What is good retention - Issue 29 - Lenny's Newsletter

What is good retention - Issue 29 - Lenny's Newsletter

"The Three Questions Facebook Uses To Guide Their Product Development"

In today's fast-paced and competitive world, companies are constantly striving to develop products that not only meet the needs of their target audience but also solve real problems. Facebook, one of the leading tech giants, has a unique approach to product development. They rely on three key questions to guide their decision-making process and ensure that they are creating products that truly address people's problems.

Question 1 — What people problem are we trying to solve?

The first question Facebook asks themselves is what people problem they are trying to solve. This question serves as the foundation for their product development process. By identifying the core issue that their users are facing, they can tailor their solutions to meet those needs effectively. For example, Facebook recognized that many users wanted to connect with like-minded individuals who shared their interests but didn't know where to find them. This led to the creation of Facebook Groups, where people could come together and discuss their passions.

Question 2— How do we know this is a real problem?

Once Facebook has identified a potential problem, they seek validation to ensure that it is indeed a real problem worth solving. This involves conducting thorough research and gathering both qualitative and quantitative data. By understanding the pain points of their users and analyzing the data, Facebook can determine the severity and prevalence of the problem. This step is crucial as it allows them to prioritize their efforts and allocate resources effectively.

Question 3— How will we know if we've solved this problem?

The final question Facebook poses is how they will measure success and determine if they have successfully solved the identified problem. Setting measurable goals, metrics, and milestones is essential to track progress and evaluate the effectiveness of their solutions. For example, in the case of Facebook Groups, they may set goals such as increasing user engagement, improving member retention, or fostering meaningful discussions. By continuously monitoring these metrics, Facebook can assess the impact of their product and make necessary adjustments if needed.

While Facebook's approach to product development is unique to their organization, there are valuable lessons that other companies can learn from. By incorporating these three questions into their own decision-making process, companies can ensure that they are creating products that truly address people's needs.

In addition to these three questions, there is another vital aspect that companies should consider – retention. Retention refers to the ability of a product to retain its users over a certain period. It is a crucial metric that indicates the value and stickiness of a product. Lenny's Newsletter provides some insights into what constitutes good retention rates in different industries.

For consumer social products, a retention rate of around 25% is considered good, while a rate of around 45% is considered great. This means that if a social media platform can retain a quarter of its users over a specific time period, it is performing well. However, if it can retain nearly half of its users, it is considered exceptional. These numbers highlight the importance of creating engaging and valuable experiences for users to keep them coming back.

On the other hand, for consumer SaaS (Software-as-a-Service) products, the bar is set even higher. A retention rate of approximately 40% is considered good, while a rate of around 70% is considered great. This is because SaaS products often require a higher level of commitment from users, such as subscriptions or ongoing usage. Therefore, a higher retention rate indicates that users find significant value in the product and are willing to continue using it.

Based on these insights, companies should strive to achieve and maintain high retention rates to ensure the long-term success and sustainability of their products. Here are three actionable pieces of advice to improve retention:

1. Understand your users: Invest time and effort in understanding the needs, preferences, and pain points of your target audience. This will allow you to create personalized experiences that resonate with them and increase their likelihood of sticking around.

2. Continuously iterate and improve: Don't settle for mediocrity. Regularly analyze user feedback and data to identify areas for improvement. By continuously iterating and enhancing your product, you can keep users engaged and prevent them from seeking alternatives.

3. Foster a sense of community: Humans are social beings, and creating a sense of community around your product can significantly impact retention. Encourage interactions among users, facilitate discussions, and provide opportunities for users to connect with like-minded individuals. This will not only increase engagement but also create a sense of loyalty and belonging.

In conclusion, Facebook's approach to product development, as guided by their three key questions, emphasizes the importance of understanding people's problems, validating their existence, and measuring success. By incorporating these questions into their decision-making process, companies can create products that truly address users' needs. Additionally, focusing on retention rates is crucial for the long-term success of products, and companies should strive to create engaging experiences that keep users coming back. By understanding their users, continuously iterating, and fostering a sense of community, companies can improve retention and ensure the sustained growth of their products.