As an app developer, your final goal is to make your app profitable and visible in the app store. You may be pouring a lot of resources into ASO, which can produce good results. However, your rank-building efforts will not be complete without retention rate improvement. Retention rate is one of the most important user engagement metrics, which makes an app sticky and illustrates the way users interact and engage with your application. It also has an impact on ranking in App Store and Google Play — the algorithms favor apps that are able to engage users. To improve app performance and make sure users return to your application time after time, you need to optimize retention rate.
What is retention rate?
In general terms, the retention rate is the number of users that return to complete a designated action in a certain period of time. This definition is vague, but that is because marketers assign different meanings to the notion of retention rate, depending on the type of the app, business model, user base or industry. For mobile applications, retention rate most often denotes users interacting with the app after the install. The formula for calculating retention rate is the following:
Retention rate = # of users who completed the action on day x after day 0 / total # of users who installed the app on day 0
This is the most basic calculation pertinent to the mobile application. Note that the formula is valid for the users from the same cohort, that is who installed the app on the same day. User segmentation and grouping per the day of install, sign up or first interaction with the app is the baseline for determining app retention rate.
Overall, RR helps to measure the efficiency of the app per user and over time; gives important insights about the app performance and helps locate the points, where users drop out. With this information, app developers can optimize both the user experience and their monetization strategy.
How to find out what is good retention rate?
As mentioned above, RR differs per industry and app type. Therefore, there is no threshold for an optimal retention rate. Obviously, the higher the percentage of users that return to the application and perform target actions, the better it is for app monetization. However, the return of 100 percent of users is an unattainable result.
Arguably, it’s better to compare RR with the previous results demonstrated by the app, rather than with other apps in the same category. The data has too many variables, such as the platform type of the app. Thus, the metrics without the context might be obsolete.
Improving RR for the application
Considering the fact that 21 percent of users abandon the app just after using it once, the focus on retention rate is essential. Higher RR improves the lifetime value (LTV) of the users and decreases the overall cost of customer acquisition. The first two steps to ensuring good RR for the app is to think about the value that application for the users and the quality of the user experience. When it’s clear what users are getting from the app and the churn due to bugs and crushes is eliminated, it’s time for additional strategies to increase the retention rate.
Personalization and individualization of mobile experience
Users crave the experience that would be individually tailored to their needs. This might include using the user’s first name in in-app communications, saving the data for more convenient sign-in and in-app purchases, keeping track of the user preferences and interests and offering relevant products and services. Personalization can drive up the conversion rate by almost 40 percent, if the individual behavior is taken into account.
Introducing new users to the app features and functions is what helps to get them through the initial stages. Additionally, it will decrease the churn rate of first-time users due to confusion with new app experience. A simple, yet effective guide through the app should point out information fields and the main actions in the app. When done right, onboarding can increase LTV by 500 percent and RR by 50 percent.
Notifications that appear on the home screen of mobile phone are great for reminding users to return to your application. The smart use of push notifications can increase retention rate by up to 180 percent and significantly improve engagement. For the apps in the Ecommerce, Music, Travel and Food & Drink categories, engagement is getting more than a 100 percent increase after the implementation of push notifications, according to Localytics.
For the users that opted out the push notifications, there is another tactic in line. Try to remind them about your app via remarketing, locating and targeting users on other channels, such as email or social media. Usually, users need to provide those in order to sign up. The strategy is reported to be successful, when marketers take into account users’ personal preferences.
Optimizing an app for increasing retention rate is well worth the effort. It decreases the overall worth of acquiring a customer and increases the LTV of the user. Mobile marketers and app developers should that keep track of the retention rate, have better chances of locating app crushes in time and optimizing their user engagement strategies on the go. Accordingly, retention rate is a crucial metric and one of the main KPI for any advertising campaign and is equally effective for increasing app visibility in app stores.