Although retention is widely considered to be the most important metric to get right when building (or investing in) a business, it’s also one of the least understood. Why? Because unless you’re a growth expert or an experienced investor, you’re often relying on anecdotes, dated blog posts, and misguided benchmarks.
Hi Lenny, you say "But just know, startups rarely increase retention significantly." Curious to know why you say that? Does this mean a startup with a retention problem should pivot the idea?
Hey Lenny, if you have any resources on split of mobile vs main enterprise software retention rate i.e JIRA on desktop vs JIRA on mobile retention rates/ Outlook on desktop and Outlook on mobile retention rates. Every SaaS ends up having product on multiple platform, but standards of the retention rates on different platform is scarce. Please share /add on this article - will be super helpful.
Hi Lenny - thanks a lot for the very thoughtful research!
How do we tie in market penetration rates into dollar revenue retention? Businesses operating in low penetration categories can demonstrate higher dollar retention than more mature/penetrated categories.
How can we get a sense of net dollar/customer retention in ’steady state’?
Interesting insights, but, i think since each business within the same category is trying to solve very different need of the customer, not sure if such standardized benchmark will ever make sense.
Hi Lenny, for consumer transactional, what is the assumption on frequency of use within the 6-month horizon?
If a user only makes two transactions, in month 1 and month 6, I presume they're classified as retained under the numbers above. That said, this might be enough frequency for Airbnb but not for lower transaction marketplaces like Uber.
Across companies with different transaction sizes, do you have guidance on how frequent users need to be making transactions within the 6-month horizon to be classified as a "good retained user"?
For instance, for Airbnb transactions are in $100s so maybe once every 3 months across the 6-month horizon, whereas for Uber transactions are in the $10s so maybe once every two weeks across the 6-month horizon?
This is one of the best resources out there on retention. Thank you.
Clarification: Is the 6 month retention reference for consumer saas considered to be "N-Day" or "unbounded" retention over a 6 month period? It sounds like N-day given the comment that it is measuring users that came back in the 6th month.
Lenny wonderful wonderful research! Thanks for sharing.
In the consumer SaaS section, I noticed all the examples are entertainment related, did you find anything in the more 'aspirational/self help' side of consumer SaaS - examples being Audible, Blinkist, Calm or Headspace, Coursera/Udemy - essentially subscriptions that users have for products that require a bit more effort?
Lenny - Longtime reader and love your newsletter, but I think there's a problem here.
The user retention numbers for mid-market and enterprise SaaS here are misleading.
If you dig into the sources cited, none of them appears to be user retention, or even account user retention (ie, the % of accounts still using the product). Here's what's on offer.
- Atlassian: customer retention, or how many accounts are still subscribing (not USING) the product
- Salesforce: customer retention
- Slack: customer retention
- ADP: gross revenue retention (GRR)
- Workday: GRR
- Quickbook: Dead link
So were your expert recommendations using customer retention, GRR, or some mix? Was anyone describing user retention?
Frankly this is a disappointing because I had been using these "user retention" benchmarks with leadership at my co and will now have to explain why this isn't accurate .
Really late here, but I think some of the consumer social numbers use different definitions. Snapchat and Twitter are using D90 numbers (number of users that came back on D90) whereas the other ones are using Month 6 numbers (number of users that came back between D181 and D210).
Hi there Lenny, thanks for this very informative article.
I have a question regarding a paragraph in the Casey article about retention that you cited. “For a business where supply side retention is high and acquisition costs are low, demand side retention can be lower, and the company can still be very successful. Etsy and Wag I imagine fit more into this model.”
In these examples of B2C transactional/ marketplace businesses, 1) do low acquisition costs refer to consumer or seller side acquisition? 2) if referring to consumer acquisition, would “low” be a certain ideal LTV/CAC and if so do you have an idea of what that might be, or another way of interpreting? 3) is there a benchmark or any data you might have around what user retention looks like for the cited business or similar ones for the 6 mth mark/ curve flattening mark?
Hi Lenny, you say "But just know, startups rarely increase retention significantly." Curious to know why you say that? Does this mean a startup with a retention problem should pivot the idea?
