What is retention design?

Our main job is to retain the users we already have on our platform.

As soon as you begin this section, you will come across a major blocker:

"Man, I can't find the exact retention rate for my product" or "I don't have the data to plot this retention curve" or "Should I change my product because I don't have data?"

Well, this is a common blocker that most of us face, breaking it down into pieces always helps!

Example Problem:

When you don’t have access to primary data, using industry benchmarks can be a great way to estimate key metrics like retention rates. Let’s use Zomato and Swiggy as examples, two prominent players in the food delivery industry, to guide you through this process.

Step 1: Identify the Industry Standard

Begin by looking at the retention rate of a leading company in your industry. For instance, Zomato’s retention rate is around 70%. This rate serves as your baseline.

Step 2: Adjust Based on Relevant Factors

Adjust this baseline retention rate according to factors that influence your specific situation. Here’s how to approach this:

1. Time to Value:

• How quickly do users perceive value from your app? A faster time to value generally leads to higher retention.
• If your app delivers instant benefits (like instant discounts or quick meal delivery), you might add 5% to your retention estimate. Conversely, if users need to wait or go through a lengthy onboarding process, you might subtract 5%.

1. Natural Frequency:

• How frequently do users engage with your app? Daily interactions often result in higher retention.
• A daily-use app like a meal delivery service or a fitness tracker could see a 10% increase if used daily. In contrast, if your app is used only occasionally (like travel booking), you might see a 10% decrease.

1. Competition:

• The level of competition can affect your retention. High competition might drive your retention lower unless you offer something unique.
• In a market saturated with food delivery apps, you might subtract 10% from your estimate due to intense competition. If you have a unique offering that sets you apart, you might only subtract 5%.

1. Brand Value/Word of Mouth (WoM):

• The strength of your brand and the effectiveness of word of mouth can significantly impact retention. If users come through strong word of mouth, your retention rate could be higher.
• Zomato and Swiggy benefit from strong brand recognition and word of mouth (assumption-do your own research)), with a substantial percentage of users coming through these channels. If 20% of new users for these companies come from word of mouth, and your brand is less established, you might subtract up to 20% from your baseline estimate.

This adjustment should make you arrive at your Retention Rate, you can repeat the same process for attaining the MoM Retention for different ICP's and Features.

Note: These are not the only factors you can consider, tweak them for your product and relevance

Step 3: Plotting this Retention Rate

We need to have retention rate of a particular segment over some timeline to begin plotting the retention curve.

Here's an example for you, where we have:

1. ICP 1 : Tech-savy individual who orders at least twice a day from Zomato/Blinkit
2. ICP 2: Mid aged health freak, who orders only once a week (maybe) and prefers eating at home.

Because of their different personalities, they will tend to have different retention curves, one better than the other.

(Similarly, you could dig deeper, with the features and combination of features. This will help you prioritize which feature prioritization and launching engagement and retention campaigns)

Here's an example from one of our previous member submissions:

Step 4: Insights and Observations

We're at the very last leg of this section and just need to gather and present the insights from these curves.

1. Any particular ICP has better retention than other and the why behind it?(ICP 1 could be more hands on with tech and their lifestyle could favour better retention as compared to others)
2. Any particular feature or the combination of two features that derives better retention*(A combination of features used together might drive better value and hence more sticky, remember apple products work better with each other and the same goes for Freshchat)*

(Retention is a very important metric and often indicates the health of the users, we know it is tough to nail, but will be great!)