Psychology Behind App User Retention

The Psychology Behind App User Retention and What To Do About It

Tamar Barlev

August 9, 2021 · 7 minutes

Hello and a very warm welcome to you! Today is a fine day to discuss app user retention, which is a topic that is critical to the growth and success of your app. While user acquisition is very important, user retention is a crucial component of not only getting new users but keeping them and getting them to tell their friends. So, let’s dive in, shall we?

What is App User Retention?

In simple terms, app user retention is a metric used to measure how well your product is keeping its users.

The equation has two parts: how many new users you acquire and how many you lose. So, you’re subtracting the number of new users from total users over a given period, divided by the number of initial users, to find the percentage of users you kept. 

 

If you measure retention between January and March, it will look something like this:

Psychology behind user retention equation

Some Stats on App User Retention

For apps, it’s pretty standard to measure retention per user at Day #1, 7, and 30 and to measure overall churn in a given period. These stats can clue you in to what’s going through your user’s minds. So, for instance, if you see a major drop off after Day 1 usage, that can hint at a problem with onboarding. Alternatively, if you push a new feature and experience a spike in retention—you know you did something right. 

According to a study by Adjust, iOS apps experience an average 26% retention rate on day 1, and then 11%, 7%, and 6% on days 7, 21, and 30, respectively. 

However, it’s important to note that these numbers also vary a lot by vertical. Apps that are needed more frequently (and are therefore habit-forming) have higher retention rates. For example, imagine how often you use your weather app versus your airline app. 


Why is App User Retention Important?

Excellent question. User retention is not only critical to measuring how well your app keeps its users (and indicates user satisfaction.) It also boosts ROI and revenue by increasing loyalty (aka brand defensibility) and User Lifetime Value (ULTV). According to a study done by Bain, repeat users buy more often and spend more than new ones. In fact, a 5% increase in customer retention can increase revenue by anywhere from 25-95%

Not to mention, it’s 5-25x more expensive to get new customers than it is to retain the ones you already have. Plus, you’re actually better off at acquiring new customers because enthusiastic users are more likely to refer others to your app. 92% of consumers trust word-of-mouth recommendations—so increasing customer retention is a win-win-win. Win. 

 

The Science Behind User Retention

To understand the pointers we will give you below, we think it’s important to understand the behavioral psychology behind this whole thing. We’re piggy-backing here off of a previous Stanford marketing lecturer and investor named Nir Eyal, who’s written a few books on consumer behavior. 

The Hook Loop Model

The Hook Loop Model illustrates the psychological cycle that occurs as users build habits. It outlines four main parts: Trigger, Action, Reward, Investment, and then loops back to Trigger. 

The Trigger, which can be external (a directive – such as a notification) or internal (a mental association – such as an emotion, person, or routine). It’s kind of like how when we’re bored, we often almost unconsciously type in “Youtube” or “Reddit” into our search bar. 

The Action is the simplest action that gets you anticipating the reward—for example, scrolling on Reddit. 

The Reward is, yes, the reward that soothes the craving we feel after completing the action. We tend to be intrigued by the unknown or “variable” rewards. According to Eyal, there are three types of variable rewards that are employed by habit-forming tech. 

Tribe – feeling a part of something greater or unified with others (the counterpart to loneliness.)

Hunt – which originates from our primal desire to hunt for food and resources (i.e., power and strength.)

Self (achievement) – revolving around mastery and competency (ever wonder why it just feels so good to make that to-do list?)

There are also social rewards, such as partnership, competition, and empathetic joy. 


Lastly, there’s
Investment – which loads the next trigger of the hook. When users invest even a tiny bit of emotional, physical, or time into an app, they’re investing in future benefits. They “store value” for future app use; that value could be content, data, followers, reputation. 

This investment also creates preference since we place a higher value on things we invest effort in (Ariely, Mochon, & Norton, 2021). 

So, with every “pass-through” of the Hook Loop, the user’s preferences and attitudes are formed; with enough frequency, a habit is formed. 


Making Use of the Hook Loop Model

When you’re investigating user app retention for your app, think of the Hook Loop Model and ask yourself the following questions: 

Trigger: what internal trigger is my product addressing, and what external trigger turns my user to my product?

Action: what is the simplest behavior my user does in anticipation of reward?

Reward: is the reward supplied fulfilling but leaves the user wanting more?

Investment: what effort is exerted to increase the likelihood of the user coming back?

 

Action Items for Increasing App User Retention

Okay, that psychological theory was very fun and all—but let’s see how we can put it to work. Keeping in mind the motivations and needs (internal and external triggers) we discussed in the Hook Loop Model, we can now move on to what material things you can actually do to increase your app user retention. 

Informing App Development and Strategy with Data

A huge part of app development, in general, is iterations and feedback; we wager there have been very few, if any, successful apps that have gotten things 100% right the first time. So there will always be a need to make tweaks, whether they are dramatic or subtle. And the first place to look for feedback and inform development is—you guessed it—the people who actually use your app.

