🚪 How to keep your users coming back
Frontdoor Finds - Issue 9
William Mathews & Frontdoor
March 20, 2023
As builders, we spend a lot of time consuming knowledge on the web. At Frontdoor, we've built a personal librarian for the internet to help. Each week we pick a topic, and ask Frontdoor to curate 3 tweets, 2 articles and 1 book. Here's what we've dug up....
3️⃣ Tweets
1/ Mike Houck, on metrics to track
churn rate:
startups can't afford to have a leaky bucket
churn is the % of users or subscribers that left during a given period
it can be looked at per a day, week, month, or year for different types of businesses
churn rate = (starting users - ending users) / starting users
— Michael Houck 💡 (@callmehouck)
Aug 7, 2022
Mike Houck has a great thread where he goes through some of the most important metrics to track for startups. In this case the most important metric to track when trying to keep users coming back is churn rate. This is calculated using the formula shown in the tweet. The time frame you look at is completely dependant on your product e.g. a B2B SaaS product with a 3 month average sales cycle would look a far longer time period than a B2C social app.
2/ Nikita Bier on the cadence of returning users
If you’re building a social app and you’re not seeing recurring sessions on an hourly basis each day among some cohort of users, don’t waste another minute: throw everything out and go back to the drawing board.
— Nikita Bier (@nikitabier)
Jan 4, 2023
I enjoyed Nikita Biers tweet, explaining that you don't just need users coming back, you need them coming back regularly, especially in the context of a social app.
According to him, its not enough to have a high weekly active user number you need a high hourly active user number, otherwise its not working and you should pivot.
Im not 100% sure that I agree completely, apps like Breal are an obvious exception to this rule. But I think the core point is important - you need to keep users coming back, and regularly
3/ Eric Torenberg on employee retention
Growing companies introduce processes to reduce impact of any person leaving.
But that also makes it less interesting to work there, b/c by definition people want to work where they have a big impact.
The paradox: Actions meant to reduce impact of churn can lead to more churn.
— Erik Torenberg (@eriktorenberg)
May 25, 2021
This tweet is a little tangential, but its interesting so I wanted to include it. As a startup founder, employee churn is just as important as user churn. If you cant keep your employees, you operational efficiency will go down the toilet.
I don’t know what the solution to this problem is, but it did make me think, feel free to respond, would be interesting to hear more thoughts on this
2️⃣ Articles
1/ David Sacks: Individuals or teams?
🤖 Frontdoor Summary: In this article, David Sacks suggests that SaaS founders should prioritise team plans over individual plans due to their superior economics, larger deal sizes, higher retention rates, and upsell possibilities. Although individual plans can generate leads and help develop the product, their long-term revenue potential is limited. B2B SaaS companies should focus on team plans for compounding revenue, while utilising individual plans for specific purposes like lead generation or power user financing.
2/ Chris Dixon: Stickiness is bad in some cases
🤖Frontdoor Summary: Chris dixon states that on a website that captures value from advertising, Stickiness is a bad thing.
This is counterintuitive because entrepreneurs are always trying to increase the stickiness of products and reduce churn. The reason Chris thinks stickiness is bad, is because less people leaving the site, means less clicks on adverts. Since most adverts charge based on a cost per click mechanism, this reduces ad revenue. The example Chris gives is facebook vs google. Google is not sticky as user navigate there regularly then click away quickly. This is the opposite of facebook which has very few users click through quickly. This resulted in google having 30x the revenue at the time of writing.
1️⃣ Book
The Effortless Experience: Conquering the New Battleground for Customer Loyalty
This book, by Matthew Dixon, Nick Toman and Rick Delisi has some great frameworks for retaining users and keeping them happy, we have read through and included our favourite snippets .
Key Takeaways:
1/ Customer Effort Score (CES): The Effortless Experience introduces the concept of Customer Effort Score, a metric that measures the ease of interaction between customers and your business. High effort experiences are likely to result in disloyalty, while low effort experiences can lead to increased customer retention and loyalty.
2/ Delight is overrated: Contrary to popular belief, delighting customers with extraordinary service isn't as effective in retaining customers as simply providing a hassle-free experience. The book emphasises that investing resources in reducing customer effort will yield better results than focusing on exceeding their expectations.
3/ Consistency is key: The authors highlight the importance of delivering a consistent, low-effort experience across all channels. Inconsistent experiences can lead to increased customer effort, which negatively impacts retention.
4/ Problem prevention: Proactively identifying and addressing issues before they become problems can significantly reduce customer effort. This includes optimising processes, refining products or services, and providing helpful, easily accessible self-service options.
5/ Employee empowerment: The book emphasises the importance of empowering frontline employees to make decisions and solve problems without needing management approval. This can help reduce customer effort, as it enables staff to quickly resolve issues and provide a smoother experience.
Key Takeaways
1️⃣ Track churn rates, over a sensible timeframe
2️⃣ SaaS founders should prioritise selling to teams if the option is there
3️⃣ Keep customer experiences consistent, consistently
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