Hey Lenny, if you have any resources on split of mobile vs main enterprise software retention rate i.e JIRA on desktop vs JIRA on mobile retention rates/ Outlook on desktop and Outlook on mobile retention rates. Every SaaS ends up having product on multiple platform, but standards of the retention rates on different platform is scarce. Please share /add on this article - will be super helpful.
Hi Lenny - thanks a lot for the very thoughtful research!
How do we tie in market penetration rates into dollar revenue retention? Businesses operating in low penetration categories can demonstrate higher dollar retention than more mature/penetrated categories.
How can we get a sense of net dollar/customer retention in ’steady state’?
Interesting insights, but, i think since each business within the same category is trying to solve very different need of the customer, not sure if such standardized benchmark will ever make sense.
Hey Lenny, could you quickly tell me whether or not this is "unbounded" or "bounded" retention? Thanks so much!
Hi Lenny, for consumer transactional, what is the assumption on frequency of use within the 6-month horizon?
If a user only makes two transactions, in month 1 and month 6, I presume they're classified as retained under the numbers above. That said, this might be enough frequency for Airbnb but not for lower transaction marketplaces like Uber.
Across companies with different transaction sizes, do you have guidance on how frequent users need to be making transactions within the 6-month horizon to be classified as a "good retained user"?
For instance, for Airbnb transactions are in $100s so maybe once every 3 months across the 6-month horizon, whereas for Uber transactions are in the $10s so maybe once every two weeks across the 6-month horizon?
Hi Lenny, do you have any knowledge on how those retention numbers apply to the casual mobile gaming industry?
This is one of the best resources out there on retention. Thank you.
Clarification: Is the 6 month retention reference for consumer saas considered to be "N-Day" or "unbounded" retention over a 6 month period? It sounds like N-day given the comment that it is measuring users that came back in the 6th month.
How does this apply to freemium models?
Hey Lenny, thanks for such a great article!
Apologize in advance if this is a dumb question.
When you refer to Atlassian, Slack & QuickBook's "Customer Retention" are you referring to users or accounts?
e.g. Google has 1,000 employees. Google is 1 account with 1,000 users.
Lenny wonderful wonderful research! Thanks for sharing.
In the consumer SaaS section, I noticed all the examples are entertainment related, did you find anything in the more 'aspirational/self help' side of consumer SaaS - examples being Audible, Blinkist, Calm or Headspace, Coursera/Udemy - essentially subscriptions that users have for products that require a bit more effort?
Thanks!
Lenny - Longtime reader and love your newsletter, but I think there's a problem here.
The user retention numbers for mid-market and enterprise SaaS here are misleading.
If you dig into the sources cited, none of them appears to be user retention, or even account user retention (ie, the % of accounts still using the product). Here's what's on offer.
- Atlassian: customer retention, or how many accounts are still subscribing (not USING) the product
- Salesforce: customer retention
- Slack: customer retention
- ADP: gross revenue retention (GRR)
- Workday: GRR
- Quickbook: Dead link
So were your expert recommendations using customer retention, GRR, or some mix? Was anyone describing user retention?
Frankly this is a disappointing because I had been using these "user retention" benchmarks with leadership at my co and will now have to explain why this isn't accurate .
Really late here, but I think some of the consumer social numbers use different definitions. Snapchat and Twitter are using D90 numbers (number of users that came back on D90) whereas the other ones are using Month 6 numbers (number of users that came back between D181 and D210).
Thanks for this informative article.
I have a question about being "active". In Consumer Transactional is adding something to the cart considered as active? Or it Should be a transaction?
Hi there Lenny, thanks for this very informative article.
I have a question regarding a paragraph in the Casey article about retention that you cited. “For a business where supply side retention is high and acquisition costs are low, demand side retention can be lower, and the company can still be very successful. Etsy and Wag I imagine fit more into this model.”
In these examples of B2C transactional/ marketplace businesses, 1) do low acquisition costs refer to consumer or seller side acquisition? 2) if referring to consumer acquisition, would “low” be a certain ideal LTV/CAC and if so do you have an idea of what that might be, or another way of interpreting? 3) is there a benchmark or any data you might have around what user retention looks like for the cited business or similar ones for the 6 mth mark/ curve flattening mark?
Much thanks Lenny!
This is awesome, thanks very much for compiling. Any sense of what constitutes good free trial -> paying conversion for Consumer SAAS?