Retention is the metric that has the closest link to revenue and growth in the Pirate Model. Retention, (aka loyalty) is the number of customers that come back and use your product over and over again.
In this chapter, we’ll look at the elements that influence customers to stay and use your product over the long haul. We’ll give you tools for developing your own retention campaign and we’ll look at example retention strategies that will help
increase the lifetime value of your customers and set them up to become your best marketing channel.
These retention strategies are transactional, meaning that they’re targeted one-to-one messages that are triggered by individual actions. Transactional emails are especially effective in retention because they target specific pain points in your
We’ll go over specific strategies later in this chapter, but first let’s understand exactly what we’re talking about and how to measure it.
A Bird in Hand is Worth Two in the Bush
It’s always easier to keep existing customers than it is find new ones.
Users that have reached the retention stage of the pirate model have become extremely valuable to your company and you should take care of them. These customers have used your product, they understand your value proposition, and they’re at most just
one step away from paying you. They’re so close in fact that
Harvard Business School
found that even just a 5% increase in retention translates into a 25-95% increase in profit.
How to Define a Retained User
A retained user is more than a customer that uses your product over a long period of time. A customer that continues to pay for your service, but never signs in to your product is not your ideal user, so it’s important define the qualities of a
Similar to activated users, retained users are customers that use your product for the specific feature (or features) you offer that differentiates you from your competitors. By defining a retained user using specific metrics like subscription,
feature usage, engagement, or activity, you can make sure that your customers are a good fit for your company and constitute an actual demand for what you do.
Finding your Core Retention Behavior
Once you’ve defined what a retained user looks like, now you need to determine your core retention behavior. Similar to the “Aha” moment, this is the point where your customers understand your product and will continue to use it long term.
For Facebook, they’ve defined core retention behavior as the point when a user has added at least 15 friends to their account. In Alex Schultz’s
lecture he discloses that, for Facebook, someone that has 15 friends is likely to remain active on the service for a long time, so their retention strategies are all focused around promoting the behavior of adding friends.
To find your own core retention behavior, look for specific actions that are common to your ideal users, then promote that behavior in your retention strategies.
How to Measure Retention
Before you dive into creating a retention strategy you need a baseline to measure your successes.
Retention is the percentage of customers that continue to use your product over a period of time, so to calculate your retention rate here’s a simple formula:
Retention Rate = ((CE – CN) / CS) x 100
= Number of customers at the end of a period
= Number of new customers acquired during a period
= Number of customers at the start of a period
Obviously, the goal is to have a high retention rate (because losing customers sucks), but the real value of calculating this comes from mapping its progress over time.
Another way to measure retention is to look at churn.
What is Churn?
Your churn rate is the number of users that cut ties with your company during a period of time. Like retention, churn is calculated by dividing the number of customers lost by the number of customers at the start of the month (or period of your
3 Customers Lost / 100 Customers at the start of the month = 3% Churn Rate
How you decide to measure your company’s retention isn’t as important as maintaining consistency in your measurement methods.
Three Ways to Increase Customer Retention
Priming customers for retention starts long before they reach the retention stage of the Pirate Model. In fact, it starts at the top of funnel. Customers don’t owe loyalty to your product, so building a relationship that retains customers takes time.
Here are 3 ways to set yourself up for success:
Find the right users to start with.
Believe it or not, retention starts with acquisition. If you’re attracting the right customers for your product, they’ll naturally get the most out of it. If your retention rate is low, you might be attracting the wrong users. Determine your ideal
customers and use them as a measuring stick to assess the quality of your acquisitions.
Have a killer onboarding process.
Making sure your new users actually use your product is key to retaining them later in the funnel. Are your users activating? Have they found and used your product's key features? If not, retention emails are going to have a hard time convincing them
to stay with your product. Retention strategies add value on top of your product – icing on the cake – if users have missed the value of the product alltogether then just the icing isn’t going to cut it.
Don’t let your customers forget about you.
Great retention strategies continue to solve problems for their customers long after they’ve started using the product. Constant and continuous education in the form of videos, webinars, slideshows, eBooks, blog posts, etc. will keep your users
engaged and will make sure that your company stays at the top of their mind. But remember, give your customers practical and actionable content that they can actually draw value from. Customers that see value in your content will thank you with their
Seven Proven Email Retention Strategies
With so many products on the market, keeping customers engaged with your company is harder than ever. So, if you find that your customers are churning after activation, we’ve compiled 7 transactional emails strategies you can implement to loop them
back into your product.
