Prioritizing Strategy: Should New Mobile App Companies Concentrate More on User Retention or Attracting New Users?
In the world of mobile applications, two key strategies have been at the forefront of discussions: user acquisition and retention. However, a recent trend shows that relying solely on retention to drive an app is no longer a safe strategy, with average mobile app retention rates decreasing globally.
User Acquisition: Attracting New Users
User acquisition is the practice of attracting and creating new application users, typically through marketing techniques aimed at driving app downloads. Companies cannot sustain growth without a plan to retain these new users, as an 8% retention rate, as seen in a flawed retention-based strategy, means that the only way to maintain an application is to keep adding more users to the user base.
The Critical Role of Retention
User retention, on the other hand, refers to the practice of retaining users who download an application, with the goal of improving user experience and engagement to reduce app churn and decrease the latency of inactive users. Modern users have all the attention in the world for the things they like to do, making user retention only possible if users are willing to spend time on a particular app.
A retention-driven strategy focuses on constant improvement to keep the existing app user base happy and satisfied, with satisfied users more likely to stick with the app for longer and potentially recommend it to others. In fact, a five percent increase in user retention can lead to a 25 to 95 percent increase in profits, according to a study by HBR.
The Balanced Approach
A sustainable way to grow app users is by adopting a balanced approach of focusing on both user acquisition and retention. Companies should first focus on user acquisition to reach a critical mass of users, then adopt a retention-only approach to ensure a high-quality user experience and high retention.
Effectively monetizing the growing user base is crucial for the long-term success of an app. A retention-based approach, while ideal for its focus on user experience, should not disregard the importance of attracting new users. After all, a satisfied user is likely to recommend the app to others and participate in referral programs, benefiting the app through word-of-mouth phenomena.
Disclosure: Transparency and Trust
Disclosure is a critical decision for startups and small businesses, as they have limited resources and must carefully plan their disclosure strategy. A disclosure strategy enhances transparency, builds trust with investors and customers, and can facilitate access to funding and market opportunities by clearly communicating risks and sustainability efforts. This strategic openness helps them compete effectively and seize environmental and climate-related advantages in a competitive market.
In conclusion, the retention-acquisition debate for startups and small businesses is a zero-sum game. Companies have to choose one or the other when launching an app to the market. However, a balanced approach that focuses on both user acquisition and retention is the key to long-term success in the mobile application industry.
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