Retention can create 25x aggregate revenue when optimized toward incentives and viral loops

AAARRR Pirate Funnel- Retention

43% of optimization efforts have a 100%+ impact on growth in the funnel

On average, 70 to 95% of the revenue of businesses comes from upsells and renewals — THREEKIT

Background

Why should customers come back to you? This is the central question to retention; if they have a great starting experience but see no value to continue you have no retention. What you want to avoid is a situation where value creation stops quickly. Some of the measures to be used to understand and better optimize retention are:

• Retention rate vs. churn rate
• Open rate of emails
• Click through rate of emails
• Customer churn
• Month to recover CAC
• Average customer retention length (time people stay active customers)
• Net Promoter Score
• Infrequent logins

Context

Retention is about addressing some key questions that lead to strategic decisions on retaining customers in the long term:

• How long are customers active?
• How long are customers using my service?
• What does customer retention mean for my service?
• What is most valuable to my customers?

Retention boils down to problem-solving. If the type of problem you’re solving for your customers is ongoing then you’re more likely to have higher retention. However, if it’s a one-off that happens frequently then the question is what are the side-effects or by-products of your solution that will continue? Understanding this helps identify how to retain customers.

Takeaway

If you cannot continuously provide value, customers will eventually churn. A high churn rate means more cost and more cost means less profitability. Retention is vital to growth, and an area where growth leaks are hard to recover if it starts to become unoptimized.

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ABOUT — Growth Thinking

Growth Thinking is a design methodology for growth hacking by the bestselling author of Ready Set Growth Hack, Nader Sabry. It has been applied as a book and a $1 million challenge known as the 10-day growth hacking challenge, which has generated $138m in revenue. This methodology has been adopted by universities like Harvard and Stanford, fortune 500s (Google/Microsoft), and unicorns.