Acquiring and retaining users

August 6, 2018

Strategies to drive engagement and retain users

UX Design: First Impressions Are Important

One of the primary challenges in app retention is the umpteen choices available to a user.  For every Uber app, there’s a Lyft, and for every Tinder, there’s a Hinge.  New product users can ultimately be thought of as “strangers.”  It’s crucial that, when these strangers open your app for the first time, they are met with a good first impression.

A frictionless app onboarding process is analogous to a warm welcome or a strong handshake.  In fact, when users are onboard effectively, their lifetime value increases upwards of 500%.  An app that requires too many steps to sign up, has too many information fields, or possesses confusing features and functions will cause disgruntled users to abandon it.

Signing up can often be a barrier to app adoption, so the process should be fast and easy. When an app user is first asked to log in or create an account, steps should be reduced to the bare minimum and multiple registration options should be made available if necessary.  Giving users the option to sign in through existing social media accounts like Facebook, Twitter, or Google is an effective way of easing the sign-in process and even building user trust.  Postponing the sign-up process to a later stage in the app is also a good strategy to improve the initial experience.

The process of describing an app’s key features should be equally simple. By showing users how to complete the desired task by utilizing callouts and highlighting key buttons, users can quickly and effectively understand how to navigate the app.  Teaching through action exposes gestures and actions needed in the app experience and eliminates confusion and the boredom of reading text-heavy instructions and explanations.  Progress indicators, demonstrating how far along the user is in the onboarding process, should also be used to provide a sense of movement and build-up.

Furthermore, many apps require data access or messaging permissions in order to provide the user with the best experience and value.  Studies show that 60% of users say they have chosen not to install an app after discovering how much personal information the app asked for.  Therefore, to avoid making users jumpy, apps should only ask for the essential permissions up front and nothing else with a quick line explaining exactly why such access is crucial.

Good app onboarding means trimming the fat and creating a streamlined and quick process. When done poorly, users may fail to understand how the app functions, grow frustrated and possibly abandon the app for good.  Efficient, to-the-point app onboarding provides users with a solid first impression and ultimately leads to better retention rates.

Push Notifications Can Work Wonders

A user’s device is like a valuable piece of real estate, and push notifications serve to remind users of an app’s existence.  Through targeting messaged-based behavioral data and preferences, push notifications encourage usage and boost retention rates anywhere from 56% to 180%.

While push notifications are a statistically effective strategy to keep users engaged, users should be provided with an opt-out option to avoid angering or inconveniencing those customers who would prefer a notification-free experience.  For users that want to be notified, only strategic and contextually relevant messages should be delivered.  Sending too many notifications to users who don’t find them useful may lead them to opt out of notifications or even stop using the app altogether.  Therefore, the amount of push notifications is less important than the value that they can provide.

Furthermore, users are three times more likely to engage with push notifications when the messages are personalized.  Therefore, it’s important for app developers to pay attention to a user’s activity within the app in order to determine what content the user might find most relevant.  One machine learning algorithm called Optimal Time analyzes individual app usage patterns to automatically send a push notification at a time when the user is most likely to open it.  Optimal Time push notifications result in a 6.97% increase in retention over the first 30 days.

Customization will help a user develop a strong relationship with an app and rid them of the sense that they’re on the receiving end of a non-specific broadcast.

Overall, users receiving push notifications exhibit 88% higher app engagement than those who opt out of the experience.  When leveraged properly, push notifications are a significant way to increase retention rates.

Using Incentives and Rewards to Lure Users

Positive reinforcement is an effective way of enticing mobile app users. To add value and excitement to an app, a variety of different incentive and reward strategies can be implemented.  Coupons, special deals, discounts, exclusive services and offers for app users, promotions, and other offers tremendously increase app engagement and retention.

The Starbucks app is a prime example of a successful rewards program.  After getting 30 stars by buying 30 coffees, a user achieves Gold status and subsequently gets a reward for every 12 stars.  By centralizing the entire app towards achieving loyalty points in the form of “stars,” the app has created an effective loyalty loop where users keep purchasing more coffees to use up their points.

Obviously, different types of apps require different reward and incentive strategies.  The gaming app, Clash Royale, offers a clever incentive system that encourages users to interact with the app on a daily basis.  After winning a match, a Clash Royale player earns a chest.  Once earned, chests have a 24-hour lifespan until they expire.  Since players can still play Clash Royale without the chest rewards, the system does not restrict gameplay.  However, the potential rewards encourage players to keep logging in day after day.

Rewarding users pays off.  After launching an incentive-driven retention strategy and referral model, Airbnb’s sign-ups increased by 300% per day.  By rewarding both new and existing users, Airbnb’s large user base boasts impressive retention rates.  Overall, promoting user loyalty through means of positive reinforcement is an endlessly successful retention strategy.

