We’ve all had interactions with products that didn’t deliver on their promises. From incorrectly set expectations to poorly placed paywalls, users abandon products for a variety of reasons. And because user retention varies across industries, regions, and company size, it’s difficult to know whether your product is retaining a sufficient number of users—or if you lose more than your peers.
If you can’t retain customers, it will hurt your company’s revenue. Provide digital experiences that keep users engaged with your product over the long term, and your customers will be happier, more likely to stick around, and even become advocates.
User retention vs. customer retention
There are two types of retention: User retention and customer retention. Although user retention and customer retention sound similar, they measure two different things.
- User storage measure how many first-time visitors or accounts return to your product over a certain period of time.
- Customer retention measure how much account return to your product over a certain period of time, regardless of how many of that account’s employees return to your product.
Although user retention and customer retention sound similar, they measure two different things. For B2C companies, user and customer retention are often interchangeable. But for B2B companies, it’s a signal of how satisfied your customers are with their financial commitment to your product. In this blog, we look at user retention as an indicator of end user satisfaction.
How to measure your user retention rate
At Pendo, we measure user retention by counting the total number of new visitors to a product, and whether they return in the first, second, and third months after their first visit. If a user is visiting your product for the first time, we look to see if they return within 30 days (first month), 30 to 60 days (second month), or 60 to 90 days (third month).
We categorize retention into four groups: Low (25th percentile), Average (50th percentile), High (75th percentile), and Best in class (90th percentile).
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Over three months, the product lost 70% of its users
The product retains an average of 39% of users after one month. After three months, around 30% of users still return to using the product. For every 100 active users you add, 30 will stick around after three months.
For new products, a one-month retention rate of 39% shows that your product provides added value to users. For an established enterprise product, a user retention rate of 39% may indicate an underlying functionality problem.
The top 10% of products retained 1.7x as many customers in the first month, 1.8x as many customers in the second month, and 1.9x as many customers in the third month, compared to average.
Manufacturing and Consumer Goods have the tallest user retention rate
Industry has a huge impact on user retention of your product. Manufacturing leads, followed by Consumer Goods and Media. Products in the Finance and Government sectors had difficulty attracting customers again after one month.
If your product is a B2C free game, a user retention rate of 40% means users find your product fun. However, for a communications app designed for everyday use, a user retention rate of 40% might signal potential problems.
Users stay more in small companies
Companies with fewer than 200 employees have higher average user retention after the first and second months. But after the third month, companies with more than 2,500+ employees were the winners. After one month, the small company retained 40 customers for every 100 customers. In the second month, they retained 34 customers. In the third month, they retained an average of 16.7 users.
Tips to increase your user retention rate
Retention should be more than just a metric—it should be a framework of thinking. To fix this, follow these best practices:
- Simplify and automate new user onboarding: When new users come to your product, highlight your core features, offer a product guide, and link to your resource center. See how five product teams improved the onboarding process.
- Continuously adding value: Nurture customer relationships even after they understand your app. Create an in-app and out-of-app messaging strategy to create a product environment where users are always learning and discovering features at their own pace. Here are 12 dos and don’ts in product communications.
- Take advantage of your product analysis: You can’t improve retention without explaining the problem. Look at your product’s qualitative, quantitative, and visual data across different user segments. Session replay, product analysis, and feedback capture tell you what your key users are doing so you can guide at-risk customers to deliver value.
- Review retention data regularly in team meetings. Create dashboards that are easily accessible and visible to everyone. Celebrate retention wins. Make retention a part of who you are product development process. If a team improves a feature that significantly improves retention, acknowledge that. These habits keep everyone aligned and focused on what matters most: providing value that keeps users coming back.
User retention varies greatly depending on industry, region, and company size. Use our interactive benchmarking tool to find out how yours peers retain users.
Gaming Hub
A gaming hub can refer to a central platform or space dedicated to gaming, where players can access games, interact with other gamers, and enjoy related content.