One of the major transitions that app and website owners have undergone in recent times has been the shift in focus from acquiring new users to retaining current users. Building customer loyalty is taking over measuring the number of “installs” in the app universe as business owners begin to realise the advantages of customer retention over acquisition. In short, it’s the quality of users you have versus the quantity.
The advantage that user retention has over new user acquisition is that it is six times more cost-effective to retain a current customer than it is to acquire a new one. Statistics show that existing customers are 50% more likely to try new products and spend 31% more money compared to new customers.
Increasing customer retention rates by a mere 5% leads to a 25% to 95% increase in profit, according to a Bain & Company study. Despite this overwhelming evidence, only 18% of companies make retention a top initiative.
Let’s First Understand The Existing Trends Across Sectors
Customer retention rate
In simple terms, retention rate can be defined as “returning to the app at least 1x within 30 days.” It’s the number of times a customer uses your app after installation within the first three months. As per industry standards, retention rate is usually measured for 90 days or over the span of one quarter.
The shift in focus from attaining new users to retaining the existing ones comes from the revelation in understanding app or website metrics. While ‘installs’ were considered to be the strongest pillar of success, what people didn’t take into account was the fickleness of these users.
On an average, over 29% of these new customers use the app just once causing a big leak in the number of installs that convert. In a further study, this number reduced to 23% by the end of month three. This is why brands are going beyond measuring app installs and focusing on in-app behavior to promote engagement and retention.