User retention rate should be the first metric you want to improve. You ask why? If you don’t have endless resources, you have to make money and be a profitable company. To be a profitable company, you need to gain new customers.
However, another critical point that will protect and increase your profitability rate is to retain your existing users. It doesn’t make much sense for new customers to join your company when you’re constantly losing customers.
Consider a ship taking on water. Some of the sailors try to empty the water with buckets. But the ship continues to take on water. Do you think this ship, which has taken water, will be able to dock at the port safely? In a single scenario, this seems possible. Someone has to plug the goddamn holes!
It’s like having a successful company. You have to plug those holes where you lost customers one by one.
Shall I tell you another positive aspect of your high customer retention rate? Retaining your existing customers is much cheaper than acquiring new ones. Because you spend thousands of dollars on your marketing efforts to gain new customers.
In addition, the existing customers provide you with many benefits without you realizing it: they become advocates of your product, they help you to improve your product constantly by giving feedback, and sometimes they help you gain customers by making nice comments on social media platforms.
If we look at what I’ve told you, a high user retention rate is giving good signals for your company, while a low user retention rate gives bad signals.
So, how about 3 recommendations that will increase your user retention rate? At the same time, we will prevent you from reducing this rate, which is very important for your company, by talking about 3 mistakes you should avoid! Shall we begin?
Quick Setup, Easy to Use, and Many Integrations
Manage your product announcements from a single place and easily distribute them
across multiple channels.
What is the User Retention Rate?
User retention rate is the percentage of users who return to your app or website after their first visit. There are several ways to calculate this, but the most common is to take the number of returning users in a given time period (30 days for example) and divide that by the total number of visitors in the same time period.
So if you had 100 unique visitors in January and 20 of them came back in February, your retention rate would be 20%.
There are a number of factors that can affect your retention rate, both positively and negatively. On the positive side, things like great content, a user-friendly interface, and engaging features will keep people coming back. On the downside, things like bugs, crashes, and poor performance will drive people away.
Increasing your user retention rate can be difficult, but it’s worth it. Not only will it help you keep existing users happy, but it will also help you attract new ones.
How is user retention calculated?
Customer Retention Rate Formula = ((EC-NC)/SC)*100, where:
EC – number of customers at the end of a period
NC – number of new customers in this period
SC – number of customers at the start of that period
Let’s say you launch a SaaS product. On May 1, you had 1000 users. By May 30, you had 500 new users, but 200 users stopped using the product. So, at the end of a period (a month in our case), you have 1300 paying customers. Let’s calculate the retention rate: ((1300-500)/1000)*100=80
Do you want to know more about calculating the user retention rate, visit this informative post!
What is a good customer retention rate?
User retention rates vary for each industry. For example, while the retention rate of X in sector A can be described as good, the same ratio in sector B can be described as bad.
The highest and lowest rates of user retention can be determined entirely according to the internal dynamics and potentials of the sectors.
3 mistakes and 3 improvements affecting user retention rate:
1) Customer loyalty programs are an incentive for your customers to rebuy or revisit your product or service.
2) The positive performance of your customer support team can win the hearts of your customers.
3) Customizable themes allow your customers to connect with your product. Thanks to customizable themes can rise your user retention rates.
4) User onboarding processes should be perfect. A bad start can prevent your users from seeing the benefits of your product.
5) Inadequate communication negatively affects the perception of your brand and product. Remind them of yourself by communicating with your customers.
6) Continuously improve your product by asking for feedback. Otherwise, your competitors may be your customers’ new visiting places.
3 Great tips will increase your user retention rate!
There are many methods you can use to improve customer retention. Thanks to these methods, we will ensure that your users choose you again and again! 🐝
Give them a reason: Customer Loyalty Program 😻
Have you thought about rewarding your users? You don’t need to look for big reasons. Just give your users a simple reason to re-engage your brand and make them buy from you again and again.
For example, divide your customers into various segments and define a certain discount for each segment group. You can specify a different discount reason for each segment. For example, you can offer a 5% discount to your users who have been actively shopping from you for 1 year. Or you can define a special discount for users born in the current month.
This is exactly why I asked you to segment users. A purchase incentive that will work in one group may not work in the other.
You can easily reach the target customer group by making these offers via e-mail. Of course, the language you use and personalized emails will positively affect the performance of your loyalty program.
The logic in this method is quite simple. Reward your customers. Reward them so they buy from you again. In some cases, you can define discounts for your users who meet certain conditions. For example, you can set rewards for your users who share their purchases from you on social media or for your users who leave comments on the App Store.
Make sure the condition is fairly simple and users can easily fulfill it. Nobody wants to do a complicated operation. Even if they get a discount in the final.
