"Great retention is THE scalable way to grow a product. It's the best indicator of product-market fit, it is the most important factor in a user’s lifetime value, and high retention drives all of the best acquisition strategies. It's growth's equivalent of the triple-word-score."
Although retention is widely considered to be the most important metric to get right when building (and investing in) a business, it’s also one of the least understood. Why? Because unless you’re a growth expert or an experienced investor, you’re often relying on anecdotes, dated blog posts, and misguided benchmarks. I ran into this problem myself many times when working with startups.
So when Casey Winters (former head of growth at Pinterest, GrubHub, and now CPO at Eventbrite) brought up this question in a conversation we were having, we decided to take the opportunity to do some new research. Together, we reached out to twenty of the most experienced growth practitioners we knew and asked them two simple questions:
- What do you consider GOOD and GREAT user retention (at 6 months)?
- What do you consider GOOD and GREAT net revenue retention (at 12 months)?
Taking these insights and combining them with available public data, we’ve come up with a set of concrete recommendations for GOOD and GREAT retention across most types of businesses. Below you’ll find a visual summary of these conclusions, along with detailed recommendations from each of the experts, and public comps from many of today’s biggest companies.
As a companion to this post, Casey also published an essay delving into ways to increase retention, amongst other topics, which you should definitely check out.
Without further ado, let’s dive in.
What is GOOD and GREAT retention?
GOOD and GREAT User Retention
- Consumer Social: ~25% is GOOD, ~45% is GREAT
- Consumer Transactional: ~30% is GOOD, ~50% is GREAT
- Consumer SaaS: ~40% is GOOD, ~70% is GREAT
- SMB / Mid-Market SaaS: ~60% is GOOD, ~80% is GREAT
- Enterprise SaaS: ~70% is GOOD, ~90% is GREAT
GOOD and GREAT Net Revenue Retention
- Consumer SaaS: ~55% is GOOD, ~80% is GREAT
- Bottom-Up SaaS: ~100% is GOOD, ~120% is GREAT
- Land and Expand VSB SaaS: ~80% is GOOD, ~100% is GREAT
- Land and Expand SMB / Mid-Market SaaS: ~90% is GOOD, ~110% is GREAT
- Enterprise SaaS: ~110% is GOOD, ~130% is GREAT
Here’s a handy visual guide, which links to a high-res PDF:
Big thank you to the experts
Adam Fishman (Patreon, Imperfect Foods), Andrew Chen (Uber, a16z), Andy Johns (Twitter, Facebook, Wealthfront), Brian Balfour (Reforge), Brian Rothenberg (Eventbrite, TaskRabbit), ChenLi Wang (Dropbox), Dan Hockenmaier (Thumbtack), Elena Verna (SurveyMonkey, Miro), Fareed Mosavat (Slack), Jamie Quint (Notion, Reddit), Jeff Chang (Pinterest), Julie Zhou (Hipmunk, Yik Yak, AdRoll), Kevin Kwok (Greylock), Li Jin (a16z), Merci Grace (Slack), Mike Duboe (Stitch Fix, Greylock), Naomi Ionita (Evernote, Menlo Ventures), Nick Soman (Gusto, Decent), Sarah Guo (Greylock), Shaun Clowes (Atlassian, MuleSoft), and Yuriy Timen (Grammarly). And of course, my incredible partner on this research, Casey Winters.
Disclaimer: Why it may be OK for your retention to be low
To some, these retention benchmarks will seem high. This is because the bar to build a massively successful business is high. Frankly, it’s why most startups fail. However, although retention is an important metric to get right, it doesn’t live in vacuum. There are cases where a lower retention rate is OK:
- You’re just starting out: Don’t despair if you don’t see this level of retention immediately. Use these benchmarks a guide to prioritize between retention vs. acquisition, and read Casey’s post for three ways to approach increasing retention. But just know, startups rarely increase retention significantly.
- You have low CAC and marginal costs: Growth is a balancing act between CAC, retention, and unit economics. If you can acquire new users cheaply (e.g. SEO, WOM, or virality), you can afford to lose more users. This thread by Dan Hockenmaier explains why low retention for businesses like Shopify and Twitter is OK.
- You’re not building a venture-scale business: These benchmarks are coming from people who helped build iconic, massively scalable, businesses. This level of retention is not required for product/market fit, or to build a sustainable business. Though the upside will be limited, a flat retention curve that drives a scalable acquisition strategy is enough to keep your business alive.
Ultimately, what matters is that your retention supports sustained growth.
Now, let’s get into the details.
1. What is good User Retention?
Let’s define user retention as the % of users who signed up and are still active (i.e. using the product, making a purchase, posting a photo) six months later.
