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Retention Analysis the Right Way

This is an Analytics Recipe written by Natalie Issa from Woopra. Every week we’ll feature a new recipe from a tool on the Segment platform.

Making decisions off inaccurate data is perhaps more damaging than having no data at all. In this recipe, we’ll explain how to set up a retention analysis the right way and avoid common mistakes.

Retention reports show you how long customers stick around after they’ve done something inside of your page or app. It can answer questions like: “How long did they stick around after purchasing for the first time?” or “How long do customers continue to use my app after they sign up?”

Spotlighted Tool: Woopra

In the example below, we’ll create a retention report for the car service app Uber. We’ll analyze how long users continue to take rides after they add a credit card. But we could also use this for all kinds of other events, like the first time users “Completed Order” or the first time they “Left a Comment”.

Step 1: Choose What to Track

For this analysis, the first thing we would need to do is set up our analytics to track two events:

  1. User added a credit card
  2. User took a ride

Step 2: Set Your Initial Event

Our initial event is the first step in your retention report (“Added Credit Card” is the initial event in the Uber example). This defines the initial group of people (or cohort) we’ll be analyzing.

Pro Tip: Always Compare Apples to Apples

One common mistake people make when defining cohorts is not comparing apples to apples. A generic initial event will dilute cohorts with people who aren’t important to your analysis.

For example, Uber’s initial event should be adding a credit card, rather than simply installing the app. Uber needs to understand how well they retain valuable users (those who are ready to pay). People who installed the Uber app is a much larger and amorphous group diluted by people who never intended to use the service.

How to Set Your “Initial Event” in Woopra:

  1. Navigate to the Retention tab.
  2. Click the “+” button at the top left to create a new Retention report.
  3. When the editor loads, name your report.
  4. Use the trigger filters next to “Initially” to define the event. For the Uber example, you will select the action “Creditcard Added”.

Step 3: Set Your Goal Event

Once we’ve defined our initial event, we need to define the action we want users to continue doing (“Took a Ride” in our Uber example).

It’s important to choose an event that signifies customer engagement with your product. While specific goals will vary, here are some examples:

  • Uber will want to measure how long users continue to take rides.
  • Instagram will want to measure how long users continue to share photos.
  • Amazon will want to measure how long customers continue to make purchases.

Companies often measure generic actions, like whether a customer returns to the website or opens the app. But this doesn’t provide insight about user engagement and sheds little light on customer retention. Measuring how long customers continue to perform an important action is a true indicator of product usage.

Pro Tip: Create Specialized Goal Events

Many experts define specific goal events, like “Took a Ride Over 6 Miles” or “Purchased Electronics Over $200”. By comparing more specific events, you’ll get a deeper understanding of customer engagement.

How to set Your Goal Event in Woopra:

  1. Use the same editor from Step 2.
  2. Use the trigger filters next to “Then” to define the event. For the Uber example, we will select the action “Take Ride” from the drop down to set it as the “Goal Event”.

Step 4: Analyze your results in Woopra

Now that you’ve set up your report, you should see something like this:

In this report, we can see that out of all the users who added a credit card, 20.5% took a ride 1 week later, 11.4% took a ride 2 weeks later, and so on.

Averages appear at the top of this report to provide a high-level snapshot of how long users continue to book rides after adding a credit card. If we dig a bit deeper in the data table we can see retention for each cohort (those who did the initial event at the same time). Knowing how product, pricing, and other factors affect retention over time is like gold for your product team.

What To Do Next

Now that you’ve analyzed your results, it’s time to come up with creative ideas for improving your retention. For instance, you may consider product changes, lifecycle emails, or loyalty programs. It’s important to continue monitoring retention to see which experiments are working, and iterate your way to the best possible product.

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