What is a retention rate?

A retention rate gives a number to the percentage of users who still use an app a certain number of days after install. It is calculated by counting unique users that trigger at least one session in one day, then dividing this by total installs within a given cohort.

To calculate basic retention rate, you just need three key pieces of information. 

1. The number of active users at the end of a time period 

2. The number of active users at the beginning of a time period 

3. The time period you want to measure

You can then take this information and use the retention rate formula to get your result. 

Retention rate = [# of users at the end of a time period / number of users at the beginning of a time period] x 100. 

Retention rates help you understand how well your app is performing over time. Generally speaking, a higher retention rate is better overall because users who stay active for longer provide more engagement, as well as greater monetization opportunities. 

At its core, retention rate analysis helps uncover why users return to an app repeatedly, shedding light on the elements that resonate most with the audience. This insight is invaluable, guiding decisions on everything from feature development to marketing strategies. Retention rates are also useful for understanding when and why many users disengage from apps, and where you stand in the grander scheme of app performance. This can help pinpoint what you can improve and how to extend your users’ lifetime value (LTV).

When perofming retention rate analysis, you can look, for example, at how retention develops in your app over a 30-day period. If retention drops at a certain point, a logical goal would be to increase the number of users who are interested and engaged enough to retain past that date. In gaming, this is often the end of the onboarding period. In verticals like e-commerce, you could find out when purchases occur and optimize for that point in time.

The importance of retention rates extends far beyond simple user counts. They serve as a multifaceted tool that impacts various aspects of an app's performance, including:

1. User value indication: High retention rates suggest users find ongoing value in the app's offerings.

2. Monetization opportunities: Engaged users are more likely to make in-app purchases or interact with ads.

3. Cost-efficiency: Keeping existing users is typically less expensive than acquiring new ones.

4. App health barometer: Retention trends can highlight strengths and weaknesses in user experience.

5. Lifetime value enhancement: Long-term users are more likely to contribute more to an app's overall revenue.

6. Marketing strategy refinement: Retention data helps identify which user acquisition methods yield loyal customers.

7. Competitive edge: Strong retention can set an app apart in a crowded marketplace.

By leveraging these insights, app marketers and develoeprs can craft experiences that not only attract users but keep them coming back, fostering a sustainable and thriving app business.

Average retention rates vary significantly by vertical and business model. Having benchmarks to follow, however, helps marketers and developers to set realistic goals and to evaluate app performance. These benchmarks provide context for comparison, serve as a starting point for analysis, and help teams identify areas of strength and opportunity for improvement.

According to Adjust data, the average global retention rates are:

1. Day 1: 26%
2. Day 7: 13%
3. Day 14: 10
4. Day 30: 7%

While retention rate measures the percentage of users who continue to use your app, churn rate represents the opposite–the percentage of users who stop using your app over a given period. 

These metrics are closely related but provide different perspectives on user behavior:

Retention rate = 100% - Churn rate

For example, if your app has a 30-day retention rate of 20%, its churn rate for the same period would be 80%.

Understanding both metrics is crucial for a comprehensive view of your app's performance. While high retention is desirable, analyzing churn can help identify specific points in the user journey where users are dropping off, allowing you to address these issues and improve overall retention.

Read more on how to win back churned users and grow your app.

Improving retention rates always begins with an optimized onboarding process designed to showcase your app’s value proposition and key features efficiently. From there, the following points go a long way in driving sustained user engagement:

• Gamification elements like challenges and rewards
• Regular content updates to maintain freshness
• Behavioral analysis to identify and address problem areas
• Responsive customer support to build trust
• Community-building features to foster user connections

Strategic implementation of push notifications can also re-engage users without overwhelming them, while continuous performance improvements ensure a smooth, bug-free experience. User feedback should be actively sought and incorporated into app development, guiding improvements and new features. Let’s take a closer look at some important fundamentals for good retention.

1. Always consider ways to individualize your UX

A one-size-fits-all approach isn’t enough. There are plenty of ways to craft unique user experiences that will keep attention. Segmenting users is an important step in achieving this, also increases the impact of retargeting campaigns.

2. Fine-tune your messaging

From in-app campaigns to push notifications, messaging and creatives are a powerful tool that can make a huge difference in retaining users. For example, depending on your vertical, you may want to consider leveraging user stories to bring others back to your app.

3. Identify bottlenecks

Almost every app has its moments of frustration. Locating these can help you offer a greater user experience than your competitors. For example, it could be that your gaming app has a few difficulty imbalances, or needs to be faster when loading new levels.

4. A/B test your product

As you may already be aware, this is a surefire way to discover what works for your audience. A/B testing new features gives you the insight you need without alienating your audience and consequently lowering retention.

5. Prioritize onboarding

For many verticals, day 1 is the best chance you have to stretch a user’s LTV. Make sure your users are able to experience the full value of your app by optimizing the onboarding experience from the point of install.

By focusing on these strategies and continuously monitoring your retention metrics, you can work toward improving user engagement and long-term app success. Remember that retention optimization is an ongoing process that requires constant attention and refinement based on user behavior and feedback.

Retention rates are a key cumulative cohort metric within Datascape, and can be viewed and analyzed on the Cohorts dashboard, where you can group your users in different ways to create useful analyses. One of the key use cases of Datascape’s Cohorts dashboard is the heatmap table, which enables clear and easy identification of the retention rate of your users over time. 

This data gives you a firm idea of user activity in your app, and allows you to check and compare recent user activity and long-term development by switching views. These views include days, weeks, or months after install. 

To gain greater insight into user retention and working with Adjust to improve your rates, you can take a look at our in depth guide: How to successfully keep users and grow your app.

For more information on Adjust’s measurement and how we can help grow your app, request a demo today.