Guide to New User Retention Rate & How to Calculate this Metric

Imagine a scenario where your business is a bustling hub of activity – users are flocking to your product, engaging with enthusiasm, and coming back for more. It’s not just a dream - it’s the reality of successful user retention.

But this rate isn’t just a number. 

In fact, it’s a reflection of customer loyalty and satisfaction.

So we invite you to discover how to calculate and leverage this powerful metric to supercharge your business’s success with LiveSession.

What is user retention rate?

User retention rate measures the percentage of users who continue to engage with a product or service over a specific period. It reflects customer loyalty and satisfaction. As such, it indicates the effectiveness of a business in retaining its users.

How to calculate user retention rate?

To measure user retention, follow these steps:

1. Define the time frame: choose a specific time period, such as a week, month, or year, for measuring retention.
2. Identify the starting users: determine the number of users who started using your product or service within the chosen time frame.
3. Track returning users: measure the number of users who continue to engage with your product or service within subsequent time periods.
4. Calculate retention rate: divide the number of returning users by the number of starting users, then multiply by 100 to get the retention rate percentage.

Formula: (Number of Returning Users / Number of Starting Users) x 100

Let’s say you’re measuring the retention for a mobile app users over a 30-day period:

1. Define the time frame: 30 days (from January 1st to January 31st).
2. Identify the starting users: On January 1st, 10,000 users installed your app.
3. Track returning users: By January 15th, 3,000 of those users had opened the app again.
4. Calculate retention rate: (3,000 returning users / 10,000 starting users) x 100 = 30% retention rate.

Customer retention rate vs user retention rate

Customer retention and user retention are related concepts in the realm of business and user engagement. However, they focus on slightly different aspects.

Here’s a breakdown of their differences and similarities:

Customer retention:

• Focus: customer retention refers to the ability of a business to retain existing paying customers.
• Scope: it encompasses the entire customer relationship, including repeat purchases, loyalty, and overall customer satisfaction.
• Metrics: metrics used to measure customer retention include customer churn rate, repeat purchase rate, customer lifetime value, and customer satisfaction scores.

User retention:

• Focus: user retention primarily pertains to retaining users of a product, app, or platform, irrespective of whether they are paying customers or not.
• Scope: it covers the engagement and interaction of users with the product, including their continued use and interaction patterns.
• Metrics: user retention is measured using data like the number of active users over time, user sessions, time spent in-app, and the frequency of interactions.

Similarities:

• Both involve retaining individuals who have engaged with your brand or product.
• Higher retention rates are indicative of strong customer satisfaction and value.
• Both contribute to long-term business success by increasing customer lifetime value and brand loyalty.

What about user churn rate?

User churn rate (CR) is a metric that represents the percentage of users who stop using a product, service, or platform within a specific time frame. It’s essentially the opposite of user retention. User CR measures the rate at which users disengage and leave, while user retention measures the rate at which users continue to engage and stay.

Relation to user retention:

• Complementary metrics: user CR and user retention are closely related metrics - a decrease in user retention typically results in an increase in user CR, and vice versa.
• Insight into engagement: user CR provides insights into why users are leaving a product, helping businesses identify pain points or areas for improvement in user experience.
• Overall performance: high user CR can be detrimental to a business, as it indicates that users are not finding enough value in the product to continue using it.

Most popular user retention metrics

Below are the most popular metrics associated with retaining users:

Retention rate

Measures the percentage of users who continue using a product over a specific period. Common intervals include 7-day, 30-day, and 90-day retention rates.

Churn rate

Represents the percentage of users who have stopped using a product within a specific time frame. It’s the opposite of retention rate and indicates disengagement.

Repeat purchase rate

Relevant for e-commerce, it measures the percentage of customers who make repeat purchases over a specific period.

Customer lifetime value (CLV)

Estimates the total value a customer generates for a business during their entire relationship. It’s directly related to user retention efforts.

Cohort analysis

Involves tracking the behavior of specific groups (cohorts) of users over time to understand how user engagement changes across different segments.

User activation rate

Measures the percentage of users who complete a specific action or reach a certain level of engagement within a predefined period.

Net Promoter Score (NPS)

Gauges user loyalty and satisfaction by asking users how likely they are to recommend the product to others.

