Is your team struggling to find the best way to measure retention?
Retention is one of the key relevant metrics for any business. It has an effect on all of the important business indicators (active users, engagement, stickiness, LTV, payback period, etc.) and is the primary metric of sustainable growth.
A retention metric measures how many users return to a product over time and take any action.
In some cases, product managers have trouble identifying the most appropriate type of retention for their business cases.
There are three methods to measure retention here.
1. N day retention.
N day retention tells you what percentage of user come back to your solution on a specific day.
Example : A 2 day retention rate is the percentage of users who returned exactly on Day 2.
2. Unbounded retention.
Unbounded retention shows you what percentage of users come back on a specific day or later. You can also think of unbounded retention as the opposite of your churn rate.
Example : A 2 day retention is the percentage of users who came back on day 2 or any data after that.
3. Bracket retention.
Bracket retention allows you to define any time brackets that you want, from a single day/week/month to multiple days/weeks/months.
Example : You could set your 1st bracket as day 0, your 2nd bracket at day 1-7, and your 3rd bracket as day 8-14. It will measure the percentage of users that return during each bracket.
Your app’s retention method depends heavily on how often you expect people to use it. N-day retention is probably more appropriate if you are expecting people to return regularly. For example, if you want people to return daily to a mobile game, or once a week to an exercise app. Unbounded retention may be a more accurate measure of how your business is doing if your users do not have a steady usage pattern, like people who place orders sporadically through a food delivery app.
In the example on the left – N day retention, 21 percent of users returned after 24 hours (Day 1) and performed some kind of action within the app, 17 percent returned after 48 hours (Day 2), and so on.
According to the graph on the right – Unbounded retention, these are the same data points as in the N day retention graph. The unbounded Day 1 retention rate is 50%, compared to only 21% for N day. This is due to half of all users who signed up on Day 0 returning at some point during the month following.