Why does retention matter?
Retention matters because it’s deeply connected to every aspect of a business.
Working on retention affects how much money you make, how many people sign up, how happy they are, how long they stick around, what they say about you and how many people they tell. No other aspect of product work connects as many important dots.
If users stick around for long enough to pay for another month, that’s just money in the bank. The longer they stick around the more chances you get to upsell them onto higher plans or other services. If you’re freemium, keeping people for longer improves your chances of converting them to paid users.
The longer people stay the more likely they are to bring others into the fold. I’m not just talking about friend invites, I’m talking about virality as a consequence of natural usage. People signup, they do your thing, your thing goes out into the world, other people see it, they like it, they check you out and some signup.
Not all products have this kind of virality baked in, some rely on ads or sales teams to get people in the door. This brings us back to money in the bank. The more people you retain, the more money you make, the more you can spend on ads and sales, and round and round it goes.
Retention is one of the most underrated growth channels. It’s also the least understood.