Develop your lacking sides in your business 👩💻
User retention is often thought of as a non-modifiable metric. However, it is important to understand that there is always room for improvement when it comes to customer support and success. By understanding the errors that can lead to low user retention, you can easily change your own performance.
A common mistake is failing to provide adequate customer support. This may be related to understaffing, insufficient training, or insufficient budgeting within your company for customer support. This can lead to frustration that customers may later give up.
To avoid these mistakes and increase your user retention rate, make sure you have adequately trained your customer support team and provide them with the training they need to resolve customer issues effectively.
Add customizations that will make your customers happy in the processes 🤓
The first step to achieving a high user retention rate is to make sure your customers are happy. To do this, try customizing all steps of your product or service and offering themes tailored to their needs.
For example, you can develop a feature where they can change the website design as they wish. (Like dark mode on Twitter or different themes on AnnounceKit.) Or when they visit your site again, you can address them by name and say “Welcome, Hakan”. Even remembering and celebrating birthdays is enough to establish a bond with your users.
Try to collect all the information that will customize your customers’ experience while they are still signing up. Then use this information to create a unique user experience for them.
Quick Setup, Easy to Use, and Many Integrations
Manage your product announcements from a single place and easily distribute them
across multiple channels.
3 Mistakes can reduce your retention rates 👎
Some mistakes can result in lower user retention rates. But these mistakes can be avoided and let’s examine what we can do to achieve better results!
The user onboarding process should be perfect! 👌
The first thing you need to do is ensure that your user onboarding process is effective and efficient. To do this, you must ensure that the information you provide to your users is relevant to your product and is easy to understand. Some complex onboarding processes cause users to leave the product before they even start using it.
The second thing you need to do is make sure you have a clear path for users through the onboarding process. This means they need to be confident in their ability to complete tasks and understand how everything works before proceeding.
Finally, make sure your onboarding process includes some kind of feedback mechanism so users know if they’ve successfully completed their task or if there’s anything else they need help with.
When they have questions about your product, you can quickly answer these questions and give them a great user experience. They will have a great impression of your product when they need you again.
An inefficient user onboarding process causes your user retention rates to decrease rapidly.
To improve your user onboarding processes you can check out our article which is called “SaaS Onboarding Best Practices to Improve Customer Success“
You can’t bond with your customers without strong communication 💔
If you don’t communicate with your users regularly, you risk driving them away from your product. This is because users are not aware of new features and updates, which reduces product adoption.
One of the biggest mistakes startups and businesses make is failing to communicate effectively with their users. This lack of communication can have a number of negative consequences, including:
- To drive users away from the product
- Reducing product adoption rates
- Missing valuable feedback
But most importantly, they may not want to visit your site again. Even if your product is exactly what they need, they may not want to use your product when they need it. Because they even won’t remember of your product or service.
It’s important to make sure you’re communicating with your users on a regular basis. By staying in touch with your users, you should keep them updated on new features and developments that will help them interact with your product.
Ask for feedback or give up on your customers
The third big mistake that leads to a poor user retention rate is not asking for feedback. User feedback is critical to understanding how your product is being used and what improvements can be made. However, many startups and businesses are not able to collect or effectively use this feedback.
It’s important to make sure you ask the right questions to get useful feedback that can be used to improve your product. Additionally, you need to make sure that this feedback is acted on in a timely manner. Otherwise, users will feel their concerns go unheard and will likely give up.
How to calculate user retention rate: 3 methods
While most SaaS teams reach for a single retention number, there are actually three distinct ways to calculate user retention rate — and each one answers a different question about your product. Choosing the wrong method (or mixing them up) is one of the most common reasons retention reporting gets disputed across product, marketing, and finance teams. The three methods below — Classic, Range, and Rolling — are the standard approaches used by leading analytics platforms like Amplitude, Mixpanel, and Userpilot.
Pick the method that matches how often your product is used. A daily news app should use Rolling Retention. A weekly project management tool fits Classic Retention. A monthly billing SaaS often reports Range Retention. Once you settle on a method, document it so cohorts stay comparable over time.
Classic Retention
Classic Retention measures the percentage of users who return on a specific day after their first visit. The formula is: Classic Retention (Day N) = (Users active on Day N) ÷ (Users in original cohort) × 100. If 100 users signed up on Monday and 35 of them came back exactly seven days later, your Day 7 Classic Retention is 35%. Use this when you care about repeat usage on precise milestones — typical for mobile apps, games, and consumer products with daily engagement loops.
Range Retention
Range Retention measures whether users return at all within a defined window (a week, a month, a quarter). The formula is: Range Retention = (Users active at least once during the range) ÷ (Users in original cohort) × 100. If 100 users signed up in January and 80 of them came back at least once during February, your monthly Range Retention is 80%. Range Retention is more forgiving than Classic and is the standard for B2B SaaS reporting, customer success dashboards, and quarterly board metrics — because business users rarely log in on exact day boundaries.
