Improving Your App Retention Rate in 2020

Gilad Bechar Gilad Bechar | 5.7.20

Originally posted August, 2019

There are over 5 million apps on the market, and most of them are free. Because of this flood of new apps, mobile app retention rates are decreasing. It’s easier than ever for a user to find an app or service similar to yours, and it takes only a few seconds.

It’s therefore extremely important to work on increasing your average retention rate for your app. Simply pushing tons of traffic and mobile app installs to your app everyday won’t help if people jump the fence soon after.

User acquisition is becoming more and more expensive. Actually, it’s 5 times more expensive to bring in a new client than to retain an existing one.

What is mobile user retention?

The retention rate is one of the most important app store optimization factors to take into consideration. It’s the percentage of active users (people who use your app continuously) over a given period of time.

Generally, what’s used across the industry (and remember, it’s subjective), is the percentage of an app’s users who return to the app within three months of its initial download. The benchmark is around 30-35% at the three month mark, but of course it varies widely according to the app category.

It might surprise you to discover that retention stats are this staggeringly low. On average, only just over a quarter of users return to an app over ten times. So, what happened to the rest? They lost interest. These users contribute to what’s known as the “churn rate” (the percentage of users that leave the app in a given period of time).

Around a quarter of users will abandon an app after just one use!

In Google Play, an app’s retention rate is calculated in the following intervals:

  • 1 day
  • 7 days
  • 15 days
  • 30 days

 

Google Play retention report

iOS differs slightly, where App Store Connect allows you to view your Daily Retention rate. See below:

App Store Connect retention report

Finally, AppsFlyer, another key player, measures retention in either weekly or daily intervals within dates selected by you:

  • In the Daily report, retention can be calculated for up to 30 days
  • In the Weekly report, retention can be calculated for up to 12 weeks

Where does the real value lie in user retention?

How important is user retention? Firstly, we’d like to introduce something new here: LTV (or lifetime investment). This refers to the prediction of how much a particular customer is likely to spend on your app, or how much profit they’re going to provide you with. It’s a vital metric for creating marketing budgets and enabling companies to run efficiently, and it starts with the retention rate. You can’t accurately work out the LTV without knowing your retention rate, which makes your retention stats highly valuable.

Secondly, since most users download an app and abandon it straight away, user retention acts as the best indicator of your app’s success.

Analyzing it can help you discover multiple reasons for which a business is losing money. If users are churning at a fast rate because of a bug or lack of content, the app’s profitability will likely decrease. Alternatively…

The higher the retention rate, the higher the chances are of the user converting into a paying customer to provide you with a good ROI.

You should remember that there’s no one size fits all. A flight booking app with a low retention rate is not a problem, as users uninstall the app after the flight. On the other hand, a B2B app where users are linked to a monthly payment usually has a higher retention rate.

For apps that survive off of conversions and monetization, such as Uber or Tinder, retention is the most critical. Active users yield the most revenue. And revenue is the ultimate end goal, right?

Taking this all into account, retention marketing is both cheaper than acquisition and provides you with a higher revenue. Meaning you can pump money into other areas and you’ll probably grow faster too.

Even better, if tracking your retention helps you calculate your LTV, and knowing your LTV enables you to pump your budget into acquiring more valuable users, well…you get the idea. Improving your retention can help to improve your acquisition!

It’s worth noting that the same existing users, who are happy with your product, are more likely to pass on the word: “download this app, it’s great”! Word of mouth is the cheapest and yet strongest way to acquire high value customers anyway.

How to calculate retention rate?

There are multiple ways you can go about this with different user retention metrics.

One option is measuring the Aggregate Retention Rate (ARR). This is the total number of monthly active users (MAU) divided by the total number of installs in that period.

MAU / #installs = % ARR

Aggregate App Retention Rate

However, this is less used since it’s harder to interpret and extract information from.

Most commonly, user retention is measured by working out the percentage of users who use an app within a certain amount of days since their first use. User abandonment, engagement and retention can be tracked better through this cohort analysis of the retention rate. You can calculate this using the following formula:

(# users at the end of the period – # users acquired throughout the period) / (# of users at the start of the period) * 100 = App Retention Rate

App retention rate formula

Of course, app retention rates can also be calculated in a simpler way by only taking into consideration the users that were acquired at the start of the time period (most analytics aso tools can track users easily).

