The percentage of users who continue using a product after a specified period. It is the inverse of [[churn rate]] and serves as a key metric for evaluating *customer engagement and long-term business sustainability*. ## Importance - A high retention rate indicates a strong product-market fit and user satisfaction. - Retained users tend to have a higher [[Customer Lifetime Value (CLV or LTV)]], making them more profitable over time. - Customer acquisition is often more expensive than retention, making retention a cost-effective growth strategy. - Loyal users can become brand advocates, driving organic growth through [[word-of-mouth]]. > [!formula] > $\text{Retention Rate} = \frac{\text{Users at End of Period} - \text{New Users Acquired}}{\text{Users at Start of Period}}$ > > Alternatively, it can be expressed as: > > $\text{Retention Rate} = 1 - \text{Churn Rate}$ ## Factors Influencing Retention 1. **Product Satisfaction** – The product must effectively solve the user’s problem and meet expectations. 2. **Cost-Benefit Perception** – Users weigh not only monetary costs but also time, effort, and attention required to use the product. 3. **Enhanced Value Over Time** – Some products gain increasing value as more users engage with them (e.g., [[network effects]] in social platforms or marketplaces). 4. **Absence of Negative or Painful Experiences** – Users are more likely to stay if they do not encounter frustrations, such as poor customer support, technical issues, or intrusive ads. 5. **Availability of Alternatives** – Retention is higher when users perceive a lack of comparable alternatives.