The Science of Retention: Building Habits and Retaining the Marginal Audience

The Science of Retention: Building Habits and Retaining the Marginal Audience

Retention is a critical factor for the success of any business, whether it's in the consumer social or SaaS industry. In this article, we will explore what constitutes good retention in these sectors and delve into the strategies that can be employed to improve it. We will also discuss the impact of COVID-19 on retention and how businesses can adapt to the changing behavior of their users.

According to Lenny's Newsletter, good retention in consumer social platforms is around 25%, while great retention reaches about 45%. In the consumer SaaS industry, good retention stands at approximately 40%, with great retention hovering around 70%. These statistics highlight the varying benchmarks for retention across different sectors. However, it is important to note that these numbers are not set in stone and can vary depending on the specific context and target audience of a business.

To achieve great retention, it is crucial to understand the science behind habit building. Building and deepening user habits over time is the key to success. Users have motivations, face cognitive and physical friction, and seek rewards. All these factors play a role in habit formation. By identifying and addressing these elements, businesses can create an environment that fosters habit formation and ultimately improves retention.

It is essential to view revenue retention as an output of usage rather than a primary focus. It is a lagging indicator that reflects the effectiveness of your retention efforts. Instead, businesses should concentrate on the core inputs that drive retention: Activation, Engagement, and Resurrection. These three factors are the pillars that businesses must focus on to improve their retention rates.

Trying to retain every single user may seem like the ideal approach, but it can actually lead to sub-optimal results. Behavior shifts are bound to occur, and businesses must adapt accordingly. Instead of trying to retain everyone, it is more effective to identify and retain the marginal audience. These are the users who are on the edge of disengagement but can still be nurtured into becoming long-term customers. By focusing on this audience, businesses can ensure that their efforts are targeted and yield the best possible results.

To determine whether the marginal audience is experiencing real value or only temporary value, it is crucial to analyze the underlying behaviors that drive engagement. If users are engaging solely because of current events but are not experiencing the broader value proposition of the product or service, their retention is likely to be low. By understanding the motivations and needs of the marginal audience, businesses can tailor their strategies to provide long-lasting value and increase retention rates.

In the times of COVID-19, retention strategies must adapt to the changing behavior of users. The pandemic has brought about significant shifts in consumer behavior, with people relying more on digital platforms and services. Businesses must recognize these changes and adjust their offerings and engagement strategies accordingly. This could involve providing personalized experiences, offering flexibility in payment plans, or enhancing customer support to address the unique challenges posed by the pandemic.

In conclusion, good retention is a crucial factor for the success of any business. By understanding the science of habit building and prioritizing the core inputs of Activation, Engagement, and Resurrection, businesses can improve their retention rates. Additionally, focusing on the marginal audience and providing long-lasting value will help retain users who are on the edge of disengagement. In these uncertain times, businesses must also adapt their retention strategies to meet the changing behavior of users. By incorporating these actionable tips, businesses can build strong and lasting relationships with their customers, ultimately driving growth and success.