Retention Rate: What It Is and How to Measure It
What is Retention Rate?
Retention rate measures the percentage of users who continue to use your product over a specific timeframe. It reflects how many users stay engaged with your product after their first interaction, making it a vital metric for assessing user satisfaction and product effectiveness.
For example, if you acquire 1,000 users in January and 700 are still active in February, your monthly retention rate is 70%. Depending on your product and business model, this metric can be calculated for various periods—daily (DAU/MAU), weekly, or monthly. Retention rates are also tied to user cohorts, allowing you to track how specific groups of users (e.g., those who signed up during a campaign) behave over time.
Why does Retention Rate Matter?
Retention insights will help you understand how "sticky" your product is and how likely users will come back over and over again to perform certain actions. Acquiring and activating users is crucial for any business, but retaining existing customers is just as important for achieving sustainable growth. Without focusing on user retention, your revenue depends solely on attracting new users—a far more challenging and costly process than maintaining relationships with current customers.
A high retention rate means users are happy and finding value in your product, while a low retention rate can be a warning sign that something isn’t working. Retention of your users is critical to achieving product-market fit and sustainable long-term growth.
Retention rate doesn’t just show you what’s going wrong; it also points out what’s working. If certain features or experiences keep users engaged, you can double down on those areas. By improving retention, you’re not just keeping users around—you’re building stronger relationships and setting your product up for long-term success.
Where Can you Use Retention Rate?
Product Teams
As a product professional, you can use retention analysis to identify which features or services most engage your users. By recognizing where users drop off, you can make targeted improvements that address pain points and improve overall satisfaction. Understanding what drives user loyalty allows you to refine your onboarding process, ensuring a smooth initial experience and encouraging long-term usage. You can also track which features are "sticky" and how long users continue to use your app, as well as measure the ratio of users who churn month after month to better understand your product's retention performance.
Revenue Teams
As a revenue-focused sales, customer success, or marketing professional, you can use retention analysis to identify key customer interactions that drive higher retention rates. By understanding which touchpoints or engagements lead to long-term loyalty, you can tailor your strategies to foster stronger customer relationships. Additionally, retention metrics allow you to track retained revenue month over month, giving you valuable insights into customer retention trends. For instance, you can measure the monthly net dollar retention and evaluate how many accounts you retain monthly to ensure consistent revenue growth.
How can Product Analytics Tools Help you Measure Retention Rate?
Mitzu.io makes understanding retention easy with powerful analytics tools and clear insights. With cohort analysis, you can compare user groups to see what drives high retention. Funnel analysis helps you pinpoint where users drop off so you can improve key steps like onboarding.
The advanced segmentation feature lets you group users by behavior and preferences, while retention curve tracking shows how user engagement changes over time.
Mitzu automatically generates SQL queries with every click as it is warehouse-native, ensuring you always have the most up-to-date data without extra cost. It pulls all your data together from your warehouse without the need of additional tool, helping you track retention and make smarter decisions to keep users returning.
