Able to Retain Customers?

So far, some people believed your promises (value proposition/social proof/UX) and they gave you something valuable: their time or money. They spent time or money on your product at least once (i.e you can acquire users or customers).


But did you product deliver on the promise? Was your product good enough to bring those customers back for re-use or repeat purchase or continue the subscription? YES or NO? Are your existing customers actively using your product and would be disappointed if it went away? Are your customers loyal to your platform and not defecting?


Some are and some aren’t? Go check out “Do I have Product/Market Fit”  for qualitative and quantitative measures to determine acceptable retention (and hence product/market fit)


Retention is important because It doesn’t matter how fast you are acquiring customers, If you are losing them all on the other side, you have a big problem….This problem is called the “leaky bucket”: If you have holes in your bucket, it doesn’t matter how fast you fill it; It’s still going to lose all its water. The same goes for a startup. Unless the startup has high retention (i.e low or no holes), you can never fill the bucket - i.e build a sustainable business.


It’s a common assumption among early stage founders that growth = acquisition. “I get more customers, my startup grows”. That’s like saying to fill a bucket you just need a large tap. In an early stage founder’s mind, that tap looks like a firehose and the water is free, and never ending. In reality, it’s not a tap, but a hand pump, and sometimes it’s expensive to pump! Even if it is a large firehose, if you don’t plug the holes in the bucket, you can run out of water - this is what’s happening to Twitter - it’s running out of people to acquire!

Retention is about ensuring you plug all the holes in the bucket. Retaining existing customers is (1) way cheaper than acquiring new ones (2) proves your product is still the preferred solution among all the options available  (3) bridge to upselling, expand to new product lines, acquiring new customers through referrals, word of mouth etc.