It is 7x more expensive to acquire a customer than to keep one. A study by Bain and Co. shows that a 5% increase in customer retention can increase a company's profitability by 75%.

And if that's not enough, another recent study shows that 80% of your company's future revenue will come from 20% of your current customers.

In short, retention is probably the absolutely most important part of your business.

And yet, bizarrely, it's also one of the most overlooked aspects of building a successful company. Startups pour all of their efforts into growth and new customer acquisition, and they lose half of those customers out of their leaky bucket faster than they can add new ones.

That's how promising companies die.

But it doesn't have to be this way. If you use these 7 absolutely critical tools today, you'll turn retention from a weakness into a strength, and that will give you a massive competitive advantage.

1. Email

Email is the #1 way to drive users back to your app again and again.

The foundation of your app's new user experience is the email drip campaign. You need to be in frequent contact with your user to let him/her know the value you bring to the table and how best to use your app. This is where you'll establish the foundation of a long-lasting customer relationship.

For users who've dropped off over time, you need to work on your email open->click->activate->retain loop to get people coming back to your app, discovering new features, and seeing how your product has evolved.

And to do all of this successfully, you need to make your emails incredibly personal and targeted. That's how you make your emails valuable and opened, rather than useless and ending up in the spam folder.

Customer.io is best-of-breed for sending targeted emails to your users. It has powerful tools for segmenting your users based on what they do inside of the app, but it's simple enough for the marketing team to use without spending developer time.

2. User Engagement

According to famed investor and co-founder of Union Square Ventures Fred Wilson, the #1 thing that entrepreneurs should focus on when raising money is "90 day retention numbers for your acquisition cohorts."

This is so important because it tells you what the long-term health of your product is--without retention, your company will die.

Creating acquisition cohorts means breaking out your users into groups based on when they joined. Week 1 acquisition cohorts could be those who registered from August 16-22 and Week 2 acquisition cohorts would be those who joined from August 23-29, and so on.

90 day retention numbers means the percent of those users who are still active 90 days from registration. When you look at that by cohort, you're looking at a separate number per acquisition cohort, rather than doing a weighted average.

Needless to say, this can get complicated to implement. That's where using the right analytics software is so important.

Amplitude has a massive free plan and they make it easy to measure the stickiness of your app. They'll show you Day 1, Day2, Day 3, Day 7, and Day 90 retention to see how you're doing and take actionable measures to improve your retention.

3. Revenue Churn

SaaS business may not need to be as user-engagement focused as consumer apps. Nevertheless, they need to be laser focused on keeping revenue churn as low as humanly possible.

Suppose your churn doubles from 2% to 4%--over the course of a year, you could lose $50,000 in monthly recurring revenue and $500,000 in total annual revenue. That could kill your business.

ProfitWell delivers actionable SaaS metrics in the form of actionable analysis they show you revenue churn by cohort, so that you know how you're doing today, and how that number is trending.

Plus, they give you the data you need to break down your churn number, understand what caused any changes to it, and then take steps to improve it. They'll show you who cancelled and downgraded, so that you can reach out to those customers and reactivate them.

And ProfitWell is 100% free.

4. Push Notifications

A recent study showed that push notifications on mobile drive increases in 90-day retention rates by as much as 180%. Combined with email retention, they're a powerful driver for bringing people back to your app.

Still, if you're push notifications aren't on point, they'll get ignored and then the user will revoke permission.

To prominent tech commentator Andrew Chen, there's a hierarchy of push notifications:

“Here’s a rough hierarchy, from top to bottom:

... versus less desirable messaging, which lacks personal context and comes from the company, not a friend or :

Leanplum makes it easy to send highly personalized push notifications based on specific in-app behavior. You can personalize your push notifications based on user activity, demographic or geographic location.

5. In-App A/B Testing and Optimization

App Store approval waits means that it can take weeks and months to go through the data->analysis->improvement->deployment loop.

That makes it extremely frustrating and difficult for developers to iterate on app designs and improve their retention numbers.

Apptimize is a powerful tool for making immediate changes for improvement that don't require any update or App Store approval so that you can work to solve your retention problems immediately

Run A/B tests in large areas like messaging and user flows to see any significant impact on your retention rates, and make those changes immediately.

6. Uptime

Uptime and performance are more important for retention than most people appreciate. This is especially true for B2B SaaS and infrastructure tools. If you aren't communicative and transparent about your uptime, you'll lose to providers that are.

Statuspage.io makes it easy to communicate with your user about how your site is doing. This communication improves retention because customers can be in the know of when something is going on rather than just assuming that your app is terrible.

Instead of just seeing that your site is down and assuming it's closed or terminated, they can know that it's temporary and will be inclined to return later.

A status page might seem like a trivial detail to pay attention to, but it's actually an extremely effective tool in terms of getting customers to stay.

7. In App Messaging

You need to constantly be in communication with your users, whether it's telling them about new features, asking for feedback, running NPS surveys, or just checking in to say hi.

That personal touch is a super effective way to build a real relationship with your customers. They'll become powerful advocates in good times and they'll be more likely to cut you some slack when things go wrong.

Messaging with your user inside of your app is one of the least intrusive ways to start a conversation with your user, because you're not interrupting them with push or taking up precious space in their email inbox.

Appcues is a web and mobile service that makes in-app messaging easy. Plus, it allows you to create personalized onboarding flows in your app that will improve your retention rates.

They give you simple and attractive designs that you can choose to implement to better inform your customers. For example, you can create hotspots in your app for onboarding and new feature announcements.

Their personalized messaging feature allows you to target and segment messages to onboarding customers. This can be integral in helping your customer find that AHA or WOW moment that will make them want to convert and stay.

Published on: Sep 1, 2015