Engagement Rate

Measures the depth of user interaction by analyzing rates like average session duration, pages viewed, and interactions per session.

Feature adoption rate

Tracks the rate at which users acquire new features, indicating the value and relevance of these features.

User segmentation

Analyzing retention rates based on user demographics, behavior, or engagement levels to identify trends and tailor retention strategies.

Improve user retention in 5 steps

If you’re struggling with keeping your users around, try these techniques:

Understand user needs

Gather feedback, conduct surveys or interviews, and analyze user behavior to identify pain points and preferences. This way, you’ll be able to tailor your product to meet their needs.

Example:

Analyze heatmaps and user session recordings using irreplaceable and powerful tools like LiveSession. Identify areas where users drop off during the checkout process. Implement A/B testing to experiment with different checkout page layouts and see which one yields higher conversion rates.

Enhance user experience

Optimize your product’s usability, navigation, and design to provide a seamless and enjoyable experience that keeps users engaged and encourages them to return.

Example:

Use Google’s PageSpeed Insights to evaluate your mobile app’s loading speed and identify areas for improvement. Leverage tools like Firebase Performance Monitoring or New Relic to monitor app performance in real-time. As a result, you’ll deliver smooth user experiences.

Focus on personalization

Use data-driven insights to offer personalized recommendations, content, and experiences that resonate with individual users. Your goal should be to make your users feel valued and understood.

Example:

Implement a recommendation engine like Amazon’s Personalize to provide tailored product suggestions to customers based on their browsing and purchase history. Use tools to track user behavior and trigger personalized emails when users abandon their carts. For abandoned cart emails, you might want to check out Mailchimp.

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Maintain regular communication

Stay in touch with users through email newsletters, in-app messages, and social media updates. Provide valuable content, product updates, and special offers to keep their interest.

Example:

Utilize email marketing platforms such as Mailchimp or Klaviyo to segment your email list based on user preferences and purchase history. Send automated emails for product recommendations, special discounts, and exclusive content to keep users engaged and informed. You could also run a regular blog section on your website. Focus on delivering value and engaging your users.

Introduce gamification & incentives

Incorporate gamification elements like badges, rewards, and challenges to motivate users to engage more with your product. Offer exclusive benefits to loyal users to create a sense of belonging.

Example:

Create a loyalty program using tools like Smile.io or LoyaltyLion. Offer points for different actions, such as making purchases, referring friends, or writing reviews. Display users’ progress towards rewards and encourage them to engage more with your brand to unlock benefits.

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Boost user retention with LiveSession

LiveSession is your secret weapon for boosting user retention.

With the power of session replays and event-based product analytics, LiveSession helps you understand users’ behavior, find bugs, and improve the experience of your users.

Imagine being able to answer questions like:

• “How are users using my application?“,
• “Where and why do users drop off?”, or
• “What features are most used in my product?”

It’s not just about data – it’s about gaining insights that drive meaningful actions.

The best part? LiveSession lets you combine data from various tools, like Google Analytics, to get the big picture.

You can focus on the most important recordings using advanced filtering, ensuring you identify crucial patterns.

But that’s not all. LiveSession empowers you to enhance user engagement by optimizing your website’s UI and UX, addressing issues proactively, and crafting an experience that keeps users coming back for more. 

Trusted by companies like Kissflow, Databox, and TalentLyft, LiveSession is the secret sauce behind their continuous improvement and success stories.

Ready to supercharge your user retention strategy? Try LiveSession today and witness the impact on your business growth.

Other than that, happy “user retaining” - best of luck!

FAQ

What is the definition of user retention rate?

The user retention rate is a crucial metric that quantifies the percentage of users who remain engaged with a product or service over a given time period. To calculate it, subtract the number of new customers acquired during that time from the total number of users at the beginning of the period. Then, divide the result by the initial number of users and multiply by 100 to express it as a percentage. 

Why is LiveSession a great tool for improving user retention for my SaaS business?

LiveSession is an invaluable tool for boosting user retention in your SaaS business due to its advanced analytics capabilities. It enables you to comprehensively analyze user behavior, uncover pain points, optimize onboarding processes, and identify areas for improvement.

How to improve user retention in my company?

Boost user retention with effective onboarding, analyzing your cohort, engaging loyal customers, optimizing user acquisition, and employing analytics.