Stay Relevant with Fresh Content

 You’ve probably heard the adage “Content is King”.  70% of companies say it’s cheaper to retain an existing customer than acquire a brand new one, meaning that app developers should introduce new content on a regular basis to keep users interested and intrigued.  Consistent updates should also be launched to help to ensure that an app remains modern, up-to-speed, and perceptive to user feedback.

The Starbucks app is once again a terrific example of this retention strategy.  Aside from offering users rewards with every coffee purchase, the mobile platform features a variety of engaging content.  Through partnering with Spotify, users can use the Starbucks app to find out what songs are playing in a Starbucks store or listen to curated playlists on the go.  By being creative and introducing content that isn’t even necessarily related to the company product, the Starbucks app has experienced tremendous success.

Ensuring that an app possesses quality content also means making sure that it is bug-free.  Since only 16% of users will try a failing app more than once, functionality is crucial to positive retention rates.  Therefore, before launching an app or an update, developers should rigorously perform both a security and performance check to guarantee that users will be satisfied with the final product.

Engaging apps possess quality content.  Creative features and timely updates keep users interested and satisfied and may also lead to benefits such as press mentions, high app market ratings, and a wider user base.

Overall, heightening retention rates has enormous benefits. A report published by Bain & Co states that a 5% increase in customer retention can increase a company’s profitability by a staggering 75%.  In addition, Gartner reports that 80% of a company’s future revenue comes from just 20% of its existing customers.  An effective retention strategy is therefore crucial, and following our guide ensures that app users will remain active and engaged.


App Monetization Models

1. Freemium

The commonly adopted “freemium” approach to monetization means users can download an app for free and pay for access to premium, gated features.  Freemium strategies may be capacity-based (Dropbox, Evernote), feature-based (Buffer, Skype), or time-based (Spotify, Audible).

Developers should carefully design the app’s free package so that it is attractive enough to acquire a user base, yet limited to the extent that users will have a desire to upgrade.  The success of this revenue strategy ultimately lies in the app’s ability to entice free users to upgrade to the premium version of the app by ensuring that the unlocked features will notably benefit and improve the user experience.

Evenflow, a meditation app developed here at Guaraná, was designed according to the freemium revenue model.   The free version of the app delivers expertly guided mindfulness-based content on health, career, and relationship topics yet offer a limited amount of sessions.  By upgrading to the premium version, users get unlimited access to hundreds of meditations on an even wider range of subjects.

When upgrading, Evenflow users can choose between making a $9.99 monthly subscription, a $6.25 yearly subscription, or a $199 lifetime payment.  The flexibility of offering multiple purchase options is an appealing way of incentivizing users to decide to invest in premium features.

Ultimately, this monetization strategy is an easy way to build up a large user base.  Furthermore, people who “try before they buy” are more likely to become engaged and loyal users later on.

2. Virtual goods

Virtual goods are in-app purchases that users can make once an app has been downloaded. This monetization strategy tends to be a popular choice among games apps, such as the immensely popular Pokémon Go. Players spend real money on PokéCoins and then exchange the virtual currency for features like power-ups, extra items, and other game enhancements.

In the Mood is a couples’ app recently developed by Guarana that allows users to bond with their significant other.  In the Mood users can purchase “hearts” from the in-app store and use them to purchase unique date ideas, stickers, and other surprises for their partner.  The store lists 1,000 hearts for $8.99, 700 hearts for $5.99, 300 hearts for $2.99, 200 hearts for $1.99, and 100 hearts for 99 cents.

With this revenue model, app developers should ensure that the in-app purchases are creatively incorporated into the app’s overall functionality and design.  Providing goods with clearly-defined value is also an important consideration when considering this model.

Currently, the global market for virtual goods is valued at approximately $15 billion.   While App Stores generally take a cut of the revenue for virtual goods, this revenue model is nonetheless a lucrative one.  By not grossly interrupting an app user’s experience, virtual goods offer a low amount of risk.  Furthermore, this flexible model can also be adapted to include affiliate programs and partnerships that drive additional referral revenue.

3. Paid Download

The paid download strategy is the clearest and most obvious monetization model.  Essentially, a user makes a payment to download an app and the app owner receives direct income from the number of app downloads. A benefit to paid apps is that users tend to be more loyal, given that they have made a small investment in their digital product.

Most likely due to the surfacing of new and alternative modernization options over the years, the paid app model has become a rather unpopular monetization strategy.  While 75.9% of app revenues were generated through paid downloads in 2013, this figure decreased to a mere 37.8% in 2017.

