| 1 min read

You might be choosing the wrong unit of retention

I was meeting with a SaaS founder friend and she was frustrated with the potential churn in their product. She’s spending a lot on gathering feedback, and the product team is working hard. But, she suspects most of what they’re doing isn’t helping. 

I also didn’t know what they should be working on either, since I do not have the context of their situation. So, I asked her one question: 

“What’s your measuring unit of retention? Is it revenue or product usage?”

I almost always get an answer involving monthly/yearly revenue retention.

And this is a red flag for me.

Remember, revenue is an output while product usage is an input. You may earn a month or year’s worth of revenue, but if the customers aren’t using the product, they will churn when that period is up. And once a paying customer is churned. Winning them back is almost impossible.

Maybe, you are measuring your retention perfectly. The percentage of users who are active in a given time period are increasing. But the real question would be: How deeply engaged are they during that time? For instance I measure my email ‘opens per opener’ as my true measure of engagement because the best emails tend to get opened many times and that act as a proxy for real value delivered.

I hope it helps