 

So, track data as soon as you can. From the first interaction you have with a user, be it a visit to your landing site or a download, see how they behave in relation to your app, find trends, and when appropriate, as for feedback.

 

Testing – in essence, the goal is to measure performance and identify which strategies and features are winning users and losing them. But right now, we’ll talk about two.  Testing can look like many different things, but we’ll highlight two: 

  • Beta Testing – or testing the app within an invite-only audience
  • Soft launching for A/B Testing – which you can use to compare responses to different app versions to optimize performance. For example, A/B testing can be location-based to tailor and make region-based adjustments. 

 

Excellent UX and CX

We’ve heard plenty about the importance of Customer Experience (CX) and User Experience (a subset of CX). But where is their role demonstrated?

Product Design and UI/UX
How easy-to-use and straightforward is the app? Is its value proposition clear, not only in its marketing but also in its design? Keep it simple. Create appropriate branding. And making it pretty helps.

Customer Service
Every interaction with customers, whether on social media or troubleshooting, should be on-brand, positive, and rewarding. Think of moments you’ve felt underappreciated as a customer. Now imagine the moments you’ve felt brands you love going out of their way to make you feel heard, appreciated, and taken care of—and recreate them. 

Aligning Marketing with Product
Your marketing should be stellar. But it should also be accurate. How would you like it if someone finally promised to make an app that locates and delivers every artisanal earl grey ice cream in your 30-mile radius, only to have chocolate on their menu? Emotionally burned. That’s how.

Personalization
Users love customization and personalization. In fact, according to Accenture, 91% of users prefer brands that provide personalized offers and recommendations. We like feeling tailored to, special, and heard. But to a certain extent, of course—balance that sentiment with privacy to avoid making users feel creeped out.

Optimizing Onboarding

In this day and age, the average attention span is about the same as a newborn fly’s. And while that is a made-up fact, these tips are not: keep it simple, visual, and end onboarding with a call to action such as enabling push notifications (external triggers!) Also, you don’t need to explain second-nature concepts such as “likes” and “comments”—unless you know your demographic needs those explanations.

 

Creating Loyalty and Emotional Bonds

Let’s go back to internal triggers: there are main emotional motivators most people experience, such as the need to be validated, related to, and recognized. It’s essential to keep all of these in mind as you create a brand voice. Building a consistent brand voice that relates to your target audience will generate loyalty and, in turn, defensibility and referrals.

 

Tribe Mentality 

We all like to feel a part of something, a sense of belonging. And when you effectively create a brand voice that relates to your users, and you use it wisely (in interactions, customer service, and so on), you’re generating a “tribe.” It will stick with you and recruit others to do so. For example, we all know someone so obsessed with CrossFit that they go to CrossFit meet-ups and will constantly try to get you to come with them. So, something like that.

Reciprocity

This is a two-way street! You care about your bottom line, sure. But your user cares about getting a great solution and feeling heard if something goes awry and recognized when they post about you on social media. So retweet them. It’ll make you both feel warm and fuzzy.

Rewards, Appreciation, and Recognition

Asking for and receiving feedback can be massively helpful to you and your bottom line. So when you ask and receive, make sure to recognize your user took a few extra minutes to help them out. Send over some credits, a personalized message—even a gift card. If you have users that become major advocates for your brand, reward them. If you have highly loyal users, give them a shout-out on Instagram (with their permission.) After all, we all like to feel appreciated and reciprocated for our efforts.

Email Marketing

49% of users like to receive regular promotional emails from brands they like. This is your chance to build brand loyalty, increase engagement and improve retention rates by sharing exclusive discounts and feature updates.  And *ding ding ding!* – this is your perfect opportunity for external triggers. 

 

Using External Triggers that Increase App User Retention

We’ll start with the caveat that you should definitely avoid blowing up anyone’s phone. So—if you have their push notifications, in-app messaging, and email notifications, try to avoid sending the same message on all three. 

We already talked about marketing emails. However, in-app messaging is also a fantastic way to reach out. In fact, mobile apps that use in-app messaging see an increase in retention rates of 61-74% after Day 28. 

So, all three of these are excellent ways to remind your user why they love you and why they should open your app. Use them—but wisely. 

 

 

 

Lastly, it could be beneficial to consult product strategy experts who’ll help you put the theory to the rubber.

Coincidentally, hi, we’re Goji Labs—a product and software development consultancy with experience in designing, “rescuing,” and deploying hundreds of products

Looking to develop a new app or revamp an existing one? 

Have any general questions about who we are and our authority on the subject? 

Reach us at GojiLabs.com.

 

                 – Goji Labs

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About Tamar Barlev

Content Writer based in San Francisco. Passionate about the written word, indie-electronica, and baking.

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