When it comes to digital marketing, measurement is everything – or so we’ve been told. These days, there’s new thinking on the street and it’s that “Benchmarks are bogus.” Benchmarks are simply an average, and for most marketers, average just isn’t good enough. No matter how you cut it, whatever you measure, it’s going to be different depending on your app category and your company. That’s why on a recent episode of Retention Masterclass we took a deep dive into what retention benchmarks really mean, with the help of Brian Balfour, CEO of Reforge.
Reforge undertook a research project as part of a retention engagement course — while “also trying to establish why we kind of intuitively knew why it was so important,” says Brian. “But if you actually look at any category among SaaS companies, B2C social, anything, you’ll always find that the companies and the products that are the category leaders in their space are always the ones with the highest retention.” In other words, Reforge has helped confirm exactly why you should be tuning in to Retention Masterclass.
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Why retention matters
Is the fact that the leaders in each category are retention masters just a coincidence? “When you actually drill down and understand retention engagement at its foundational level and what it does, what you find is what we call the center of the growth engine,” says Brian.
“If you think about growth, it’s a system with three parts: acquisition, retention, and monetization,” says Brian. “And those three don’t work in silos, they work all together as one system. So, if you change one part of the system the other part has effects on the other part of the system, and so you need to understand all of these relationships.”
But if you have to choose the most important part of the puzzle, you might lean toward retention. “It just so happens that retention is the thing that kind of moves everything else, right?” she says. “Retention moves acquisition. As you increase retention, it typically flows through to your various acquisition mechanisms. If your primary acquisition mechanism is virality, then increased retention is going to increase your kind of viral users that you’re getting in two different ways. You’re going to have a larger percentage of a cohort of users that are inviting other users.” And the longer they retain, the more invitation touchpoints they will encounter.
Let’s take Dropbox for example. “The longer I use Dropbox, the more people I probably invite to Dropbox,” says Brian. You share folders and send files, and with each invite you help grow the Dropbox userbase. “But the second thing is that typically, as you increase retention, you also increase the monetization part of your ecosystem as well, right? The longer I retain a user, the more money that I’m going to make from them.” As you put more files into Dropbox and increase your need for storage, you’re more likely to spend more to meet those needs.
When you think about acquisition, retention, and monetization as a whole, you start to see how retention is the bedrock of it all. And if you ignore the foundation, the whole house will crumble.
Using retention to inform your acquisition
It all comes full circle when you think about the larger cohort. “The more money I make out of a cohort, the more flows back through to acquisition because that means I’m extending my LTV. I have more to spend on CAC. The more I have to spend on CAC, the more I can acquire — the more that I acquire, the more that I retain, right?”
When you know which of your users retain and monetize most successfully you can user your acquisition budget to target similar users. “You have to have a very clear definition of who you’re targeting now and who you’re targeting next, and those are the people that your teams should be working on,” says Brian.
To learn more about how retention can help you boost your overall performance tune in to the entire conversation above and read the transcript below.