Rolling Retention
Rolling Retention measures the percentage of users still active on or after a given day — including any future activity. The formula is: Rolling Retention (Day N) = (Users with any activity on or after Day N) ÷ (Users in original cohort) × 100. By definition, today’s Rolling Retention can only go up as past users return. This makes Rolling Retention useful for evaluating long-term product stickiness and lifetime value — but it lags real-time signals, so don’t use it alone for catching short-term drops.
A worked example
Let’s run a single calculation end to end so the formula clicks. Suppose your SaaS product starts April with 1,000 active users. During April, you acquire 200 new sign-ups and 150 users stop using the product. By April 30, you have 1,050 users in total. Using the standard customer retention formula — ((End Customers − New Customers) ÷ Start Customers) × 100 — your April retention rate is ((1,050 − 200) ÷ 1,000) × 100 = 85%. That means 85% of the users you started the month with were still around at the end of it. Anything new you added during the month is excluded, which keeps the number honest.
What is a good user retention rate? Benchmarks by industry
“Good” retention is relative to your product category, your monetization model, and how long you’ve been measuring. A 75% monthly retention rate is excellent for a freemium consumer app, mediocre for a paid B2B SaaS tool, and disastrous for a high-touch enterprise platform. Always compare yourself to peers in your category — and to your own cohorts over time — rather than to a single global number you saw on Twitter.
SaaS benchmarks
For B2B SaaS, the widely cited benchmark is a monthly user retention rate of 90% or higher for healthy companies — which translates to roughly 10% or less monthly churn. Public benchmark studies from ChartMogul, Recurly, and ProfitWell typically put the median annual gross retention rate for SMB SaaS at 85–90%, with mid-market SaaS at 92–96% and enterprise SaaS at 95%+. If you’re below 85% monthly user retention, your acquisition flywheel will struggle to outpace churn regardless of how much you spend on marketing.
Mobile and consumer app benchmarks
Mobile apps live in a much steeper retention curve. Industry data from Adjust, AppsFlyer, and Amplitude consistently shows median Day 1 retention around 25–30%, Day 7 around 11–15%, and Day 30 around 5–8% — with top-quartile gaming and social apps reaching Day 30 retention above 15%. Consumer SaaS sits between mobile and B2B norms. The key thing for consumer products is the slope of the curve, not the absolute number: a flattening curve after Day 30 is a stronger signal than a high Day 1.
Enterprise benchmarks
Enterprise software with annual contracts and dedicated customer success teams routinely reports gross retention rates above 95% and net retention above 110% (counting expansion revenue). Below 90% gross enterprise retention almost always signals a deeper issue — pricing, onboarding, or buyer/user misalignment — rather than a marketing problem. Benchmark yourself against published numbers from KeyBanc Capital Markets’ SaaS Survey or the OpenView SaaS benchmarks report for the most recent year.
Why cohort age matters
Retention is not a single number — it’s a curve. A 6-month-old cohort almost always has lower retention than a 12-month-old cohort, because the users who survive the first six months are the ones most committed to your product. Always look at retention by cohort age before declaring a trend. A drop in your overall retention rate may just mean you acquired more new users this month who haven’t survived the early decay yet.
User retention vs customer retention vs MRR retention: which one to track
These three metrics get used interchangeably, but they answer different business questions, and tracking only one of them hides important signals. User retention rate measures whether individual end users keep coming back to your product. Customer retention rate measures whether paying accounts (often companies, not individuals) stay subscribed. MRR retention rate (sometimes called net revenue retention) measures whether the dollars you’re earning each month from existing customers are growing, flat, or shrinking — accounting for upgrades, downgrades, and churn.
For a SaaS product with team-based pricing, you can have a healthy customer retention rate (95%) while user retention is quietly bleeding (60%) because individual seats inside accounts are being removed. The reverse also happens: every single user loves the product, but a handful of high-value accounts churn and tank your MRR. Track all three on the same dashboard and act on whichever one moves first. A growing MRR retention rate above 100% — also known as net negative churn — is the strongest single signal of product-market fit in SaaS.
Common reasons user retention rate drops
Before you can lift retention, you have to know why it dropped. The five diagnostics below cover the overwhelming majority of cases we see when companies dig into their retention curves. Walk through them in order — the early ones are cheaper to fix than the later ones.
1. Onboarding drop-off. The single biggest predictor of long-term retention is whether new users hit your product’s “aha moment” in their first session. If your activation rate (the percentage of new sign-ups who complete a key milestone) is below 30%, retention will not be salvageable downstream — fix onboarding first. Look for the step where new users drop off and either eliminate it, automate it, or coach users through it with a checklist or in-product tooltip.
