App User Retention: How to Win New Users?

User acquisition is the first step to an app’s success. The next thing that really matters is user retention. It measures if users are regularly using your app after downloading it or abandoning it.

A low retention rate can increase user acquisition costs and churn rates. These metrics directly impact your app’s success. In this guide, we’ll explore key app user retention metrics and best practices to retain users.

How to Measure App User Retention?

There are four key app user retention metrics to measure user retention rate. These include:

1. User retention rate
2. Customer churn rate
3. Daily and monthly active users
4. Customer lifetime value

These metrics allow you to measure your app’s overall user retention rate. Thus, you get an idea of what your app’s success rate is like. 

User retention rate 

User retention rate provides a quantitative way to measure the percentage of users you’re retaining over a set period of time.

You will need three numbers to calculate your app’s user retention rate:

CS = Number of customers at the beginning of the set period

CE = Number of customers at the end of the set period

CN = Number of new customers gained during the set period

Now you can put these numbers in the given formula: 

[(CE – CN) / CS] x 100 = customer retention rate 

For example, you can calculate your user retention over a quarter, you can add the number of customers at the start of the period, customers gained during the period, and customers at the end of the period to the formula.

Customer churn rate 

Customer churn rate represents the number of customers lost during a set period of time. It’s the opposite of retention rate. High churn rate means acquired users are easily lost. This means that your customer acquisition costs will also be high.

You can calculate your churn rate with the given formula:

(CS + CN) – (CE) = lost customers 

Daily (DAU) and monthly (MAU) active users

DAU and MAU show the number of users active on your app on a daily and monthly basis. For these metrics, however, there is no defined way to measure.

The definition of ‘active’ may vary from business to business. For some companies, it may mean opening the app while for others, users completing a specific action may count as ‘active’. 

You need to define what your ‘active’ metric is. Once you have it, you will have to define a way to identify unique users, such as via user IDs. Finally, use a product analytics tool to measure active users.

Customer lifetime value (CLV) 

Customer lifetime value, also known as CLV, measures how much value or revenue you can expect from a customer over their average lifespan with your brand. To measure CLV, you need two metrics: customer value and average customer lifespan.

The customer value refers to the average number of purchases a customer makes in a given timeframe multiplied by the average value of their purchase. 

You can calculate customer value by multiplying the value of an average sale and the number of sales made within a specific period of time.

The average customer lifespan refers to how long a customer is retained. The longer you retain users, the more likely they’re to purchase from your brand.

Now that you’ve understood these terms, here’s the formula to calculate CLV:

[Customer value] x [Average customer lifespan] = Customer lifetime value 

Tracking user retention

Depending on your product goals and audience, the way you track user retention can be different than your competitors. For instance, a keyword search tool may find Monthly Active Users as a more suitable metric than daily. 

Similarly, your pricing model can indicate which user retention metrics are suitable for your app. The key thing is to track these metrics consistently. These metrics can help you understand how user retention improves or declines over a long period of time.

User Retention Benchmarks: What Do They Mean?

Just like user retention metrics differ based on the product, they vary significantly based on industry. You can still understand some general benchmarks to get a sense of where your current retention rate stands.

Generally, a good user retention rate at the 30-day mark after download is 10% or higher for mobile apps. But as said, the benchmarks can vary based on the industry of your app. In some cases, a lower retention rate may be considered successful too.

How to Retain New Users for Your App?

User retention follows the ‘win-win situation’ rule. When you’re defining best measures to retain new users, you consider two aspects:

• How to meet your users’ needs
• How to meet your business’ needs

Your goal is to find a balance between the two. In any strategy, make sure that it increases positive user engagement, reduces negative user experiences, and benefits your business.

1. Meet expectations

Delivering exactly what your users expect when they download your app is essential. It creates a positive experience and reduces the churn rate. 

Set clear expectations. All the content and images on your web copy and app store copy should clearly show your app’s current user experience. Use the best app store optimization practices to find the right users for your app.

Don’t hide core features behind paywalls. After user acquisition, many companies move their high-priority features on paid tiers. But if users don’t get what they signed up for, they will find an alternative. A better way is to keep your core features free and move additional upgrades to the paid versions.

Collect user data. User data can help you understand what leads users to sign up, and how they navigate through the app. You can use this data to improve user flows and overall user experience. 

2. Reduce friction

Creating good features is one thing, but keeping them easily accessible is another. The next key to user retention is reducing friction within your app.

Here are some key ways to do this:

Design an intuitive and visually aligned app. Follow the best app design principles when you design your app’s user experience (UX) and user interface (UI). Make sure that your app is intuitive, responsive, and easy-to-use.

Ensure that your app is consistent. A good app is consistent with branding elements and its user experience. However, poor user flows and backend can create friction. You can fix this by:

• Reducing load times
• Eliminating outages and crashes
• Reducing the number of steps to complete tasks

Run usability testing. Usability testing allows you to test how easy and intuitive your app is to use with real users. It can help you find workflows and app screens that need improvements, reducing friction in all aspects.

3. Incentivize return visits

App user retention isn’t all about the user. At times, you need to address your business needs in a way that it creates a positive engagement for users as well. 

That’s when you can think of incentivizing returns. In simple words, you make users visit your app repeatedly to gain some value from it. Their return visits are profitable for your business too.

Gamify your app. Use gaming principles such as scores, badges, and rewards to create systems for user engagement. This ‘reward’ system makes users perform specific tasks or stay on your app for longer. 

Here are some popular ways to gamify an app:

• Challenge users to earn rewards
• Add leaderboards in your app
• Daily streaks
• Show user stats (bonuses, rewards, goals)
• Create levels within an app

Build loyalty. Customer retention is much easier with a dedicated loyalty program. In particular, loyalty programs work by either rewarding users with something they want or rescuing them from something they dislike.

Some of the most common loyalty programs include:

• Referral programs that reward customers for referring new users
• Points-based programs that let users earn points for completing a specific task
• Paid membership programs where users pay an additional fee to join the program to get ongoing rewards

Send personalized push notifications. When personalized for the user, push notifications can be a great way to incentivize a return visit. Avoid sending too many notifications that may push users away instead.

Build an Engaging App in Minutes

While there are no shortcuts to high retention rate, building an app with AI and no-code can make it much easier.

Natively lets you execute your app idea within minutes — without any coding. The faster you build on your idea, the easier it is to iterate on user feedback. At the same time, you can integrate a mobile analytics tool for data. 

It takes an hour to build an MVP and several weeks for your app’s final version. Since you don’t need to focus on developing the app, you can focus on user retention. It’s feasible — start building with Natively now.