The success of a paid app depends on persuading users that the app’s functionality surpasses free apps’ offers.  This showcasing involves strong marketing and PR efforts to demonstrate that the paid app’s value matches its price tag.

The paid download strategy might, therefore, be a good revenue model for a company bringing a truly innovative and unique product to the app market.  Unique and outstanding design, functionality, or brand features incentivize users to pay up.  On a similar note, paid applications produced by well-known and trusted software companies to stand a better chance of winning the market. Overall, apps offering undeniable and distinctive benefits to users are most likely to find success with the paid app model.

4. In-App Advertising

With in-app advertising, companies can eliminate the cost barrier (pay per download), making their app more attractive to users.  In-app ads can come in a variety of forms from pop-ups to banners to videos offering rewards.

Some ad formats are more effective than others.  Banner ads, located at the top or bottom of an app, are often considered more distracting than other ad formats since they sacrifice an app’s screen space and can disrupt a user’s experience on the app.  Interstitial ads, inserted at transition points in an app, are popularly chosen among games apps and function like TV commercials.  When implemented properly, they can be immensely successful.

Alongside offering virtual goods, In the Mood also has a store tab that allows users to purchase candles, jewelry, and other romantic gift ideas from actual online stores in an Amazon-like fashion.  In this win-win setup, store owners gain potential customers from In the Mood’s user base and In the Mood benefits from a cut of purchase profits.

While in-app advertising is an effective monetization method, it can easily sacrifice the overall user experience.  Collecting demographic and behavioral data on users can help ensure that ads have at least partial relevance to the user base.  Furthermore, matching the ad to the app’s form, function, and feel is important, as smoothly integrated ads aren’t as disruptive to users.

The in-app advertising strategy is the best choice for apps that result in frequent visits or long sessions.  The Facebook or Instagram ad model is a successful case study.  Ads show up in users’ newsfeeds that are relevantly chosen and minimally intrusive.

5. White-labeling

A “white label” refers to a fully supported product or service that’s made by one company but sold by another.  Because white label products and services are brand-free, a reseller can customize the product with their own unique brand, logo, and identity.

The mobile app development process is time-consuming and expensive, meaning that white-labeling and packaging an app’s structure to sell to other businesses is a quick and easy source of revenue.  This monetization model can be beneficial at the very start and bitter end of an app’s lifestyle when the app isn’t receiving proper user acquisition or retention figures.

White-labeling is a mutually beneficial practice, saving customers time and energy while providing a reliable stream of revenue for app developers.  An established application that has received positive user feedback and is supported by top-notch code will be sure to profit from white-labeling.

6. Transaction Fees

For apps delivering services or operating as marketplaces, revenue can easily be generated through the charging of transaction fees.  This monetization strategy requires simply connecting a resource to demand, handling the transaction, and taking a percentage of the transaction for profit.

FinTech start-ups have successfully taken advantage of transaction fees to generate app revenue.  Stripe, the online payments processing startup, is currently valued at 9.2 billion.  All of Stripe’s profits are gleaned by charging users small fees for every completed transaction.

The charging of transaction fees is a simple revenue model involving no bothersome need for advertisements or charging a fee upfront.  While a smart and obvious strategy for certain apps, excessively high transaction fees can deter users for either monetary or even moral reasons.

GoFundMe, for example, has recently come under attack for its business model, which takes 5% of the total sum of money raised from a user’s personal campaign.  As a crowdfunding site commonly used after crises, personal disasters, and the like, GoFundMe’s fee has received criticism for “profiting out of the pockets of those in dire need.”  In response, YouCaring has emerged as an alternative, tip-based crowdfunding platform.

7. Data monetization

Data monetization means selling customer data to third parties.  Keeping privacy and security laws in mind, there are many legal avenues for applying this strategy. This revenue model is ideal for apps that collect big data on customer habits or preferences since many companies’ products rely on or heavily benefit from insights into what people do and want.

Foursquare is a widely-used and free check-in app that allows users to publicly share their “check-ins” with others.  After compiling this information into massive databases, Foursquare sells its data to interested third parties.  With data on more than 10 billion check-ins, it’s safe to say that this monetization strategy is a lucrative one for Foursquare.

On a per-user basis, the amount of revenue generated through data monetization is much higher than any other app monetization strategy.  While other methods require the user to be in the app for monetization to occur, data monetization allows an app to generate income even from users that haven’t been active for a while.  By occurring in the background, data monetization also protects the quality of user experience, as there are no intrusive ads or irritating payments required.

Application development and monetization need to be part of the same overall strategic plan. These 7 tactics and strategies offer successful ways to transform your app into a profit-generating machine.



by Guarana

Filed under App Funding


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