The harsh truth is that you may lose 77% of your app users within the first 3 days after the install. Within 30 days, this figure can reach 90%. A well-known marketing ‘leaky bucket’ analogy suggests that you have to constantly increase the water flow (=user acquisition) to replace the customers you are losing.
But what if you try plugging some of the holes in the bucket instead (=boosting customer retention)? Read this post to define what user acquisition and user retention are for app growth and how to get them in sync.
What is customer acquisition?
In the mobile world, customer acquisition is the process of driving app installs and gaining new customers. For customer acquisition, apps use such methods as App Store Optimization (ASO), paid advertising, influencer marketing, and content marketing.
How is customer acquisition measured?
When it comes to customer acquisition, by far the key metric you’ll have to focus on is Customer Acquisition Cost (CAC). It can be calculated by dividing all the marketing costs by the number of new users acquired in the billing period:
Reducing CAC means that the business is spending money wisely. However, effective user acquisition is not just about paying less to get a customer. For sustainable app growth, it is crucial that CAC is in line with your ability to monetize acquired customers.
We could not agree more on this. While customer acquisition strategy mainly depends on your ability to attract new users, customer retention relies on your ability to provide value with your product, build relationships and personalize user experience.
What is customer retention?
In the mobile context, “customer retention” refers to the app’s ability to keep users after the initial download. Retention is one of the most important metrics of the app’s performance.
How is customer retention measured?
Customer Retention Rate is the rate at which you retain customers over a certain period of time. The most commonly taken metrics for mobile apps are Day 1, Day 7, and Day 30 retention.
For example, 30-day retention would be the percentage of users returning to the app within 30 days. However, you can measure user retention for any time period:
The opposite of Customer Retention Rate is Churn Rate. It is measured as the percentage of users who uninstall or stop using an app over time.
Having a high retention rate and a low churn rate means that you are doing a good job engaging with your users, educating them about the app, and offering the most aligned features and incentives.
Customer acquisition cost vs. customer retention cost
In the post-IDFA world, user acquisition has become more expensive. Due to Apple’s App Tracking Transparency (ATT) framework, iOS users are harder to track and hence, more costly to acquire. For example, in e-commerce, the average CPA has increased by 155%.
To keep your app viable in the changing landscape of mobile advertising, it is crucial to keep CPA lower than a typical user's lifetime value (LTV). The possible solution here is a “product-first” approach to customer experience.
Should you be focusing more on customer acquisition or retention?
Boosting your app retention rate can be more cost-effective in the long run. A classic Bain & Company study suggests that for an average market, a 5% increase in retention rate leads to a profit increase by 25% to 95%. For your app’s growth, simply pushing tons of traffic and mobile app installs to your app everyday won’t help if people jump the fence soon after.
Best strategy for app growth: align customer acquisition and retention
The same way as an acquired customer base is strengthened by customer retention, a well-planned acquisition can help optimize future retention. A smart marketing strategy doesn't rely on just acquiring anyone. They look for the best users who engage, retain, and eventually, monetize.
A key to successful acquisition/retention strategies is to apply user segmentation throughout the funnel, so that your value proposition hits the target at every stage of the customer journey — from installation and adoption to in-app purchases and upgrades.
Map and automate customer journeys
Mapping customer journeys will show all the interactions your clients have with your app. Automated customer journeys can perform 3 main functions:
▪︎ Identify churn points;
▪︎ Segment users according to their behavior and characteristics;
▪︎Send event-triggered messages with instructions, product tips, and feature promotions.
In Pushwoosh Customer Journey Builder, you can easily set up cross-channel campaigns and target your app's users with the right messages at the right time.
Use activation to balance acquisition and retention
The bridge between user acquisition and retention is user activation — a metric that shows how many customers have started using the app and already performed a valuable action. Without user activation, you can’t take newcomers down the sales funnel as they haven’t found reasons to use your app. It’s no wonder user activation can impact D1 Retention, as it determines the very first impression users get from the app. But did you know that successful activation can even increase customer LTV by up to 300%?
In successful user activation, automated mobile messaging plays a paramount role. Think about the action that a user should take to be considered activated, for example, making their first photo collage or tracking their first run. Send a message motivating users to take the action:
- In-app messages for effective user onboarding;
- Emails to encourage customers to actually make an activation event;
- Push notifications to engage customers from Day 1 and take them towards activation action in a single tap.
Apply personalization in messaging
Another way to improve a user’s retention is by sending them personalized messages. This will help you build long-lasting loyalty at each stage of the customer journey. With Customer Journey Builder, you can segment users by the target action they took (or didn’t take) and tag user segments for A/B/N testing. Set User-specific Tags and update information about a specific user no matter how many devices they have assigned.
We've talked to top industry experts and learned that for app’s long-term growth, it is crucial to align customer acquisition and retention. While acquisition allows you to expand your audience, retention maximizes the value of customers you have already captured.
After acquiring users with a good potential for monetization, you should focus on converting their motivation into sales. This can be done by communicating your app’s value at all stages of the customer journey. Talk to our team to learn how compelling and timely mobile messaging — push notifications, emails, and in-apps — make part of this holistic approach.