As of mid-2017, a total of 5 million apps are available for download across Google’s Play Store and Apple’s App Store. At the same time, though, nearly 85% of all smartphone usage is allocated to 5 apps or fewer; and almost 4 out 5 users never use an app again 72 hours after first installing it. This shows that most people use only a few apps consistently whilst quickly abandoning all other apps for good. Retaining customers is, thus, a serious problem for app-centred startups. To help address this issue, I’ll describe 5 key strategies for effectively boosting your customer retention rates.
What is Customer Retention?
“Custom acquisition” and “customer retention” are two fundamental aspects of building successful businesses.
Now, the moment you successfully acquire a new customer you must start doing everything you can to retain that customer for as long into the future as possible.
“Customer retention refers to the percentage of customer relationships that, once established, a business is able to maintain on a long-term basis. Customer retention is a simple concept[:] happy customers who feel important and are regularly communicated with in the right way will keep coming back”.
“The goal of customer retention programs is to help companies retain as many customers as possible, often through customer loyalty and brand loyalty initiatives. … [C]ustomer retention begins with the first contact a customer has with a company and continues throughout the entire lifetime of the relationship”.
Attracting customers to your app in the first place is certainly important but keeping your customers well into the future is even more crucial to the success of your startup!
Because of two key reasons: 1) companies that effectively retain their customers grow faster than those that do not and 2) it costs far less—sometimes up to 7x less—to retain a current customer than it does to acquire a new customer.
And one of the smartest ways to do this is to maximize your customer retention.
Here are 5 strategies to effectively boost customer retention rates:
1. Optimize Your Onboarding Experience
According to Casey Winters, growth advisor at Greylock, onboarding is the most crucial part of your growth strategy.
As I’ve recently pointed out:
“The major objective of app onboarding is to gently guide users along the process of using your app to the point where they finally have their ‘Aha! Moment’, i.e., the moment when they truly recognize the value that your app provides to their lives and they then become dedicated users”.
In this sense, then, you can understand the first part of customer retention as involving successful customer acquisition.
In other words, you can’t successfully keep a customer if you don’t successfully create a paying customer in the first place.
Dropbox, Facebook, and Twitter all struggled with onboarding during their earliest days.
Each company eventually figured out that having new users complete one or more specific tasks was essential to converting them to long-term users (e.g., with Twitter, it was crucial for users to follow at least 10 other people shortly after signing up, otherwise they’d abandon the service).
I’ve recently outlined 6 specific tactics that startups can use to create a seamless and smooth onboarding experience for new users:
- Reduce friction;
- Provide a clear indication of progress;
- Use social sign-ups;
- Offer incentives;
- Provide use cases; and
- Use brief yet helpful tutorials
Be sure to check out the full article here for a detailed explanation of each of these excellent tactics.
An example of Twitter’s onboarding experience:
2. Utilize “Triggers” (Push Notifications)
The ultimate goal of customer retention is not merely to ensure that customers keep your app installed on their cell phones but rather that they regularly engage with, i.e., use, your app.
“Triggers” in the form of “push notifications” are an incredibly effective way of encouraging your users to keep utilizing your app.
A push notification is:
“a way for an app to send you a message or to notify you [about a digital occurrence] without you actually opening the app. The notification is ‘pushed’ to you without you needing to do anything [to cause it]”.
If you’ve used a cell phone any time in the last decade then you’re familiar with push notifications.
They’re the auto-generated messages or icons that appear on your phone when you receive a new like on your Instagram photo, a new comment on your Facebook post, a new upvote on your Quora answer, and so on.
These kinds of triggers are incredibly addicting not only because they cause a person to experience a short burst of pleasure whenever they arise but also because they “prime” that individual to then anticipate additional notifications in order to experience similar feelings of pleasure (sources: 1, 2, 3).
You need to keep bringing users back to your app, and push notifications are an incredibly effective way to do so.
However, it’s important that you implement push notifications into your app is a tolerable, voluntary, and “non-spammy” way.
- Use an opt-in/opt-out system instead of arbitrarily forcing notifications to users’ phones;
- Design your triggers around the most common and rewarding digital events rather than utilizing them for every single action that can occur within your app;
- Resist the urge to add vibration to your push notifications as this is likely to annoy users and potentially lead them to uninstall your app; and
- Personal your notifications to make them less intrusive (e.g., “Kevin just liked your photo, Mark!”)
An example of Instagram triggers:
3. Encourage Customer Investment
A highly effective way to boost your customer retention numbers is to get your customers to invest in your app.
