In 2014, my team and I had been digging into retention for our new HubSpot Sales product. The more we unearthed, the more I realized how critical improving retention was to blowing out the product’s growth story. By May 2015, I was sharing our insights on retention with the wider startup community.
At the same time, high profile startups like Homejoy, Fab.com, and others, that had raised hundreds of millions of dollars and shot to the moon on rocketship acquisition metrics, were bursting into flames and crashing back to earth.
Since that time retention has become one of the hottest topics among growth professionals. It has emerged as the antidote to this boom and bust story line and the common denominator that separates the most valuable companies from the rest of the pack. It’s become the most valuable player in growth - and this is a great thing.
Yet, there’s still a problem - there is a lack of understanding why retention is the priority. Without understanding this, people end up working on the wrong things and missing the biggest opportunities.
Most people think retention is so crucial simply because it means you lose fewer users than you otherwise would. Though this is true, it misses the critical point.
Retention is the core of your growth model and influences every other input to your model. This is important because if you improve retention, you’ll also improve the rest of your funnel.
Improving retention spurs growth in 4 key ways:
- Retention drives acquisition
- Retention improves monetization
- Retention builds an acquisition competitive edge
- Retention accelerates payback period