What Makes an Effective App User Retention Strategy? A View from 2023

In the last three years, the mobile users’ world has changed. From binge-using apps for every daily task at the outbreak of the pandemic, customers returned to being mindful of their screen time and selective about their shopping choices. At that, the role of retention in the app business’s success has never waned.

On the contrary, it may have even strengthened its position as apps need to adapt their strategies to today’s economic challenges. When acquisition budgets experience cuts, retention takes the stage as it requires another type of investment in the first place: keen intelligence and creativity.

How can an app marketer meet the challenge of defining and implementing an effective user retention strategy? We’re going to break it down in this post.

The Value of User Retention and the Cost of App Success

Marketing a mobile app has always been challenging. 99.5% of apps would never see success, failing to generate revenue, let alone profit; many would go out of the competition even earlier, failing to retain their first costly-acquired users.

If it wasn’t for the deadly churn rate, could the bottom line be positive for many striving apps? The numbers say so: a 5% increase in customer retention is known to increase company revenue by 25–95%. So if you were waiting for a sign to get serious about the retention stage of your app user funnel, that was it.

Indeed, an effective user retention strategy can help app businesses maintain a loyal user base, increase user engagement, and generate sustainable revenue. Furthermore, retaining users is more cost-effective than acquiring new ones, making it a wise investment for businesses to focus on.

How to Develop an Effective User Retention Strategy Step by Step

Whether you’re working on a user retention strategy from scratch or looking to take control of your previous retention efforts, we recommend you take a systematic approach. Here are the steps you can follow:

1. Leverage Data to Understand Your Users’ Needs and Behavior

In 2023, apps have no other choice but to be user-centric and data-driven:

📊 Have a general view of the key metrics

User engagement, session duration, retention rate, and churn rate: track these app performance metrics over time to identify patterns and make informed decisions about optimizing your app to increase user retention.

🔎 Conduct in-depth research on user segments and their specific needs and preferences

First, segment your user base by attributes, behavior, or RFM criteria, depending on what is the most relevant in your case.

Second, observe how user segments react to your messaging across the channels (push notifications, in-app messages, and emails). Are they even opted-in for/subscribed to your communications? How do they engage with certain types of offers and convert to the target action afterward?

Use tools like Pushwoosh Customer Journey Builder to get a clear overview of the entire user lifecycle.

2. Align Your Retention Strategy With Organizational Goals

A user retention strategy can take different directions, for example:

▶️ Aim at retaining new users from Day 1 to Day 7, converting them to registration, activation action, and first purchase. This kind of retention strategy helps an app business to generate new revenue.

🔁 Focus on satisfying the needs of existing paid users, converting them to repeat purchases, upgrades, referrals, and loyalty. This kind of retention strategy will help to increase customer lifetime value.

So before you start mapping out a retention strategy, take another look at the business’s broader objectives and plan your efforts with one specific goal in mind.

3. Create Targeted Messaging

Now that you see where your app business is headed and how current users see it, you can craft a new messaging strategy.

🎯 Who are you going to address? Choose your target segments.

🕘 When are you going to reach out to them? Find the best time to send your message, be it the time on the clock or the time after a certain event is triggered.

💌 What message are you going to convey? Decide on whether it will be a direct CTA or an engagement, educational, and entertainment series first.

📲 Where (on which channels) will your message be delivered? We recommend you opt for an all-inclusive messaging strategy delivering your offer via mobile & web push notifications, emails, and in-app messages. This way, when a user is unreachable on one channel, you can still engage them via another channel.

4. Invest in Personalization

Personalization is key to building retention and a sense of loyalty among users. You can use personalization to tailor messaging, recommend content, and deliver targeted campaigns to specific user segments. It ensures you deliver the right message to the right user at the right time.

So we recommend you do not skimp on personalization, especially as it’s all automated today and looks perfectly natural to the user.

5. Focus on Engagement

Retention is all about keeping users engaged with your app over the long term. So make sure your app offers a compelling user experience that keeps users coming back.

📆 Consider adding and promoting features that encourage daily use, such as a personalized home screen or daily challenges that help users practice healthy habits.

👏 Celebrate users’ achievements: show an encouraging in-app message when a user has completed a challenge or reward them with a bonus when they’ve signed up to the app.

Remember that the goal of engagement messages is to encourage app usage and provide value to the user.

6. Orchestrate an Omnichannel Strategy

To see positive changes in retention rates, it is essential to accompany your users on their journey with relevant messaging. For this purpose, you need to create seamless omnichannel messaging flows, like those that follow up a push notification with an in-app message or an email to provide more information about an offer.

📡 Before sending a message, confirm that the customer is reachable on that channel.

🎯 Accurately target your message to be delivered to the right users.

📨 Track open rates to determine if the message was well-received; if not, try sending the same message via an alternative channel.

📈 Monitor key metrics such as click-through rates (CTRs) and conversions.

🔤 Conduct A/B/n testing to determine which combination of channels and messages performs best.

🤩 Use real-time statistics and insights to improve your messaging strategy and achieve your desired engagement and conversion goals.

How to Implement a User Retention Strategy Fast and Effectively and Keep It Up and Running

Creating a retention strategy is only the first step. The real challenge lies in implementing that strategy quickly and effectively and then keeping it afloat no matter what challenges come your way. Here are some tips on how to do just that.

1. Start With the Low-Hanging Fruit

When implementing your retention strategy, start with the easy wins. Identify the changes that will have the most significant impact on retention and implement them first.

💡 Look for patterns and trends that indicate where users are dropping off and where they are staying engaged. The most critical performance metrics include retention rate, churn rate, session length, and lifetime value.

Once you identify areas that need improvement, you can focus on developing tactics and strategies to address them.

2. Test and Iterate

Retention is an ongoing process, and your strategy will need to evolve over time. Test different tactics and strategies to see what works best for your app and users. To obtain viable results from retention tests:

☑️ Define a clear hypothesis

☑️ Select a test group and a control group

☑️ Measure the impact of the test

☑️ Interpret the results accurately.

☝️ Ensure that your tests are statistically significant and that you’re not making decisions based on random fluctuations in your data.

☝️ Also, test each tactic in isolation to understand its impact on retention.

Then, use data to identify patterns and trends. Look for correlations between user behavior and retention metrics to determine what changes to make. For example:

👋 If users drop off after the first week, you may need to improve your onboarding process or offer more value to users in their first few days.

✅ Or, if you notice that users who complete a certain action have higher retention rates, you can use that data to develop a strategy to encourage more users to complete that action.

Generally, you’ll want to look at metrics such as retention rate, engagement rate, and revenue per user. In addition, consider user feedback and surveys to understand how users respond to changes.

3. Monitor Progress and Adjust Course

Keep a close eye on your retention metrics to see how your strategy performs. Be prepared for the fact that some initiatives might take longer than others. For example:

• A personalized messaging campaign may show results in a few days or a week.
• A major redesign of the user experience or a new loyalty program may take several weeks or even months to prove its impact on user retention.

If you do not see the desired results, adjust your approach promptly and try something new.

To Retain Your App Users Whatever Comes Next, Stay Agile

In the app business, changes can happen rapidly. For example, economic or regulatory changes could impact your strategy, a new competitor may offer a better user experience, or your user base may evolve, making you address different needs in your user retention strategy.

Therefore, it’s crucial to remain responsive to new circumstances and willing to adjust your retention efforts if needed. Build your app user retention strategy based on the recommendations given in this post and from there, start on an exciting and never-ending retention journey.