1. Notification Emails
The most effective emails you can send are Notifications – Alex Schultz
Notifications are a great retention tool, especially for high-use products. They stand out in a user’s inbox because the content in a notification email is tied directly to what’s happening on their account. Second to welcome emails, notifications
compared to all other email categories.
Check out our blogpost on transactional email data
Similar to push notifications, email notifications are real-time update emails that can be triggered for any number of reasons. They can happen if a user has a new friend or follower, if someone’s messaged them or commented on their post, or any
other activity that happens within your product. These notifications give users meaningful information and they loop customers back into the product keeping them engaged with your company.
Another reason why notification emails can be such a successful retention strategy is because they can play into a user's vanity. Social networks have been using these kinds of notifications as a way to retain users for a long time now.
Twitter's 'New Follower' Email - The Bearer of Good News
In Twitter’s early days, Josh Elman, Twitter’s former product growth lead, realized that “once a user follows 30 people, they’re more or less active forever.” By quantifying the point at which a user is officially ‘retained,’ Elman was able to create
an email notification that promoted that behavior.
Notifications can be triggered for a number of reasons. They can happen if a user has a new friend or follower, if someone’s messaged them or commented on their post, or any other activity that happens within your product. These notifications give
users meaningful information and they loop customers back into the product keeping them engaged with your company.
The moment someone follows you Twitter you get an email notification like the one below telling you that you have a new follower.
This notification does four things:
- Uses a user’s inbox to remind them about Twitter
- Allows users to follow someone new
- Bring users back to the product
- Makes the email a positive experience by being the bearer of good news
The email is simple, but targeted. It zeros-in on Twitter’s core retention behavior by making it easy to follow new users and use the product, but here’s the clever part: the retention email is disguised as a good news email. “Congrats, you have new
Linkedin uses a similar strategy to boost their product’s retention. Their ‘who’s viewed your profile’ notification loops users back into the product and encourages users to view and add new contacts on the service.
Finding the Right Behavior to Promote with your Notifications
Both these emails promote a very specific user behaviour: add a friend. The notification emails your company sends should also promote a specific user behaviour. Choosing which behavior to target is the tricky part.
Before choosing a behavior to promote in your notification emails, you need to determine the one thing your customers need to do in order to understand and receive value from your product. Similar to the “Aha” moment, this is the point when your
customers “get” your product and they can start using it on a regular basis.
For Twitter, it was getting users to follow 30 people. For Facebook it was getting users to add 15 friends. Choose a quantifiable metric that correlates with customer retention and promote that behavior with your emails.
2. Email Newsletters
Okay, lets face it – more often than not, email newsletters suck. They’re chock full of irrelevant content and they’re poorly segmented, which makes them boring and useless for the vast majority of your customers. But, everybody sends them – so, how
do you make Newsletters awesome?
Segment your Customers
Don’t send them to everyone.
Email Newsletters can’t (and won’t) appeal to everyone. Don’t fight the losing battle - segment your newsletter lists so that they will definitely benefit a specific group of users. This can translate into more work in the long run, but it’s a
sure-fire way to raise the retention of the group you’re targeting.
Have a Plan for your Customers
Give your customers a road map for your Newsletters.
Create and follow a strict schedule of delivery for newsletter emails. If you have a plan for your customers it will create anticipation for your newsletter, and regular schedules will establish trust between you and your customer.
Fab segments its user's interests up front with very detailed email preferences. Fab lets you choose which the topics you’re interested in, which days you’d like to receive an email*, and they’ll even show you a preview of the email they’ll be
*Not only that, Fab actually stops sending you emails that you don’t open
The Golden Rule of Email Newsletters
Once you’ve properly segmented your users,
has a golden rule for email newsletters:
"The content of your newsletter should be 90% valuable for your user and 10% promotional."
Your customers are receiving dozens (hundreds?) of emails everyday. Most of them will be promotional – click this, download that, start here, follow there…
Don’t do that.
You can cut through the most of the crap in your customer’s inbox if you just remember to provide value first.
Are you giving your customers something practical and actionable that they can get value out of right away?
If not – then it’s not likely they’ll click through. People are busy - give them the shot of instant gratification that they’re looking for.
Here’s one company that does newsletters right – I look forward to their newsletter every month.
Death to the Stock Photo
is a company that makes stock photos that don’t suck. Their monthly newsletter delivers full-resolution, royalty free photos to my inbox every month. I open it, I read it, and I click through. Every. Single. Time.
Their emails are packed with content,
to view the full email
Why does this email work so well?
It is exactly what I signed up for
It is sent on a schedule, so I expect it and can look forward to it
It is 90% useful content and they save their own promotion for the end of the email
3. Educational Emails
Educational emails continue to educate users about the benefits of your product after the onboarding process.
