App churn and retention: how to measure and reduce user churn

The fact that users leave your app after a certain period of time or greatly reduce their usage is a major concern for many app developers. We've taken a closer look at how to recognize user churn and retention in the usage data of an app and how to deal with the findings from the data.

How is user churn defined in mobile apps

First, you need to get a basic understanding of the concept of user churn:

A churned user is a user that did not came back after a pre-defined time-period.

We find this is an interesting paradox: user churn cannot be measured directly, but its inverse, retention, can be.

Let's illustrate this with an example: each month, we assess which users from the previous month or year are still actively using the app we are analyzing. That is the retention rate.

Formel Churn

If the retention rate is 80%, then by deduction, we have a 20% churn rate. This percentage could be high or low, depending on your app. However, this is the approach to defining churn for a mobile app, particularly if it's a free app.

With a paid app, you can also measure whether people are actually actively canceling their plans. That's a more active action that happens too. With mobile apps, however, we mostly look at usage retention.

The last-straw action

As a product owner, developer, or app creator, you typically have a profound understanding of how users engage with your app. Using data from sources like TelemetryDeck, you can build hypotheses and then later test them.

One thing we're looking out for is what we call a last-straw action: the last action or event that is happening before someone just stops using your app.

For instance, you might feel like most customers are churning due to a specific issue with, say, creating new content in your app. To test this, you would focus on the area of your app related to that issue and start with the assumption that users who fail to create new content are more likely to just leave.

To confirm this, you must examine the churn rate among users who failed to create new content. If the rate is significantly higher in this group, it suggests this feature needs improvement.

This approach can be extremely effective. In fact, we've seen it applied successfully in many apps across various industries.

What is a good churn rate in a mobile app? It can be everything between 5-95%!

In short: You need to define it yourself since every app category has their own numbers and rules.

Sometimes we examine these churn rates and wonder, "Are we doing well? What's the industry average? What should we expect, particularly at different stages of an app?" For instance, right after the launch, you acquire early adopters from your community who are eager to provide feedback. Then, you gradually scale up to mass adoption, which may result in higher churn rates.

So, what is a good churn rate? We discussed some numbers internally, albeit vague ones. In mobile apps, these figures can be substantial depending on how you define churn. They also vary significantly across different app store categories.

Churn rate example 1: Mobile games (up to 95%)

Looking at free-to-play mobile games, we see some of the highest churn rates in the industry. In that sector, typical churn rates might be up to 80% to 95%. People often try out a game, decide it's not for them, and then move on without ever becoming a paying customer.

Churn rate example 2: Freemium apps (up to 10%)

In freemium or free mobile apps, you can expect slightly lower but still high churn rates as users abandon your app. With a paid-up front mobile app, such as a productivity tool, a good churn rate could be around 10%, and an excellent rate would be 5%.

The best churn rate is, of course, no churn at all, but there will always be customers who leave for one reason or another.

Dealing with customer feedback

To fully understand a user's story, it's essential to ask about their experience and their thoughts on what should or could be changed. A significant insight we gained is: don't just do what users ask you to do. While every user or customer has an opinion, it's crucial to delve deeper to understand the underlying issues or pain points influencing these opinions. These could be positive or negative.

We recommend running an experiment based on a hypothesis drawn from user feedback. This could involve making a change for a small group of users, conducting an A/B test, and collecting more data.

Interact with your users, customers, and team; test ideas; measure results; and adjust accordingly. Strong analytics are vital for tracking user behavior and understanding why they behave in certain ways.

Understanding why people are leaving is as important as knowing the behaviors leading them to that point.

How does adding a paid plan affect your user churn?

We received this question from a real-world app developer:

"I have an app for runners, which used to be completely free. However, I've recently implemented a one-time purchase paywall. What common pitfalls or churn do you see from altering business models in this way?"

A significant concern is that some users may be upset because something that was previously free is no longer so; this reaction is entirely expected and normal.

Additionally, it's important to understand that this will be a process. Your pricing strategy, or how you ask your customers for money, isn't a permanent decision. Just because you decide now doesn't mean you have to stick with it indefinitely. Perhaps you discover that the paywall's placement works, but the price doesn't. In this case, you can adjust the price or vice versa.

Making data-driven decisions is excellent, but remember that all data-driven decisions are based on the data available at the moment. You'll never have complete data until everything is done.

So experiment, gather data, test some more, and release new versions as often as necessary. It's vital to experiment with your pricing and payment strategies as part of the process. It's all super exciting, and it's going to be okay.

How do retention charts work?

It is important to understand the charts where you can read retention. This is the most important chart you should look at:

The chart visualizes user retention over time, with each row representing a starting month and each column representing a subsequent month. Look at the row for November and see how the boxes get lighter over time as users drop off. This app loses about half its users after 2 months.

Retention stabilizes after the first month, with decreasing drop-off rates. Analyzing different app versions can show you whether changes lead to longer user retention or increased drop-off. This approach provides a quick way to evaluate changes without A/B testing.

Can you measure user churn and still protect user privacy?

It is indeed possible to reduce churn while respecting user privacy. You can also track user retention without requiring explicit consent by using privacy-preserving analytics.

For example, using stable, randomly generated identifiers, TelemetryDeck can track a user's activity as long as they don't uninstall their app. This approach is compliant with GDPR and other data privacy laws.

We may not know the user's identity, but we can determine if they are the same individual who visited the day before. This is sufficient for calculating retention and churn rates. If user 123 visited yesterday and returned today, we know we've retained that user. If not, we know we've lost them.

Choosing an analytics solution while respecting users’s privacy

When selecting an analytics provider, it’s truly important to address the issues of privacy, data protection, and compliance. Unfortunately, this topic is often treated as a formality to be checked off the list after the fact by filing certain documents. However, it makes much more sense to consider user privacy from the very beginning and, for example, to ask whether it’s even necessary to link data to specific individuals.

You can find a brief compilation of all the key facts about app analytics in our guide:

This blog post is an extract of our webinar with Chatty Insights. You can view the recording on YouTube: User churn and how to prevent users from losing interest in your app