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What Is Retention Analysis?

What Is Retention Analysis?

When you first get started as an online or mobile marketer, user acquisition metrics are straightforward, exciting, and top-of-mind for everyone involved, from executives to investors. You may understand the importance of retention for business growth. 

However, if you are focusing on new user growth without any insight into why your customers decide to stay can waste valuable acquisition resources. After all the time, effort, and resources you’ve spent getting new users to your site or app, then seeing the churn is like a knife to the heart. 

Fighting churn sometimes feels like an impossible battle, and without in-depth knowledge, it’s like rolling the dice in the hopes of getting the seven you need. 

But it doesn’t have to be like this! Retention analysis gives you the power to create data-driven battle plans to reduce churn effectively. Retention analysis runs alongside the new-user acquisition metric to determine the percentage of your user growth that turns into recurring and profitable customers.

If you are forking out a lot of dough to acquire new users who quickly churn, those users’ customer lifetime value might be lower than their acquisition cost. The fact of the matter is that you will not survive long if you maintain a steady acquisition cost higher than the customer’s lifetime value. Not to worry, retention analysis will help you figure out how many people you’re losing and reveal the key indicators for improving your customer retention.

Retention analysis will help you better understand why your visitors are leaving and offer valuable insight into how to change it to keep more of your users. Retention analysis will also allow you to see valuable data, in numbers, to answer questions such as:

  • What is my churn rate?
  • How long do various customer personas stay?
  • What customer personas are likely to leave?
  • How long does it take a new user to return to the product?
  • What changes have decreased retention?
  • What changes are most likely to improve retention?
  • Have recent products or product changes encouraged more users to return?

By answering these questions and fixing a couple of loose screws, you can increase retention and make your product more profitable. Without it, you might just be flushing your marketing dollars down the toilet. 

What is Good Customer Retention?

Of course, you want to keep all your customers coming back for more. Unfortunately, that’s not reality. For most industries, an eight-week retention rate is sadly below 20 percent. You should measure your retention rate month-over-month and year-over-year to see which marketing efforts are working the best. 

After a time, you will have an idea of your retention rate and work towards increasing that number. Remember, you can’t compare apples to oranges, and your business is unique and should be treated as such. 

Getting Started on a Retention Analysis

Getting started on a retention analysis is where you need to dig in deeper than you probably thought was necessary. Learning your customer retention rate is the first step of a retention analysis. You’ll want to know how many customers are staying and for how long, and how many are leaving and how quickly. You will want to track users as they engage in activities such as app downloads, account creation, sign-ups, payments, and shares. You want to also track each action back to its acquisition source in order to evaluate which ads and sources are working best for retention.

What Are Cohorts

Cohorts are unchanging groups that are tracked over time. The most common type of cohort is the group of people who became customers in a particular time frame, for example, the second week of January or the first quarter of the year. Cohort analysis measures a specific metric among various groups of users to help better understand your customers. The data can reveal how your website performs based on the length of time users spend on it. It also can predict customer behavior, including reorder rate. 

To get the most data from your analysis, divide your customers into different cohorts and personas. To do this, you group customers who share the same characteristics. The data you will receive from this could predict the types of customers who purchase the most from you and stay the longest. You could then use target ads towards the same demographics. You could also figure out what types of ads work for the different personas. 

Retention can be calculated with any action that a user takes, such as logging in, or you may choose only to measure those actions you consider valuable, like converting. Depending on how valuable your clients are, you may want to calculate revenue retention along with the customer retention rate. Losing one large customer may hurt your revenue immensely while making very little impact on your customer retention rate.

Track User Behavior Throughout the Customer Lifecycle

The way customers behave during their entire lifecycle is the data you need to conduct the retention analysis. Their behavior and retention rate aren’t uniform throughout their lifecycle, which makes it more difficult to analyze. 

But for the most accurate and usable data, you need to know what happens during each stage. Retaining customers requires different actions at different times, so to increase your retention rate, you need to know what you need to be doing and when.

Remember all this work will give you the data to help you:

  • Improve marketing strategies
  • Create attention-grabbing ads with high conversions
  • Increase revenue
  • Spend less moolah on customer retention
  • Create personalized marketing efforts for the different personas
  • Develop better customer relationships

With that being said, the work will pay off tenfold, so invest the time to get the most accurate analysis completed, so you have the data you need to take your business to the next level. 

What impacts customer retention rates?

Many things add to the customer experience. However, with so much on the line and so much competition, it’s crucial to put focus on ensuring your customers' experience is awesome – every time.

Here are some key factors that go into customer experience:

  • Price. If your prices are competitive, you’re likely to be the first stop when looking to make a purchase.
  • App or site performance. A user-friendly site matters...a lot. If your app or site makes it easy for customers to find items and add them to a cart, get the information they need, and complete checkout, then they’ll be more likely to convert, and you’ll get an even better return. On the other hand, if your site is difficult to use and make a purchase, you will likely end up with a lot of frustrated customers that leave to go to your competitor with a more user-friendly site.
  • Outstanding customer service. Top-notch customer service will keep a customer coming back time and time again. Even if products need to be returned, great service after the sale can leave a positive impression on customers that they'll be more likely to refer others to your brand. Conversely, bad service infuriates customers, and word gets around.
  • Saved details. Let’s face it, today’s technology has made us very spoiled, and we want everything to be super easy including, making a purchase. When your customers' payment and contact information is saved, they only have to enter an email and password to buy. It takes the extra hassle out of the process, resulting in a happier customer.
  • Loyalty rewards. Another way to increase customer loyalty is to introduce a reward program to encourage repeat purchases. Thanking your loyal customers with offers and incentives will make them come back more often, and it makes them feel special like they are VIPs of a cool club. 


Without customer retention, your efforts can be complex, and you’ll have difficulty getting complete clarity. But with 80% of your future profits coming from 20% of current customers, your ability to keep them loyal is key to success. 

Your customer retention rate depends on your ability to analyze them accurately. Knowing what to adjust or where to veer left completely helps you maximize your retention efforts, increase revenue, and cut acquisition costs.

When you track and analyze your churn rates, you can implement churn prevention efforts and increase retention. In addition, with the data you receive by closely analyzing your customers, you could evaluate lifetime value per source and optimize your retention marketing campaigns.

Staying competitive in today’s digital age is no easy feat. Consumers are bombarded with clever ads trying to convince them to jump ship to another company, and without a strong customer retention strategy, it just might work. So implement awesome retention strategies to schmooze your customers and make them so loyal that they ignore the competitors' ads. 

The big difference between companies that grow and ones that don’t is customer retention. The more customers you can keep and continue to sell to, the more likely you are to achieve your business goals. 

It’s that simple. OK, it may take some effort to really analyze your customers and implement strategies for keeping, but once you figure that out your business's future will look bright. 

Are you ready to create a user-friendly app or site and build a huge following of loyal customers with first-class service to take your business to the next level? Then contact Awesome CX today; we’re the helping hand you need to stand out in today’s competitive market! 



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