Retention Metrics

👋 Hi there - it’s Egemen. Thanks for reading Scalable.

Retention metrics give an indication of the quality of growth.

Retention rates can be measured in terms of activity levels or also payment retention cohorts.

Today, we’re having a deep-dive on must-know learnings on retention metrics.

Here’s a snapshot of what’s on the menu today:

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🧠 Deep-Dive: Retention Metrics

1. Customer Retention Rate

A strong retention rate means your product delivers value and keeps customers engaged. This simply measures how many customers stay with you over time.

• Best way to track? Use cohort analysis—group customers by signup date and track how many stick around.

• Older cohorts often retain better because early adopters are highly motivated users.

• Benchmark: 80% retention rate, 20% churn rate at the early growth stage.

To improve retention:

• Find out why customers leave (e.g., surveys, interviews).

• Improve onboarding and feature adoption.

• Use upselling and cross-selling to increase customer value.

2. Active Users

A crucial indicator of product engagement. Tracked as Daily Active Users (DAU), Weekly Active Users (WAU), or Monthly Active Users (MAU).

Power users (those who perform core actions regularly) are the best indicators of long-term engagement.

Businesses with network effects should see newer cohorts having higher engagement due to more users in the ecosystem.

To optimize your AUs:

• Define what makes a user "active" (not just logins but meaningful interactions).

• Improve product stickiness through habit-forming features.

• Track growth loops—how existing users bring in new ones (e.g., referrals, social sharing).

3. Churn Rate

Percentage of customers who stop using your product. Churn can be based on users (customer churn) or revenue (MRR churn).

Negative churn happens when expansion revenue (upsells/cross-sells) outweighs lost revenue from churned customers.

Key factors causing churn:

• Poor onboarding or lack of feature adoption.

• Product doesn’t deliver enough value.

• Selling to the wrong customer type (e.g., SMBs that go out of business quickly).

To reduce churn:

• Identify and address weak engagement signals.

• Use retention strategies like personalized re-engagement emails and loyalty incentives.

• Monitor customer satisfaction via Net Promoter Score (NPS) and feedback loops.

🗺️ Method: Growth Accounting Framework

Pay special attention to the definition of active users which may vary from business to business.

For example, you can choose to define active users as users who open the app once per day/week/month or as users who made a purchase conversion.

A good benchmark for DAU/MAU is > 50% since this signals that the product is part of a daily habit.

Datarockets has a massive deep-dive on this if you have a couple hours to read.

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