Here’s an example: 1000 users launch an app for the first time on the day they download it. The following day, 750 users open it. The app’s day one retention is therefore 75%.

Once you’ve calculated your retention rate, you can go on to work out the LTV to predict your users’ future value.

How to increase app retention rate?

Now that we’ve discussed what app retention is and how it can be calculated, we can start talking about the matter that’s most important to your business – How to increase your app’s retention rate?

First things first, start with your retention in mind before even launching the app.

The holy grail of mobile strategy is getting users addicted to your product, but there are different routes that will lead you there. The rise of behavioural psychology gives marketers a new set of tricks that will drive users crazy and drive major sales simultaneously.

To effectively influence users, a savvy app developer or marketer should become familiar with different methods. Here are 5 practical strategies, some influenced by behavioural psychology and others more traditional, you can take on board to increase your app retention. You can even employ the help of a mobile marketing agency to help you along the way.

Optimize the app’s onboarding process

With the huge amount of users who abandon an app immediately after downloading it, you need to prove you’re worth their time ASAP.

Start by asking yourself “What are the best ways to keep the onboarding process simple and intuitive to reduce any potential friction?”

  • Reduce the number of steps to bring users closer to conversion without overwhelming them (e.g. by asking too many questions).
    • Still, make sure to highlight the benefits.
  • Choose whether to display content in a list, map or grid view; what’s easier?
  • Allow users to sign up with existing social media accounts to keep it as quick and hassle free as possible.
Onboarding pages of an app

Next, ask yourself “How can I keep users informed, engaged and excited to begin using my app?”

  • Provide a clear indication of progress (e.g. use a progress bar, as shown above).
  • Use brief tutorials and explain all features.

Finally, ask yourself “How can I best understand what my users are doing after onboarding?” This is critical to understanding user retention.

Focus on Day 1 – Day 3 Retention

A whopping 77% of users drop off within the first three days of installing an app. If you can wow users with your slick onboarding and get them to stick around, you’re on your way to success.

The higher the retention rate in the day 1 – day 3 mark, the higher in the 30 and 90 day marks. Our experience shows that retention rate decreases (on average) from 25% on the first day to 15% on the third, to 10% after two weeks.

Aha! Moment and Product Dependency: A Mobile Must-Have

You want your users to understand why your app brings them value, right? And for this to make them need your product? The key here is to guide users to their ‘aha! Moment’ as quickly as possible, and to continuously remind them of this. You know, the moment where the lightbulb flashes and they suddenly realise just how much they’ve been missing without your app in their life.

Whilst it seems pretty obvious, building an essential app is extremely hard to do. On the bright side, your product doesn’t have to answer the most urgent of needs.

Take Waze, for instance. This navigation app has managed to change the way millions of people drive with such impact that many of us can no longer get from A to B without its wisdom. Even when we know the way, we still rely on Waze.

If you can fundamentally change one simple action and make it easier or more convenient, going back to the pre-existing path might be painful enough for users to help you achieve your goal.

Remember:

  • Once you understand your app’s ‘aha! moment’, you can easily guide users towards the behaviours that lead there.
  • You can apply the Fogg Behavioural Model for driving user behaviour: Behaviour = Motivation x Ability x Trigger.

Utilize triggers and encourage customer investment and dependency

So now you’ve retained your customers with your ultra effective onboarding process, but how do you prompt them to stick with your app beyond this?

We’ve got a few ideas that just might help you.

Push notifications are pop-up messages sent to a device when an app isn’t running.

Push notifications are some of the best ways for an app to communicate with users. Revolut app tells you whenever a payment has been made. Games tell you when you should log in again for your daily boost. Facebook notifies you about messages and likes.

Sending small reminders here and there can influence your app’s retention rate. Just make sure you don’t spam users and have come prepared with a great push notification strategy.

Using push notifications can triple your user engagement! Just make sure users only receive information that’s valuable and relevant to them. You don’t want to be that pesky app that sends irrelevant information, do you?

