Trying to sort out retention on its own is like hoping to solve a medical issue by dealing with the symptoms alone, while ignoring what caused it in the first place.
A quick fix leads to shallow short-term results. You might win back a few customers, but the main issue lies somewhere else.
Retention: the everlasting worry of most companies
I’ve recently had the chance to work on retention campaigns for two very different companies:
- a medium-sized company with clients ranging from consumers to small companies, and
- a small B2B company whose clients were big companies.
Obviously, the number of sign-ups ranged from hundreds to tens of thousands per month.
Now, you might be wondering which is the common thread. This is it:
Basically, they both registered a huge drop in retention after only a few weeks of product usage. Their analytics tools showed a retention of around 10%.
Not surprisingly, both companies were sure they were experiencing a churn problem, so they wanted to address it by increasing retention.
But was that the real problem?
When we got on board, we decided to first dig deeper and see what were the real causes of this increase in churn.
Activity churn vs. payment churn
First let me clarify one thing. In our analysis, we were looking mainly at activity churn, not payment churn.
Activity churn precedes the payment churn and is a good indicator as to what is to happen.
Many times users stop paying as soon as they stop using the product, but there are plenty of cases as well when they keep paying for the service for a couple of months before deciding to give up the subscription altogether.
If you are paying attention to the activity churn, it is easier to bring back some of the users who are about to churn than if you are chasing after someone who has already given up your product.
Ideally you should gather as much info as possible about why customers stop using your product in order to know what you need to improve and have more chances to get them back.
So, why is retention often an onboarding issue?
Easy: only the users who finish the onboarding process have a reason to come back to your product.
If you base your retention report on sign-ups, everyone who hasn’t finished the onboarding process will be considered as churned. So you will surely jump to the conclusion that you are experiencing a great churn problem as your customers don’t use your product for more than two to three weeks. Your first impulse will be to set up campaigns to bring back the lost users.
But if you decide to change the angle at which you look at things, and take into account only the onboarded users, you might be in for a big surprise. Retention could be actually high for the onboarded users.
This was the precise situation for one of the companies I was telling you about at the beginning of the article. Here’s how their retention report for the onboarded users looked like.
As you can notice, the retention is 50% after one week and around 25% after a few weeks when taking into account the onboarded users, as opposed to the 10% when using the sign-ups in the formula.
For them, the conclusion was clear: to optimize retention they had to optimize the onboarding process, and get as many people as possible to finish the onboarding and experience the advantages of their products.
The optimization project revolves around finding out which are the steps at which users are getting stuck. You then have to identify which elements help users go past those blockers.
In the case of the companies I was talking about, all the efforts of the support team, live chat, email marketing and product focused on increasing the number of people who finished onboarding, and in the end it all paid off.
How to check the link between retention and onboarding?
A way to understand how important the onboarding is for optimizing retention is to analyse the retention of the sign-ups that didn’t finish the onboarding process.
If your onboarding process is well-defined and explicit, and you deliver on the promise you make to the clients with respect to the product, you will notice that the number of users who come back to your product without finishing the onboarding is around zero in the first few weeks after creating an account.
On the contrary, if the onboarding process is cumbersome, many sign-ups will abandon the product way before finishing the onboarding and reaching the wow moment.
This shows the impact of onboarding on retention.
Is this to say that all retention problems spring from onboarding problems?
No, it does not. It is definitely a very important cause, but not the only one.
Optimizing retention after the onboarding stage is finished is a step-by-step procedure. Any stage leading to payment can present its own problems which might drive customers away.
Find the issue, fix it, and you will immediately notice a rise in retention.
For instance, it could happen that the retention level drops dramatically a few weeks after finishing the onboarding. This means your product might not be up to par compared to others on the market.
Or maybe not enough people are reaching the wow moment of your product and getting the best of it. They might be paying for features that they are not even aware of, don’t understand or don’t use.
In the case of the B2B company I was talking about, their product was used for monitoring SEO campaigns. And the wow moment was reached after launching 3 such campaigns. When they reached that ’magic’ number, retention was stabilized at over 25%. Which meant that the best way to keep users onboarded was to get them to launch at least 3 campaigns.
Some of their clients were indeed small businesses that didn’t need three campaigns. So it was not a product issue in this case that needed to be addressed. It was a marketing strategy problem. Some of these companies were simply too small to afford this product or to need using it repeatedly, so they churned.
All in all, it is far more difficult to take the bull by the horns and improve retention if you don’t know what caused the churn problem in the first place.
It all boils down to data analysis. You have to dig deeper and see if you are experiencing an onboarding problem, or if users have a hard time reaching the wow moment or the different goals etc. Know your problem and this will clarify what needs to be done immediately.
And yes, onboarding is one of the key factors that influences retention. So remember, if you base your retention reports on the number of onboarded users rather than on sign-ups, your retention optimization campaigns will be clearer and easier to implement.
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