Hello again,

In the last edition, I spoke about how I am trying to uncover the things that I do often that reduce my productivity. Here are some findings from that journey:

1. Multi-tasking sucks: as humans, we try to do "more" all the time. But the key to winning is to do less. Focus on one thing at a time. Only move to the second item when the first is done.
2. Unrealistic goals: More often than not, I set aggressive and unrealistic goals for the day/week. That does two bad things. First, it forces me to work harder. Second, I feel underachieved and frustrated when I cannot achieve the goals. It is a lose-lose. Even after working long hours, I do not feel happy or fulfilled.

I've found this self-discovery journey meaningful, and I plan to continue discovering and sharing the things that reduce my productivity.

If you have any tricks or insights on the topic, please share with me by replying to this email.

In addition, I have been spending time on three new things:

1. Learning copywriting: I like writing a lot. I have decided to learn it more formally. (If you know any excellent learning resources, send them my way)
2. Sharing on Data product management: Data product management is still new, and many people don't understand it well. I discovered that there are many people interested in the topic. So I've decided to write more on it in the coming weeks.
3. Startup and product growth: I've been watching videos of founders and product leaders, who share very interesting tactics about growing products. I am loving learning about the various areas (like acquisition, engagement, people, processes, etc.) that these founders focus on.

And that gets me to this guide.

Successful founders and product leaders consider "retention" the strongest growth lever. Still, it doesn't get the attention it deserves.

Here is my attempt at simplifying "retention."

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Why is retention important?

Retention is the most effective and meaningful lever to drive growth. Good retention is a strong signal that there is PMF (product market fit.)

Good retention also signals a higher LTV (lifetime value) of your users. Higher LTV then allows you to power more acquisition channels.

Another way of thinking of retention is that it is the answer to -- "How many users are getting enough value to keep coming back?"

If the answer is none (or a low number), then you are failing at the most essential truth of creating products -- i.e. creating long-term value for users.

What is retention

Retention happens when users repeatedly do a meaningful action over a defined time period.

Let's take an example.

Let's consider Spotify's free users. One of the most meaningful actions on Spotify is to listen to a song (or podcast) for at least x seconds.

Let's assume that 100 users listened for >= x seconds today. So, the W0 (week 0) retention is 100%.

Then, we look at the same 100 users and determine what % of them came back in the next week and listened for >= x seconds. Let's say 80% did. So, the W1 (week 1) retention is = 80%.

Then in W2 (week 2), repeat the process for the same 100 users from  in W0. Let's assume that only 75% came back.

Keep repeating for multiple weeks, and you will get a curve like this

In the Spotify example:

• "Listening for >= x seconds" is the meaningful action.
• "One week (7 days)" is the defined time period.

Please note this is just an example. The meaningful action could also be other user actions like opening the app, creating a playlist, doing a search, etc.

Similarly, you could measure retention on a daily or even monthly basis.It is essential to define the right meaningful action and time period.

Whenever I think of retention, I answer the following questions to identify the meaningful action and the time period.

1. What action can the user take to get the most value?
2. Given the user's needs, how often should they do the action?

To answer these questions well, I highly recommend deeply understanding user's needs and the product's value prop.

My rule of thumb : If I can't find a good answer to question 2, I start with monthly retention. It is because, I feel that if users do not use the product once a month, there is something wrong.

What is good user retention?

A typical retention curve (like the above) will trend downward in the initial periods. But over a more extended period, it will flat line above zero and will not decrease any more.

That is precisely what you want -- a curve that flatlines above zero.

(There are two more types of retention curves, which I will talk more about in the next edition)

The next question is: when should it start flatlining, and should it be at 25%, 30%, 50% or some other number?

Short answer: The sooner it starts flatlining—the better. The higher the level—the better.

Long answer: it depends.

When it starts flatlining depends on the kind of product, user needs, competition, and many other factors.

Similarly, the level at which it starts flatlining depends on multiple factors. Luckily, there is enough industry data to create good benchmarks for common industries.

• Consumer Social: ~25% is GOOD, ~45% is GREAT
• Consumer Transactional: ~30% is GOOD, ~50% is GREAT
• Consumer SaaS: ~40% is GOOD, ~70% is GREAT
• SMB / Mid-Market SaaS: ~60% is GOOD, ~80% is GREAT
• Enterprise SaaS: ~70% is GOOD, ~90% is GREAT

(Sourced from Lenny's Good and Great Retention research.)

How can PMs increase retention?

A few caveats before answering:

1. Retention is very context-specific, i.e. what works for one might not work for others
2. Increasing retention is always challenging. It takes a lot of trial and error.
3. The below pointers are generic. They will help you think of the right things. You can create concrete action items once you start thinking of these things.

Maximise user value

Build your product to deliver maximum user value. Make it easy and quick for users to get value. If you're in a competitive market, deliver it better and quicker than others.

The best way to do this: build user empathy - learn about your users, their needs, and their problems. Then, solve them in the best possible manner.

Example: Spotify creates personalized playlists through its Discover Weekly and Daily Mix playlists. They help users find relevant songs easily and quickly. This makes the user feel Spotify understands them, and users perceive more value.

Make value explicit

Explicitly show users the value they will get from your product. Remind them if they forget.

The best way to do this: try to deliver value as often as possible, so users remember and appreciate it.

Example: As soon as you sign up, Dropbox shows users value like easy file sharing, secure storage, and cross-device access. It also updates users about new features and how users can benefit from them.

Give them so much that they fear giving it up.

If you deliver a lot of value very often, users will not want to give it up. And that is what you want.

Example: In one membership, Amazon Prime offers so much value -- free shipping, music, video, and exclusive deals -- that users find it hard to cancel their subscription.

Don't let them go away.

Identify users who are not coming back often or are about to leave the product. Find ways to engage them -- give them a reason to stay.
The best way to do this: look at past users who did not retain, identify their behaviour right before leaving, identify others who are displaying that behaviour today, and encourage them to change their behaviour so they don't leave.

Example: Netflix predicts when users might be losing interest. Then, they show personalized recommendations and send emails about new releases similar to the user's viewing history.

Win them back after they've left.

Remind users who have left your product about the value you provide. Help them understand how your product solves their essential problems. And how you do it better and quicker than other alternatives.

Example: when users stop using Grammarly, they send emails showing recent improvements that can help users write more effectively. These messages remind users of Grammarly's value, specifically focusing on new features that might address past reasons for leaving.

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Other learnings

A few other learnings that I shared recently:

• Why PMs fail to create impact: A PM's success is directly tied to the impact they create. Here are the most common reasons PM's fail to create impact.
• Want to improve communication?: Start with these 12 resources.
• Goals, OKRs, KPIs: What are they and what are the differences