In Chapter 20, we explored the Revenue stage of the AAARRR growth funnel. In this stage, we will focus on the next stage, which is Retention.
The Retention Stage
Retention becomes the natural next stage of focus after the first purchase or initial transaction.
After users have signed up for a service or purchased a product, they’ll be looking for the transformation your product or service had offered.
If you can ensure you can provide the transformation (the equivalent value of the consumer’s investment), you’ll be likely to retain the customer for a renewal, for another order, to avoid churn and improve lifetime value.
These are the metrics that are the focus of the growth marketing campaigns in this stage of the AAARRR funnel.
Metrics to Measure Retention
Customers can say “yes” to your business at multiple touch points after the initial transaction. All metrics that can measure this “yes” are retention-related metrics. Some examples are:
- Contract Renewal Rate
- Customer Lifetime Value
- Churn Rate
- MRR Churn
- Gross Revenue Retention (GRR)
- % Returning Customers
- Net Promoter Score
- % Revenue from Existing Customers
- Customer Stickiness
Retention campaigns focus on one or more of these metrics.
Examples of How Startups Measure Retention
Most subscription-focused startups measure retention in terms of churn rate, which is basically the rate at which customers stop doing business with you.
Churn leads to lost revenue and that’s what churn rate measures – at what rate you are losing potential revenue. It’s the opposite of growth rate.
Similarly, most ecommerce startups measure % revenue from repeat customers or % of orders from repeat customers along with Lifetime Customer Value.
There is another metric ‘TBP’ ie. time between purchases that is usually measured by ecommerce startup alongside the % revenue from repeat customers.
As with all stages of the funnel, when you design any campaign in retention stage, make sure to start by deciding your focus metric for the campaign.