Consumer Social: ~25% is GOOD, ~45% is GREAT
This includes companies such as Snapchat, Twitter, and Instagram that are free to use and are generally supported by advertising. The denominator in this category are registered users.
Expert recommendations
- Jeff Chang: Over 25% is GOOD, over 40% is GREAT
- Casey Winters: Over 25% is GOOD, over 45% is GREAT
- Brian Rothenberg: Over 25% is GOOD, over 50% is GREAT
- Jamie Quint: Over 30% is GOOD, over 40% is GREAT
- ChenLi Wang: Over 30% is GOOD, over 50% is GREAT
- Julie Zhou: Over 30% is GOOD, over 60% is GREAT
- Kevin Kwok: Over 30% is GOOD, over 60% is GREAT
- Andrew Chen: Over 50% is GOOD, over 75% is GREAT
Public comps
- Facebook: 60 - 70% 6-month user retention
- Instagram: 50 - 60% 6-month user retention
Consumer Transactional: ~30% is GOOD, ~50% is GREAT
This includes companies such as Airbnb, Lyft, and TurboTax that are generally supported by one-off purchases. The denominator in this category are users who have made at least one transaction.
Expert recommendations
- Casey Winters: Over 15% is GOOD, over 35% is GREAT
- Kevin Kwok: Over 30% is GOOD, over 50% is GREAT
- Dan Hockenmaier: Over 30% is GOOD, over 50% is GREAT
- Li Jin: Over 30% is GOOD, over 50% is GREAT
- Brian Rothenberg: Over 30% is GOOD, over 60% is GREAT
- ChenLi Wang: Over 30% is GOOD, over 70% is GREAT
Public comps
Consumer SaaS: ~40% is GOOD, ~70% is GREAT
This includes companies such as Netflix, Spotify, and Hulu that sell a monthly/yearly subscription to consumers. The denominator in this category are users who have started a paid subscription.
Expert recommendations
- Dan Hockenmaier: Over 40% is GOOD, over 60% is GREAT
- Adam Fishman: Over 40% is GOOD, over 70% is GREAT
- Jeff Chang: Over 50% is GOOD, over 70% is GREAT
- Mike Duboe: Over 50% is GOOD, over 70% is GREAT
- Elena Verna: Over 70% is GOOD, over 80% is GREAT
Public comps
- Amazon Prime: 93% 12-month customer retention (source)
- Dropbox: ~80% 12-month customer retention
- Netflix: 66% 12-month customer retention (source)
- Hulu: 53% 12-month customer retention (source)
SMB / Mid-Market SaaS: ~60% is GOOD, ~80% is GREAT
This includes companies such as Asana, Slack, and Atlassian that primarily sell a subscription product to companies roughly 100-1000 employees. The denominator in this category are companies who have started a paid subscription.
Expert recommendations
- Yuriy Timen: Over 60% is GOOD, over 80% is GREAT
- Mike Duboe: Over 60% is GOOD, 80% is GREAT
- Sarah Guo: Over 70% is GOOD, over 80% is GREAT
- Fareed Mosavat: Over 70% is GOOD, over 85% is GREAT
- ChenLi Wang: Over 70% is GOOD, over 85% is GREAT
- Andy Johns: Over 70% is GOOD, 90% is GREAT
- Dan Hockenmaier: Over 70% is GOOD, over 90% is GREAT
- Merci Grace: Over 80% is GOOD, 90% is GREAT
Public companies
- Atlassian: 98% 12-month customer retention (source)
- QuickBooks: 79% 12-month customer retention (source)
Enterprise SaaS: ~75% is GOOD, ~90% is GREAT
This includes companies such as Salesforce, Workday, and ADP that primarily sell a subscription product to large enterprise companies (i.e. over 1000 employees).
Expert recommendations
- Andy Johns: Over 70% is GOOD, over 90% is GREAT
- Brian Rothenberg: Over 75% is GOOD, over 90% is GREAT
- Jeff Chang: Over 80% is GOOD, over 90% is GREAT
- Sarah Guo: Over 85% is GOOD, over 95% is GREAT
- Nick Soman: Over 85% is GOOD, over 95% is GREAT
- Shaun Clowes: Over 85% is GOOD, over 95% is GREAT
Public comps
- Workday: 95% 12-month customer retention (source)
- Salesforce: 90% 12-month customer retention (source)
- ADP: 90%+ 12-month customer retention (source)
What is good Net Revenue Retention?
Let’s define Net Revenue Retention as a company’s monthly recurring revenue (MRR) one year ago divided into the current month’s MRR from that same group of customers. Essentially, how much revenue are you driving from one cohort of customers over time?
