The problem with your question is that you don't understand retention (nor the author of the post explain it well).
Retention in theory is not that I buy from your service every day. Retention is that, whenever I need your type of service, you are my first choice.
Obviously it is very difficult to measure this retention, so you measure returning users. But you have to understand your market.
This said, paying for keeping users is not unheard of. Discounts for loyal customer, targeted email for new purchase etc etc...
Usually this value is factored in the LTV (Life Time Value of a customer) and you could play with it to optimize the LTV versus the cost of acquisition (Cost of retention should be lower of cost of acquisition, if it is not, look at your product/service because it sucks).
But from your original question, it seems you have a "one-off" type of service. Think about wedding planners. Your problem is that if you acquire customers faster than new customer are born, you are in trouble. Otherwise it is a sustainable business, just take care because you have an upper bound on your growth and your cost of acquisition should be lower than the profit you get in every transaction (excluded acquisition).
The particular case I'm thinking of, is not a one-off type of service at all. It's a long-tail ecommerce shopping advice app that generates affiliate & advertising commissions that are much higher than the cost per user acquisition. The same customers are coming back repeatedly, and buying different things each time.
So you have retention. Being long tail means that probably the users does not open your app every day and measuring retention could be challenging.
For gauging retention I would look at two number, times the app is opened each month (per users) and average number of transactions per month per users (depending on the stage the transaction value could be irrelevant). And I would check the distribution.
Usually you could cluster users in different class (actually, segment them) and you will find a reasonable number to use as a measure for "lost customer". Every customer that doesn't use your app for more than that time, is a lost customer and you use it to calculate the churn rate.
Where you set the threshold is a judgement call, so be honest with yourself, better to estimate a slightly higher churn rate than underestimate it.
Also, understand that retention is an important measure in the long term, so don't optimize for it immediately, but it is strictly related to other important measure (for instance retention influence in a couple of way virality, and a poor retention could be a symptom of bad Product-Market fit).
P.s: the number in the article seems just examples, not number to use as a benchmark.
Comments
The problem with your question is that you don't understand retention (nor the author of the post explain it well). Retention in theory is not that I buy from your service every day. Retention is that, whenever I need your type of service, you are my first choice.
Obviously it is very difficult to measure this retention, so you measure returning users. But you have to understand your market.
This said, paying for keeping users is not unheard of. Discounts for loyal customer, targeted email for new purchase etc etc...
Usually this value is factored in the LTV (Life Time Value of a customer) and you could play with it to optimize the LTV versus the cost of acquisition (Cost of retention should be lower of cost of acquisition, if it is not, look at your product/service because it sucks).
But from your original question, it seems you have a "one-off" type of service. Think about wedding planners. Your problem is that if you acquire customers faster than new customer are born, you are in trouble. Otherwise it is a sustainable business, just take care because you have an upper bound on your growth and your cost of acquisition should be lower than the profit you get in every transaction (excluded acquisition).
The particular case I'm thinking of, is not a one-off type of service at all. It's a long-tail ecommerce shopping advice app that generates affiliate & advertising commissions that are much higher than the cost per user acquisition. The same customers are coming back repeatedly, and buying different things each time.
So you have retention. Being long tail means that probably the users does not open your app every day and measuring retention could be challenging.
For gauging retention I would look at two number, times the app is opened each month (per users) and average number of transactions per month per users (depending on the stage the transaction value could be irrelevant). And I would check the distribution.
Usually you could cluster users in different class (actually, segment them) and you will find a reasonable number to use as a measure for "lost customer". Every customer that doesn't use your app for more than that time, is a lost customer and you use it to calculate the churn rate.
Where you set the threshold is a judgement call, so be honest with yourself, better to estimate a slightly higher churn rate than underestimate it.
Also, understand that retention is an important measure in the long term, so don't optimize for it immediately, but it is strictly related to other important measure (for instance retention influence in a couple of way virality, and a poor retention could be a symptom of bad Product-Market fit).
P.s: the number in the article seems just examples, not number to use as a benchmark.