Retention

Retention measures how many customers or users, or how much of their revenue, a business keeps over time. Saved tweets treat it as the central metric of subscription and internet businesses.

• Why it matters. Lenny Rachitsky answers “What’s the most important growth metric to get right?” with “Retention,” and his framework holds that if you have poor retention, nothing else matters. A thread on community-driven companies argues they “increase retention, LTV, sales leads, organic word-of-mouth” while decreasing CAC, churn and marketing costs (Lolita Taub).
• How to improve it. Jeff Morris Jr. advises building a “frequent flyer program” for subscription businesses, since most internet businesses don’t reward their most loyal users often enough.
• How to read it. Mostly Borrowed Ideas’ nine-part thread summarizes an academic paper on retention-rate illusions, noting that investors follow retention closely as SaaS has grown. Steve Ressler notes that some pricing models give structural tailwinds to 100%+ Net Revenue Retention: Marketo, Pardot and Mailchimp charge by database size, and Salesforce by user license, so revenue rises as the customer’s own base grows.
• How to measure it. Cohort Analysis tracks the share of each signup cohort still active over time; The Most Important Growth Metric for Early Startups and The Hierarchy of Engagement, Expanded (Sarah Tavel) bear on the same question. Retention definitions and formulas also feature in Vista Training — Revenue and Retention Diligence.

Where this appears

• Tweets: 1-9 Thread - Retention Rate Illusions… (tweet), Loved Re-reading This Piece on… (tweet), Most internet businesses don’t reward… (tweet), 📚Underestimated founders + investors what… (tweet), Q What’s the most important… (tweet)
• Concepts: Cohort Analysis
• Learning: Vista Training — Revenue and Retention Diligence