I’m not talking about asking your users to buy shares of your company.
Rather, I’m pointing to the importance of understanding, and implementing features based on, the “sunk costs trap”.
I’ve recently explained this process as:
“[Successful startups create] growth loops in which the more their customers use their products, the less likely [their] customers are to permanently abandon their products.
This phenomenon is known as the ‘sunk costs trap’, whereby we become more liable to stick with (or finish) some system, task, or behaviour the more resources we sink into it. …
- You’re far less likely to abandon Instagram and join a rival mobile photography app if you’ve spent, let’s say, two years building up your Instagram profile [and] using specific hashtags[.]
- You’re far more liable to abandon Dropbox in order to join a competing online file storage service if you’ve used Dropbox for only a few days as compared to, for instance, the past 10 months. It’d simply be too much of a hassle to move, re-organize, and re-share across all your devices the files you’ve been storing on Dropbox for nearly a year.
- The more friends you accumulate on Facebook, the less likely you are to de-activate your profile”.
The examples go on and on.
One way to get your customers to invest their time and money into your app is to include features that allow your customers to make progress over time.
This could be the number of lessons completed (an educational app), number of levels passed (a gaming app), or number of social shares received (a blogging app).
Whichever route you choose, keep in mind that the goal is to increase customer retention rates by using ongoing achievements or accomplishments as reasons for your users to keep returning to your app.
An example of Duolingo’s progress streak:
4. Always Offer Great Customer Service
When you first launch a startup you lack both customer trust and brand credibility.
This will likely make people very cautious about using your app and becoming paying customers.
Delivering exceptional customer service is one way to gradually build customer trust, brand loyalty, and customer support.
Indeed, there are numerous examples of startups scaling at exponential rates due primarily to their fantastic customer service (Amazon being a clear case).
As Derek Sivers, founder of CD Baby, put it:
“The single most important thing [in business] is to make people happy. If you are making people happy, as a side effect, they will be happy to open up their wallets and pay you”.
Unsurprisingly, poor customer service is not only one of the top reasons why customers abandon their formerly preferred companies but also an extremely costly expense for businesses.
A U.S.-based study from 2016 found that:
Effective customer service is thus crucial to acquiring and retaining customers over the long haul.
Here are a few tips for delivering first-rate customer service:
- Always be polite, courteous, and genuine: customers respond well when they feel as if they’re communicating with another human being with real thoughts and emotions rather than with something akin to a scripted and lifeless robot
- Respond quickly: even if you can’t immediately solve a customer’s problem, the simple act of acknowledging his/her issue can drastically increase his/her sense of satisfaction with your company
- Seek out feedback: conduct user tests, create follow-up emails asking for candid responses on quality of service, and target your best customers for testimonials on using your app
- Reward customers: look for opportunities to surprise your customers with rewards, such as freebies, in exchange for using your app or raising an issue with your customer service department
- Provide lots of free, helpful information: customers appreciate it when they’re able to visit your company’s website, consult a detailed and well-written FAQ, and fix their problems on their own with little-to-no hassle
You can also get creative with your customer service by, for instance, providing your users with hand-written thank you notes, such as Jawbone did back in the day:
5. Build a Community
One final strategy for improving your customer retention rates is building an authentic user community.
Some of the most successful startups of the 21st century are grounded in diverse and lively communities of users who genuinely care about not only the products but also the cultures of the companies and the wellbeing of fellow users.
Y Combinator is one example of a very strong community-centred startup (incubator).
As Joshua Paul points out, strong user communities can definitely effectively increase customer retention:
“The qualities that make up a strong customer retention strategy, such as the ability to show transparency, mak[e] your customers feel cared for and listened to, [and] answer customers’ questions quickly, are all easily implemented using a customer community model.
Through your online community, you can identify people who are struggling or unhappy quickly and more easily, which creates the opportunity to improve their customer experience, before the relationship is damage[d] beyond repair.
Not only can your customer support team proactively reach out to discontent customers, but you also have a safety net of [customer] advocates within the community working for you 24/7”.
How can you effectively build a strong community around your app?
Write lots of blog posts about issues relevant to your niche and encouraging your users to like, comment on, and share the posts with their friends and colleagues.
Invite your users to contribute to your FAQ.
Create online forums where users can gather, chat, and help each other.
You can also consider putting together meetups as a way to encourage your users to meet both each other and the people behind your company.
Meetup.com is one excellent resource available for this task:
If You Like This Article Then Be Sure to Download Our Free Whitepaper on Creating an Addictive App: