It's extremely important to optimize the retention rate because:

• Getting new users is expensive (losing them = losing money).
• Users who stay longer on the app/site/platform will generate more revenue in the long term.
• Users who stay longer are more expected to promote the service.
• Loyal users’ data can show how they use the app thus how it can be improved for other users.

What drives retention

What drives retention is above all the quality of the product. The product needs to fit its users' needs, otherwise they will stop using it. If the retention rate keeps decreasing, it means the product doesn’t answer the users’ problems. Once the retention rate is stable, the product needs to be improved to increase retention.

Several factors can make users leave:

• Bad communication with the users (the product isn’t in their mind anymore or they are annoyed by too many emails/notifications)
• The competition offers a better solution to their problem

Products can have stored value (= the longer the users use the product, the more likely they are to continue using it).

Examples:

• Evernote: the more notes users have stored, the more likely they will come back to read them or add some, and the less likely they are to switch to a competitor (they don’t want to loose their notes)
• Instagram: the more photos, subscriptions and subscribers users have, the more likely they are to come back and use the app again (it improves their experience of the product).

The three phases of retention

The methods for retaining users evolve according to the phase the user is in.