You’ll notice this section has slightly different categories from previous section. This is because of the way the customers a business sells to impacts revenue retention (unlike user retention). For example, the network effects in Bottom-Up SaaS often drive up retention, while involuntary churn of Very Small business (VSB) is common because many go out of business, and Land and Expand models increases revenue per user in ways that can make up for high user churn.
Now, let’s look at what good and great net revenue retention looks like for each type of business.
Consumer SaaS: ~55% is GOOD, ~80% is GREAT
This includes companies such as Netflix, Spotify, and Hulu that sell a monthly/yearly subscription to consumers. The denominator in this category are users who have started a paid subscription.
Expert recommendations
- Casey Winters: Over 50% is GOOD, over 70% is GREAT
- Brian Rothenberg: Over 55% is GOOD, over 75% is GREAT
- Yuriy Timen: Over 60% is GOOD, over 80% is GREAT
- Dan Hockenmaier: Over 65% is GOOD, over 75% is GREAT
- Sarah Guo: Over 70% is GOOD, over 80% is GREAT
- Andy Johns: Over 70% is GOOD, over 90% is GREAT
- Mike Duboe: Over 70% is GOOD, over 90% is GREAT
Bottom-Up SaaS: ~100% is GOOD, ~120% is GREAT
This includes companies such as Slack, Figma, and Zoom that offer a self-serve prosumer subscription product to individual contributors inside of a company.
Expert recommendations
- Jeff Chang: Over 100% is GOOD, over 110% is GREAT
- Brian Balfour: Over 100% is GOOD, over 120% is GREAT
- Brian Rothenberg: Over 100% is GOOD, over 120% is GREAT
- Fareed Mosavat: Over 110% is GOOD, over 130% is GREAT
- Naomi Ionita: Over 110% is GOOD, over 130% is GREAT
- Sarah Guo: Over 110% is GOOD, over 130% is GREAT
- Jamie Quint: Over 120% is GOOD, over 140% is GREAT
- Merci Grace: Over 120% is GOOD, over 140% is GREAT
Public comps
- Zoom: 140% (source)
- PagerDuty: 139% (source)
- Datadog: 130% (source)
- New Relic: 115% (source)
- Dropbox: ~100% (source)
Land and Expand VSB SaaS: ~80% is GOOD, ~100% is GREAT
This includes companies such as Gusto that sell a subscription service to early-stage companies, roughly <100 employees.
Expert recommendations
- Brian Balfour: Over 80% is GOOD, over 90% is GREAT
- Sarah Guo: Over 85% is GOOD, over 105% is GREAT
- Fareed Mosavat: Over 90% is GOOD, over 110% is GREAT
Land and Expand SMB / Mid-Market SaaS: ~90% is GOOD, ~110% is GREAT
This includes companies such as Atlassian, Box, and ZenDesk that sell a subscription service to companies with roughly 100 - 1000 employees.
Expert recommendations
- Mike Duboe: 85% is GOOD, 110% is GREAT
- Sarah Guo: Over 90% is GOOD, over 110% is GREAT
- Brian Balfour: Over 100% is GOOD, over 120% is GREAT
- Brian Rothenberg: Over 100% is GOOD, over 120% is GREAT
- Adam Fishman: Over 100% is GOOD, over 125% is GREAT
Public comps
Enterprise SaaS: ~110% is GOOD, ~130% is GREAT
This includes companies such as Salesforce, Workday, and ADP that primarily sell a subscription product to large enterprise companies, roughly over 1000 employees.
Expert recommendations
- Jeff Chang: Over 110% is GOOD, over 120% is GREAT
- Naomi Ionita: Over 120% is GOOD, over 140% is GREAT
Public comps
- Alteryx: 135% (source)
- Fastly: 130% (source)
- Okta: 124% (source)
- Anaplan: 124% (source)
- Workday: 100%+ (source)
- ServiceNow: 97% (source)
In summary
If you take nothing else away from this post, it should be that retention matters. A lot. No other metric is as singularly telling of whether your business will thrive or die. And so, the better you understand what good retention looks like for your business, the better shot you have at the former. We hope this research proves useful to you whether you’re building, investing, or just curious.
Please ping me if you have any feedback, suggestions, or questions about this post. And don’t forget to go read Casey’s companion post.
https://bit.ly/34LjZvt
What Is Good Retention: An Exhaustive Benchmark Study with Lenny Rachitsky
Hi, I'm Casey Winters, Chief Product Officer at Eventbrite
At the end of 2019, I presented Eventbrite’s product plans to the board for 2020. These plans included a lot of the goals you likely have in your company: improvements in acquisition, activation, and retention. One of our board members asked: “I understand these goals for the year. But long term, how high could we push this retention number? What would great retention be for Eventbrite?”
