Engagement Retention Curves
Congratulations, you’ve just acquired a customer. Now what? In traditional enterprise software, you would be done and move on to find the next customer. However, with today’s SaaS and freemium models, you need to focus more than ever on user experience and driving engagement. Why is engagement so important? Well, in monthly self-service subscriptions, customers can churn out just as quickly as they sign up, and in freemium models, customers can remain free forever if they aren’t engaged (and sometimes even if they are).
Let’s examine the graph above. If you only looked at user counts, you’d see a nice up and to the right trajectory. Unfortunately, when you break the users down into monthly cohorts, you can see how difficult it is to build an engaged user base when customers are quickly losing engagement. It’s hard to tell by user counts, because in this case, the free users aren’t quitting, they are just inactive.
Before you can begin testing and optimizing your product for engagement, you will need to build a dashboard to measure engagement.
With this sort of a dashboard, you can track cohort engagement over time and tie improvements to engagement to changes in product.
The spreadsheet below contains both of these dashboards plus the formulas to build them from the raw user data. After you’ve put in your data, you should begin testing ways to keep your customers engaged and bring back inactive users. In the beginning, you may not have enough data points to create meaningful curves. You can actually extrapolate curves from as little as 3 months worth of data. How you ask? Well…I’ll save that for another day. :)
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