There are two ways to approach this:
Educational emails continue to educate users about the benefits of your product after the onboarding process.
There are two ways to approach this:
Targeted Feature Education
You might notice that there are features in your product that are getting underutilized even after users have started using your product. If that’s the case, then you can use an educational email campaign to automatically target users who haven’t
engaged with specific features or aspects of your product.
Here’s an example from Facebook:
Here Facebook is segmenting users who haven’t signed in and updated their Page “in a while.” It’s a gentle reminder that their Page exists, and it gives them a few quick tips on how to use that feature of the product.
Peripheral Content Education
Educational content doesn’t have to be directly tied to your product. Sometimes, users understand how to use you, but they just need a little a inspiration to get them rolling. If this is the case, your users could get a lot of value from peripheral
education - education that’s not specific to your product, but could be applied to make them more effective, or more productive users. Content marketing fits into this category.
educational emails give users exclusive access to content that teaches them about typography. Knowledge about type isn’t specific to Typecast, but it certainly helps if you’re using their service.
4. Product Updates
Keep your customers up-to-date with regular product update emails.
If you’re a SaaS or App company, your product is constantly changing. That means that customers who are engaging with you are probably waiting for new features and updates.
One way to keep your customers engaged with your product is to keep them in the loop with how your product is growing and changing. Like notification emails, product update emails pull users back using good news by introducing new features and new
ways to use the product.
product is always changing – they’re always adding new integrations. Their product update email gives me a clear and concise email outlining all the new things I can do.
5. Win-Back Emails
Every once in a while, you’ll sign up for a product, you’ll use it a bit, and then, for whatever reason, you’ll drop it. It happens - users stray. But, they’re not gone forever. That’s where win-back emails come in.
Win-back emails target inactive users and encourage them come back. Sometimes this is done with coupons and discounts, other times it’s just a simple reminder of how useful your product or service is.
Trial Extension Emails
Win-back emails can take the form of trial expiry or trial extension emails. These emails give users an incentive to use the product and they also give a sense of urgency, encouraging users to come back sooner rather than later.
Shopify’s trial extension email offers a pleasant surprise for users that might need a little more time to get their shop up and running. The email also give the Shopify an opportunity to ask users who have churned why they didn’t like the service.
Cart Abandonment Emails
Cart Abandonment emails are another example of effective win-back emails. Cart Abandonment emails are sent to customers who have added products to their cart, but failed to check out.
According to the
Baymard Institute, 67.45% of online shopping carts are abandoned. While it may not be possible to loop all those sales back to conversion, cart abandonment emails are still a very powerful retention tactic.
reports that nearly 50% of all abandoned cart emails get opened. Fifty percent! What’s more exciting is that over a third of those lead back to purchases on your site.
Just remember, abandon carts happen for 3 main reasons:
No actual intent to buy
There’s little we can do if they were never intent on buying, but price and credibility can be negotiated in a cart abandon email. You can offer coupons & discounts to relieve pricing pains, and you can point users at testimonials to boost your
(maker of the worlds most comfortable underwear) has both their bases covered. They’re sure to remind buyers that shipping is free in the US (price) & Canada and that returns are painless (credibility).
6. NPS Survey Emails
The Net Promoter Score (NPS) is one of the most recognized ways to measure customer loyalty. It’s used to figure out the lowest cost of keeping current customers and the best way to acquire new ones. And, to measure NPS, all you need to do is ask
one, simple question:
“How likely is it that you would recommend our product to a colleague or friend?”
One question - that's it.
Also, calculating your Net Promoter Score is easy:
Net Promoter Scores allow you to:
NPS surveys are sent to users after an interaction with your company to measure how they feel about your product or service. Send them after purchases, support tickets, onboarding processes, etc. You can use the survey to segment and reach out to
evangelists or to support customers that are likely to churn.*
*For quick guide to start your own
NPS system in under an hour, take a look at this hack we put together using
Open Source Email Templates.
Show me the hack
7. Review Emails
Here’s a genius retention strategy.
When you buy a book on Amazon, you get an email asking you to review it. This email drives you back to the site, but more importantly, it gets you to contribute to the value of Amazon because you’re adding content on the site that increases the
credibility of their product.
The email itself easy to implement, and, if they choose to review the product, the review will contribute to your company’s overall retention. Wow!
At the end of the day, successful retention strategies need to accomplish two things:
To start a retention strategy, you need to first discover where your customers are falling off the funnel and then determine what they need to do to stay active. Find one user metric that correlates with active, retained users and optimize for it.
Send notifications that promote that behavior, content that educates them on your product, and updates that keep them in the loop.