I have been thinking about products lately. I was inspired to do a short 1 minute video on my thought of the week on “retention”. Its a prelude to my upcoming podcast.
I was inspired by this podcast by SAAS Revolution with Brian Balfour, VP of Growth at Hubspot. He spoke about one of the key metrics for growing a SaaS business is retention. He argues that retention is important because you can’t grow a product unless you have retention. This applies to any product. It so happens that its what I have been thinking about – retention.
I work with lots of companies and speak to a lot of startups & founders. You start to notice patterns & trends. I believe that one of the key things you need to focus on in product is retention prior to growth. Otherwise you’ll be putting people into the top of the funnel, but they’ll be churning out the other end. It ultimately depends which is the bigger leak / blockage. A lot of people want to scale growth, but you need to have retention. It goes to the core product experience, which I delve into later in this post.
Brian gives an example of a product called Sidekick for tracking emails. They noticed they had a big activation issue for onboarding customers in the funnel. They had to fix that first. You can’t pour more people into the funnel if that is broken. It is a huge road block. After they fix that, they noticed that the next biggest issue was retention. So they had to focus on addressing that.
Retention is critical because customer needs to keep coming back. It is so hard to acquire a new customer. You have already done the hard job of acquiring them. The next challenge is to engage & retain them. For any product – particularly SaaS products, the whole model is built on retention. Even marketplaces and eCommerce businesses as well. Its transactional, but you’d want the customer to keep returning and transacting. You want to maximize LTV (Lifetime Value). For the customer to make as many repeatable purchases, transactions, photo uploads, likes, visits etc.. Great businesses are built on repeatable and sustained customer behaviour.
How do we do that though?
You need to build a product that customers love.
A product that they cannot live without. A product that they need. It has to be so sticky the customer keeps returning for more.
You can measure retention in a number of ways from NPS (net promoter scores) and retention in analytics.
One good measure that I mention briefly in the video is cohort analysis. Look at how groups of customers perform over time e.g. 1 August 2015 compared with 1 September 2015.
Does the new group increase their usage of the product and the rate they come back? What you are ultimately trying to determine is:
Is retention improving over time?
We can compare D1, D7, D30, D90, D365. This refers to Day 1, Day 7, Day 30, etc… What we want to see is how Cohort 1 compares to Cohort 2 over a similar time period. Its not about the same dates because customers signup on different dates. But what we are looking for is measuring the same length of time i.e. 30 day block.
Retention is one of my keys to building a great product and growing it to the next level.
I’m out like the most epic Australian rugby league grand final,