Want to be successful? Prepare for a daily struggle of constant rejection trying to retain users. The good news is that you’ll learn some lessons along the way and hopefully improve your retention KPIs
I work with loads of Saas businesses recently. What I see is that some questions are quite common across. I decided to start a series of texts that tackle most common challenges faced these days by subscription businesses. Here’s my first one. I hope it to be a living series, so please reach and feedback on what you feel I should cover next.
Dan Ariely is one of my favorite authors, expert in behavioral economy. Allow me to start here by butchering his quote and saying :
“Retention is like teenage sex: everyone SAYS they’re doing it, few are, and if they are then it’s not as great as they say it is.”
Some (most) of you might think- “F!@#$ off, I’m doing retention: I send e-mails.” Let me challenge you on this one- your emails probably suck, and they probably have promotions which train people to respond to the discount on your product instead of to see the actual value of the product.
Before I write about some lessons I’ve learned in retention, I want to write about what happens if you’re really good at everything else, but not good at retention. Twitter is a perfect example here. Twitter has extremely effective acquisition. Though, their activation rate into a monthly active user hovers around 10–15%. So, 85 out of every 100 users that tries Twitter, doesn’t get it and leaves. If you do the math on that, Twitter would run out of the entire Internet to acquire. What happens with Twitter is, they end up with ~350m MAU and almost 2bln dormant users! What they learned after they went public-
It’s much harder to reacquire someone that tried Twitter and didn’t get it, than to introduce someone to a great experience the first time.
What Twitter would have rather done is- not sign up as many of those users! Rather, wait until they figured out how to explain the vale and the service better to the average user, and then go out and get those users.
How you improve retention?
The first thing you have to do — learn what causes it? Only then you have learn to love the rejection (or aka the feedback) and the data as to why customers don’t retain.
Methods to retain users better
For few reasons, let’s take food delivery platform as an example. Like: Uber Eats, Postmates, Doordash, Bolt Food, Wolt etc. Because it’s probably an industry most of you can relate to. Plus, I dare to say that I have some hands-on experience here.
1. Improve the product!
You probably think- “No shit, Sherlock! That’s not very interesting for me.”
But the one thing I want you to take away, if nothing else, from this read is…
Retention is driven by a lunatic, or maniacal, focus on improving the core product.
And that is not usually by building new things into the product. It is usually by reducing the friction of the current product and making the product simpler to use. Sometimes even by removing features, than adding them. This is a mistake I see a ton of founders make. They (founders) think
“My products not super great, but I add this cool feature and it’s goanna be better.”
All it does is, it makes the product more complicated, and your retention rates decrease instead of increase.
What can food delivery platforms do to improve the product to increase retention? Data shows that with every additional restaurant they add in an area, they increase not only the conversion rate but also they increase the retention rate. I.E. how much and how many people who ordered first-time came back. Plus they increase the frequency.
By now you hopefully understand why those companies are very aggressive about adding as many restaurants as they can onto the platform →They see the return…
1. Smooth onboarding, more users (minimum order delivery)
The second thing they work on, is lowering the minimums and delivery fees on the platform.
Restaurants might get greedy and they might think- “I only want a delivery order if someone's gonna spend e.g. $20.” The problem is that, the conversion gets super low. Customers come to the platform and they see all these restaurants with high minimums. If a person orders just for her/himself, they might not want to spend that much money. So those platforms work directly with restaurants to help them understand that if they were able to lower their minimums and fees, they would actually make more money over the long run. Just with higher volume. And in almost all cases this is true…
2. Easier onboarding, UX, value communication
For food delivery platforms you often have 3 options on how to continue as a first-time user:
a. create an account you
b. could connect with social platform login (Facebook etc.)
c. create a guest account which just lets you go through, without giving any information
Data would show a disturbing trend- people that continue as a guest for their first order, their retention rates were drop continuously. Still, the volume of people clicking the guest account increases. How to solve it?
Experiment with UX, and value communication. Instead of having the above three options with equal weight, show the value of creating an account. Outline how users could quickly reorder food, how they can choose favorites, etc. Only then, below all of that information, show the guest account option.
The experiment might show that a platform is able to take new users and not lose any of them. Conversion rates stay the same. But instead of ~50% of people choosing a guest option for their first time order, it drops to 15%. And the people that now create accounts, that would have been guest accounts before, retain just as well as the people that were opting in to create accounts before the experiment.
It’s just few examples of different options figuring out want drives increased retention doing experiments and making the product better.
What are your thoughts? Do you see any parallel to your business? What do you want me to cover in my next texts?
Thanks for reading. Happy to hear your thoughts. You can reach me at https://www.linkedin.com/in/maciejkraus/