2. A pricing or packaging change. A retention dip that coincides with a pricing change is almost never a coincidence. Grandfather existing users, communicate changes weeks in advance, and segment your retention curve by pricing tier to see exactly which plans are losing users.
3. A missing or removed key feature. Sometimes retention drops because a competitor shipped something you didn’t, or because you deprecated a feature a small but loyal segment relied on. Look at exit feedback and support tickets for the same feature name being mentioned three or more times.
4. Support degradation. Response times creeping past 24 hours, a chat widget that’s never staffed, or a knowledge base that’s a year out of date all hit retention before they hit your CSAT score. Audit your support metrics monthly.
5. Competitor switch. When a category has multiple credible alternatives, retention erodes whenever a competitor ships meaningful improvements you don’t communicate against. Run a quarterly competitor teardown and communicate updates through release notes so existing users see momentum from your side.
Related metrics to track alongside URR
User retention rate doesn’t live alone — it’s part of a small family of metrics that, together, describe whether your product is actually working for the people who pay for it. Treating URR as the only number is how teams end up celebrating a flat retention curve while their cohort sizes are quietly collapsing.
Churn rate is the mirror image of retention: if your monthly retention is 85%, your monthly churn is 15%. Tracking both is redundant unless you want to be sensitive to small changes — churn rate is more responsive to short-term shifts. Cohort retention curves show how each monthly cohort behaves over time and surface whether a recent product change improved or harmed new users specifically. Customer lifetime value (CLV) multiplies retention by ARPU and tells you the total revenue you can expect from an average customer — it’s the metric your CFO ultimately cares about.
Net Promoter Score (NPS) is the leading indicator that often moves before retention does — use NPS to measure retention sentiment before it shows up in your churn numbers. And if you ship product changes regularly, share your public roadmap so users see the direction you’re heading and feel invested in the journey — both of which materially lift long-term retention.
Frequently Asked Questions
What is the user retention rate formula?
The standard user retention rate formula is ((End Users − New Users) ÷ Start Users) × 100. Take the number of users at the end of the period, subtract the new users you acquired during the period, then divide by the users you had at the start. Multiply by 100 for a percentage. This isolates the retention signal from acquisition growth so you can see how well your product holds onto the users it already has.
What is a good user retention rate?
For B2B SaaS, a monthly user retention rate above 90% is considered healthy. For mobile apps, Day 30 retention above 8% is solid and above 15% is excellent. For enterprise software, gross retention above 95% is the baseline. Always compare to your industry and category — there is no single “good” number that applies everywhere.
What does 80% user retention mean?
An 80% user retention rate means that of every 100 users you had at the start of the period, 80 were still active at the end of it. The other 20 either churned, stopped logging in, or downgraded out of an active state. New users acquired during the period are excluded from the calculation so the number reflects how well you keep users, not how many you add.
What is the difference between user retention rate and customer retention rate?
User retention rate tracks individual users — typically logged-in end users of your product. Customer retention rate tracks paying accounts, which in B2B SaaS are usually companies that may contain many users. You can have a high customer retention rate while user retention quietly erodes (seats being removed inside accounts), so most mature SaaS teams report both side by side.
What is the difference between user retention rate and MRR retention rate?
User retention rate is a count of people; MRR retention rate is a count of dollars. MRR retention rate tells you whether the revenue you earn each month from existing customers is growing, flat, or shrinking — accounting for upgrades, downgrades, and churn. Net MRR retention above 100% (net negative churn) is the strongest single indicator of SaaS product-market fit, even if user retention is unchanged.
Why does user retention rate drop?
The most common reasons are weak onboarding (new users never hit the aha moment), pricing or packaging changes, a missing feature competitors now offer, support degradation, and competitor switches. Diagnose by segmenting your retention curve — by cohort, by pricing tier, by activation step — until the drop localizes to a specific user behavior or moment.
How do I improve user retention rate?
The three highest-leverage tactics are: (1) fix onboarding so more new users reach activation in their first session, (2) communicate proactively about updates and improvements through changelogs, in-app messages, or email so users stay aware of new value, and (3) collect feedback regularly with NPS or in-product surveys and close the loop publicly when you ship requested features. Compounded over a year, even small lifts in each of these areas can take a 75% retention curve to 90%+.
Conclusion
Here you go — 3 mistakes that could lead to lower user retention, and 3 improvements you can take to start seeing results.
The points I mentioned may not be 100% correct method for every company, product, and sector. However, you can usually examine these areas to get started and try to improve them.
With a little effort and dedication, you will be able to keep your users happy and engaged for a long time. 🥇
Quick Setup, Easy to Use, and Many Integrations
Manage your product announcements from a single place and easily distribute them
across multiple channels.
