retentionrate

Retention rate is a metric that measures the proportion of users, customers, or participants who continue to use a product or service over a defined period. It is widely used to assess engagement, stickiness, and long-term value in digital products, software as a service, and consumer apps.

Calculation and variants: For a defined cohort of new users, the retention rate at time t is the number of these users who remain active at time t divided by the initial cohort size, expressed as a percentage. Retention can be tracked for specific time horizons such as day 1, day 7, or day 30 in apps, or on a monthly basis for subscriptions. Cohort retention follows a fixed group over time, while cross-sectional retention compares a snapshot of users at a single point in time.

Applications: Retention rate informs onboarding design, feature prioritization, and marketing efficiency. It is often analyzed by cohort, segment, or channel to identify drivers of decay and to forecast potential lifetime value. Retention is typically interpreted alongside churn rate and engagement metrics to gauge overall product health and to guide growth strategies.

Limitations and considerations: Clear definitions of “active” are essential (e.g., a login, a specific action, or a transaction). Results can be influenced by seasonality, the mix of new versus returning users, and data collection methods. Retention should be interpreted in the context of churn, revenue, and customer lifetime value to avoid misreading product health.

Example: If 100 users join a cohort and 40 remain active after 7 days, the day-7 retention rate is 40%.