The Right Place at the Right Time

Another idea is to remember that mobile devices draw tons of information from users. Some of this information, such as geo-location, can be instrumental in optimizing your brand’s mobile product specifically for consumers.

Knowing where consumers are allows marketers to offer context-specific content.

The most obvious way to use this data is to alert existing clients on new deals when they are physically near your store, but there are ways to get even more creative too.

KLM is a great example. The airline created a mobile game that lets users fly a paper jet over a virtual version of Amsterdam. Aside from being beautifully made and enjoyable to play, the game also uses mobile data to promote user loyalty.

With every purchase of a KLM flight, users win more points. Even cooler, users can advance in the game when they’re at the airport gate waiting to board their KLM flight (using geo-location technology).

The KLM Game

Customer Investment through Rewards, Loyalty Programs & Exclusive Deals

It’s far less likely that a user will abandon an app the more they use it. That’s why you need to create growth cycles. This is commonly known as the ‘sunk cost trap’: we’re more likely to stick with something the more we invest into it. Once you’ve built up your profile or database, it would require more hassle to move and reorganize your data.

But how can you ensure this? One way is to include features that highlight a user’s progress to encourage them to invest more time (e.g. to reach a goal).

Another is to introduce fresh content as often as possible to ensure users don’t lose interest. Whether it’s cool music, text, visuals or exclusive deals – these will make sure users keep coming back.

The more great content you put out there, the more satisfied your users will be.

Old or depreciated content is one of the factors that affects gaming apps the most. People finish the game and leave. The only games that stray from this situation are online games (Fortnite, for example) or games with high replayability (like Sudoku and Crosswords).

Even content that doesn’t directly relate to your product, but fits in with its general concept, is fair game.

Starbucks iOS App Page

Let’s take Starbucks as an example. The app features a variety of content (such as music) that doesn’t necessarily relate to their products.

Users who have the app get this content as added value and check-in with the app regularly to see what’s new. It’s a great way to make sure that your brand stays on the consumer’s radar.

Starbucks also offers their users loyalty points and the chance to win different prizes every time they purchase a coffee. This in turn leads users to purchase more coffee to use up their points, also falling into a growth cycle, which we touched upon above. Killing two birds with one stone!

Yet another way to promote user loyalty and investment is by using the app to keep consumers up-to-date on new products, deals and launches.

Being aware of deals before everyone else is awesome, but still not good enough – offer users deals that are only available through mobile purchases to incentivize app users to check-in regularly.

Let’s go back to the Starbucks example; receiving loyalty points and the chance to win different prizes is a deal that’s only available through the app. This therefore incentivizes Starbucks customers to consistently make their purchases through the app.

Emotional Dependency: The FOMO Factor

FOMOFear Of Missing Out – is what drives millions worldwide to constantly stare at their smartphones and hit refresh. Facebook, WhatsApp, Twitter – we want it all, all the time.

Adding a social component will not only make for a better app and increase user engagement. It will also remind users’ of what they might be missing when they’re logged out. You can also use the push mechanism to give users a taste of what goes on in the wonderful world of your app while they’re not in it, e.g. by sending time sensitive offers and mysterious deals.

Social Dependency: May the Best User Win

When this unique mobile strategy works, it pays off big time. Competitiveness drives people to do the craziest things and invest their most precious resources. Why not utilize this trait to gain something from it?

Turning your product into a competitive game can really increase app retention. If you let users know that their friends and family seem to be doing much better than they are, they’ll go to extreme lengths in order to maintain their hard-earned positions in the game.

Create an even better app by adding the option to share victories on social media and compete head-to-head with others, preferably people that the user actually knows. You’ll be surprised to find out just how invested competitive users get.

This strategy will turn your app from a fun little hobby to a personal goal that goes far beyond the mobile world.

Ensure highest quality, functionality and regular software updates

Your users aren’t going to stick around if your app is bad quality. What would be in it for them?

Let’s quickly cover what makes an app ‘bad quality’. First, you have the ANR (application not responding, then you’ve got crashes and poor load times too.

  • An ANR is when an app is unresponsive, leaving the user hanging.
  • A crash is when an app quits unexpectedly.
  • Load times refer to the length of time it takes for each action to load within the app. Slower load times = poor app performance.

