytics 360, Segment, Mixpanel, or Amplitude.
  • Know your proxy metric. What action is the user performing? (consuming content, a download, a daily active user?). Your proxy metric will be similar to your main goal metric, such as monthly active subscribers. 

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MORE IDEAS FROM Retention Metrics That Matter

Retention measures how long your customer stays actively engaged with your product or business.

The two key retention metrics are:

  • Core retention: The total number of active users after a specific time period.
  • Proxy retention: These are action-based metrics. They are the core actions users need to take to support your model. It is not pure retention but an action that should lead to retention at some time.

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Focus on new users and the initial experiences they have with your product. 

To create a great first impression:

  • Run experiments on user onboarding.
  • Personalise your sales process.
  • Incorporate feedback loops.

Target better users. Look at the channels users come through (targeted and organic). Measure each channel to find your ideal customer.

Kill features that don't provide enough core value. Use Firebase experiments to see how a rollout or a build is impacting retention metrics.

Change your model or your pricing.

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A cohort is a group of users who experience the product value at about the same time.

  • Look at users for a month. The first month is Month Zero. All the users that experience the product in Month Zero is your cohort.
  • Track the behaviour of each key retention metric for that cohort of users.

A PM can look at data per cohort to see what numbers improved over time. This can highlight the value within your product that attracts and keeps your users.

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A product-market fit gives you a sense of how ready your product is for the market. It's a measure of revenue against the payback period and shows the percentage of users who value your product over a period of time.

When you have a product-market fit, you can:

  • Scale your company
  • Spend money on growth
  • Be confident in your financial modelling
  • Be confident in your retention models.

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Building a Retention Chart

The Activation Curve shows the number of users activated over a specific period of time.

Many early-stage companies have bad retention at the start. They can get customers in but haven't figured out the mechanics to keep them around. When the metrics start to improve over time, you generally have the concept of product-market fit.

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Usage-Based Pricing

Usage-based pricing is a go-to-market model where the customer pays based on how much they use your product or service. 

It goes by many names: consumption-based pricing, pay-per-use pricing, and pay-as-you-go pricing.

The simplest examples of these are utility bills like water and electricity.

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Sales revenue

Month-over-month or year-over-year sales results tell you:

  • How interested people are in purchasing your products 
  • If your marketing efforts are paying off
  • Your performance vs. your competitors’ performance

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Teams > Individuals in SaaS businesses

SaaS companies make disproportionately more money with Team plans:

  1. Deal Sizes are bigger
  2. Retention is so much better. Once a team is collaborating in a product, no single user can easily make the decision to leave
  3. Seat Expansion. Successful Team products have “net negative churn,” meaning that expansion from retained accounts exceeds revenue lost from churned accounts.

Individual plans are the definition of a Leaky Bucket, with usual yearly churn rates of 50%. The Individual plan makes sense for enabling sharing and collaboration as soon as you can. But Teams are the ultimate destination.

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