I actually didn’t have a great answer. Soon after, I was chatting with Lenny Rachitsky, and we decided to embark on a holistic study across the industry to ask “what is great retention?” across business models, customer types, etc. Lenny surveyed a lot of the top practitioners in the industry across a variety of companies, and we’re happy to share the results here. You can see the raw data below, but I recommend reading Lenny’s analysis here. Done? Good.
Why is retention so damn important?
Why are Lenny and I spending so much time researching retention? Because it is the single most important factor in product success. Retention is not only the primary measure of product value and product/market fit for most businesses; it is also the biggest driver of monetization and acquisition as well.
Why are Lenny and I spending so much time researching retention? Because it is the single most important factor in product success. Retention is not only the primary measure of product value and product/market fit for most businesses; it is also the biggest driver of monetization and acquisition as well.
We typically think of monetization as the lifetime value formula, which is how long a user is active along with revenue per active user. Retention has the most impact on how many users are active and lengthens the amount of time they are active. For acquisition, retention is the enabler of the best acquisition strategies. For virality or word of mouth, for example, one of the key factors in any virality formula is how many people can talk about or share your product. The more retained users, the more potential sharers. For content, the more retained users, the more content, the more that content be shared or discovered to attract more users. For paid acquisition or sales, the more retained users, the higher lifetime value, the more you can spend on paid acquisition or sales and still have a comfortable payback period. Retention really is growth’s triple word score.
What are effective ways to increase retention?
Okay, so you understand retention is important and want to improve it. What do you do? Well, at a high level, there are three types of efforts you can pursue to increase retention:
Okay, so you understand retention is important and want to improve it. What do you do? Well, at a high level, there are three types of efforts you can pursue to increase retention:
- Make the product more valuable: Every product is a bundle of features, and your product may be missing features that get more marginal users to retain better. This is a journey for feature/product fit.
- Connect users better to the value of the product that already exists: This is the purpose of a growth team leveraging tactics like onboarding, emails and notifications, and reducing friction in the product where it’s too complex and adding friction when it’s required to connect people to the value.
- Create a new product: Struggling to retain users at all? You likely don’t have product/market fit and may need to pivot to a new product.
We discuss these strategies in a lot more depth in the upcoming Product Strategy program coming soon from Reforge, and if you really want a deep dive on retention, we build the Retention & Engagement deep dive.
Why does retention differ so much across categories?
One question you might be asking yourself is why does retention differ so much by different categories? This was the impetus for the initial research, and why I couldn’t give a great answer to our board. Every company has a bunch of different factors that impact retention:
One question you might be asking yourself is why does retention differ so much by different categories? This was the impetus for the initial research, and why I couldn’t give a great answer to our board. Every company has a bunch of different factors that impact retention:
- Customer type: For example, small businesses fail at a much higher rate than enterprise businesses, so businesses that target small businesses will almost always have lower retention.* This does not make them inferior businesses! They also have many more customers they can acquire.
- Customer variability: Products that have many different types of customers will typically have lower retention than products that hone in on one type of customer very well.
- Revenue model: How much money you ask from customers and how can play a big role in retention. For example, a customer may be more likely to retain for a product they marginally like if it costs $30 vs. $300,000. A product that expands revenue per user over time can have lower retention than ones that have a fixed price.
- Natural frequency: Many products have different natural frequencies. For example, you may only look for a place to live once every few years (like my time at Apartments.com), but you look for something to eat multiple times of day (like my time at Grubhub).
- Acquisition strategy: The way a company acquires users affects its retention. A wide spread approach to new users may retain worse than carefully targeting users to bring to your product.
- Network effects: Network effects may drive retention rates up more over time vs. businesses that do not have these effects. For example, all of your friends on Facebook or all of your co-workers on Slack makes it hard to churn from either product whereas churning from Calm or Grammarly is entirely up to you.
* In those businesses, the business failing and churning as a result is called “involuntary churn”, though that can also mean a payment method not working for someone who wants to retain in other models.
BONUS: Why are Casey’s benchmarks for consumer transactional businesses lower than others?
For the demand side of transactional businesses, where the retention graph flattens is more important to me than the six month retention rate. And unlike other models, these businesses can take longer than six months to have their graphs flatten. Also, for marketplaces, one of the two common models along with ecommerce in this category, a healthy demand side retention rate is very dependent on what supply side retention looks like and acquisition costs. For example, since Uber and Lyft have to spend so much time and money acquiring drivers due to a low retention rate, in order for their model to work, demand side retention either has to be high or demand side acquisition has to be low cost. For a business where supply side retention is high and acquisition costs are low, demand side retention can be lower, and the company can still be very successful. Etsy and Wag I imagine fit more into this model.
https://bit.ly/2G6OOjL
