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PMs & Metrics: Retention Fee


Throughout our final put up of the PMs & Metrics sequence, we lined the small print of the conversion price. In at the moment’s put up, we’ll be going over one other essential metric that PMs must be aware of – the client retention price.

The shopper retention price measures the proportion of consumers which have continued to make use of your product over a time period. There are two key phrases right here to pay further consideration to – “continued to make use of” and “time period.” Let’s break them down additional.

“Continued to make use of” refers to clients which were utilizing your product, and doesn’t embody model new clients. Preserve this in thoughts as a result of we’ll be seeing this idea once more once we focus on the components to calculate retention price.

“Time period” signifies that retention price might be calculated weekly, month-to-month, or yearly. It’s essential to determine what time period a given retention price refers to since that price might be completely different primarily based on the time of 12 months, time of month, and so forth.

Buyer retention is a crucial metric to measure as a result of good buyer retention denotes a superb product and good buyer assist. It makes plenty of intuitive sense to make sure that your present clients proceed to make use of your services or products. Listed below are a number of extra the reason why buyer retention is so essential:

  • A 5% enhance in buyer retention can enhance profitability by 75% (Bain & Co)
  • It’s 5-7 occasions costlier to seek out new clients than it’s to maintain a present buyer (Consumer Heartbeat)
  • 80% of income comes from 20% of present clients (Gartner Group)

Briefly, having a excessive retention price is a vastly environment friendly and helpful approach to develop the enterprise. Measuring the client retention price helps benchmark your efficiency and permits you to determine and repair areas of enchancment.

To measure the retention price, discuss with the next components:

(All clients at finish of time period – New clients acquired throughout time period)/All clients in the beginning of time period

As an example, let’s say we began with 100 customers in the beginning of the month. In the course of the month, 20 customers left and 10 new customers joined, which suggests there are 90 customers on the finish of the month. We plug this into the retention price components: (90-10)/100 = .80 – so our retention price is 80%.

What retention price ought to product managers intention for? Much like the dialog price, the retention price in query varies relying on the business. There are two motion gadgets product managers can take when retention price – they need to be monitoring enhancements over a time period, and they need to be figuring out and prioritizing options and enhancements if the retention price has been declining.

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One other helpful good thing about understanding the retention price is that the flip aspect additionally provides the attrition price – the speed at which customers depart throughout a given time period.

To shut, we’ve lined two essential key efficiency indicators (KPIs) that must be a part of any product supervisor’s software – the conversion price and the retention price. I’ve talked about earlier than that as knowledge turns into simpler to collect and all-the-more essential in resolution making, PMs ought to continually concentrate on the way to make data-backed choices.


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