What’s more, the above software errors are not only connected to the user experience and retention, but also acquisition in Google Play. Google rewards strong performing apps with higher organic traffic. So, in ridding your app of ANRs, crashes and slow load times, you’re covering all bases.

As for Apple’s App Store, it also rewards ‘good quality’ apps with a higher ranking. If lots of crashes makes your app ‘bad quality’, then you best believe it’s going to lower the retention and the ranking.

There are a number of ways you can avoid these issues, such as:

  • Test before you launch to ensure your load times, crashes and ANRs won’t be an issue.  
    • There’s an entire section in Google Play Console dedicated to monitoring app performance (load times, crashes, ANR, etc).
    • Apple’s App Store Connect provides you with a Crash report, showing how many times a day your app crashes. It can be filtered according to different parameters, such as platform or app version, to help target the cause and optimize your app.
Google Play ANR Report
  • Regularly update your app with new features and personalized content.
  • Monitor your analytics to best understand what improvements can be made.
  • Keep the user interface simple and functional. The more complicated the process, the more likely a user is to abandon before converting.
  • Splash screens can help with functionality if your app takes a while to load. Use them with caution though, because they can also increase the amount of actions a user needs to take.
  • Prioritize responsiveness/ speed. Really, your app should load as fast as or faster than a mobile site (the majority of users expect immediate responses).

Understand and communicate with your user

Communication is key to pretty much anything in life, and user retention is no different. If you build your app around your users’ daily routine, you’re giving them less reason to leave. You can map their behaviour to see what leads to retention, and don’t forget to understand their demographics. What actions do they take that correlates with this?

The best way to turn any consumer into a loyal one is by making them part of your brand. User-generated content (UGC) is the name of the game.

Mobile apps introduce endless possibilities for users to partake in brand communities and contribute their own content. For instance, in 2014, to promote their “What is Perfect Conference”, TedXPortland launched a mobile app that overlaid the word ‘perfect’ onto user-generated pictures that were shared on social media.

People immediately became curious about what the pictures meant, which helped create a buzz around the conference. The photos were later projected onto the walls of the event as part of the setting.

We also strongly advise you to encourage two-way communication to receive feedback and solve customer complaints. Make sure you take it all on board to establish what app features compel and add value to users, encouraging them to use the app. For example, what channels do they prefer? Excellent customer service contributes to users feeling valued.

As explained here, app store reviews and ratings are a great asset. Apps like Dropbox often take on board their reviews for future updates to improve their app. The in-app feedback mechanism asks you to give a star rating within the app, and if it’s below three, you’re asked to give written feedback. Dropbox used this to their advantage, ironically – when they noticed an influx of one star reviews, they could recognise the source (the absence of changelogs) and combat it specifically. Thereby improving their app, leading to a better app retention rate!

App Retention – Takeaways

  • Continuously improve your onboarding process, app functionality and the way you analyse your data. You’re never done with optimization. This requires:  
    • Keeping the onboarding process quick, simple and clear. Remember time is of the essence before users abandon your app altogether.
    • Using a testing process to avoid any major software issues in the app and regularly updating the app. So, avoid ANRs, crashes and poor load times.
  • Identifying and understanding your users is at the bottom line of everything:  
    • First, you must identify who your users are.
    • Then, you can deliver them the right message.
    • You can utilize any of the above methods, but if you’re targeting the wrong users, or targeting the right users with the wrong tone, you’re not going to get anywhere.
  • Dependency goes a long way, whether it’s emotional, social or product related.  
    • Use exclusive rewards, loyalty programs, and triggers to encourage customer loyalty.
  • It’s cheaper and more valuable to retain existing customers than to constantly acquire new users who will almost immediately abandon your app.  
    • Using your retention rate to calculate the LTV (lifetime value) even helps to improve your acquisition by allowing you to target the most valuable consumers.

If you’re interested in finding out more about how we can help improve your app’s retention rates, please don’t hesitate to get in touch.

 

As a mobile marketing agency, we pride ourselves on optimizing all levels of the app marketing funnel. Retention is just one of the elements our team of experts can help you with.

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