Understanding how well your business keeps customers engaged is crucial for success. Retention rate is a key metric to measure this success, but there's no one-size-fits-all approach. Depending of your goals and therefore your KPIs you can choose one of them to measure strategies or tactics.
Let's explore three common retention methodologies:
Classic Retention (Day N)
This method tracks the percentage of new users who return on a specific day. For example, if 3 out of 10 new users return on the second day, your Day 2 retention rate is 30%.
- Benefits: Daily granularity, easy to explain and calculate.
- Limitations: Sensitive to daily fluctuations.
- Best for: Measuring the immediate impact of short-term campaigns or analyzing day-to-day retention trends.
Range Retention
This measures retention over a specific time interval, like a week or a month. For instance, if 9 out of 50 new users return within the first week, your first-week retention rate is 18%.
- Benefits: Smooths out daily noise, easy to explain, good for long-term trend analysis.
- Limitations: Less granular, longer lag time for results.
- Best for: Monitoring overall business health and identifying weekly or monthly behavioral patterns.
Rolling Retention
This calculates the percentage of new users who return on or after a specific day. It provides a single metric representing long-term customer engagement.
- Benefits: Fast to calculate, reflects overall stickiness.
- Limitations: Open-ended, can be constantly changing, doesn't differentiate between frequent and infrequent users.
- Best for: Supplementing other KPIs and understanding long-term customer relationships.
Choosing the Right Method
- Classic Retention: Ideal for tracking short-term campaigns and daily engagement.
- Range Retention: Best for monitoring overall business health and identifying behavioral patterns.
- Rolling Retention: Useful for supplementing other metrics and understanding long-term customer relationships.