jamie quint - retention is king

Jamie Quint CEO, Co-Founder

Retention vs Virality

What is Virality - K Factor

i = number of invites sent by each customer c = conversion rate of those invites

k = i*c

Virality

Cumulative

Retention

Cumulative

Equal Retention & Virality

50% - First Week

90% - Second Week

95% - Third Week

98% - 4+ Weeks

k = 0.5 - First Week

k = 0.90 - Second Week

k = 0.95 - Third Week

k = 0.98 - 4+ Weeks

Equal Retention & Virality

88k Total Users 44k Retention

44k Virality

Higher Virality

50% - First Week

90% - Second Week

95% - Third Week

98% - 4+ Weeks

k = 0.6 - First Week k = 0.90 - Second Week

k = 0.95 - Third Week

k = 0.98 - 4+ Weeks

Higher Virality

110k Total Users 53k Retention

57k Virality

Higher Retention

60% - First Week 90% - Second Week

95% - Third Week

98% - 4+ Weeks

k = 0.5 - First Week

k = 0.90 - Second Week

k = 0.95 - Third Week

k = 0.98 - 4+ Weeks

Higher Retention

125k Total Users 65k Retention

60k Virality

High Retention > Low CAC

Scenario Total Users

Base Case 88,000

Higher Virality 110,000

Higher Retention 125,000

When does virality win?

k > 1?

Not so fast…

k > 1?

High Virality + Low Retention

k = 1.4

Low Retention

Hypergrowth??

Hypergrowth with a nasty hangover

Retention is King Only focus on virality when retention is high and stable!

Applications in Paid Acquisition

Sample Subscription Business

Monthly Subscription $20

Monthly Retention 80%

Customer Lifetime Value $100.00

Assuming a CAC of $100

Monthly Subscription $20

Monthly Retention 80%

Customer Acquisition Cost $100.00

Customer Lifetime Value $100.00

Return on Ad Spend (ROAS) 100%

20% Lower CAC and 10% Lower Retention

Monthly Subscription $20

Monthly Retention 72%

Customer Acquisition Cost $80

Customer Lifetime Value $71.45

Return on Ad Spend (ROAS) 89%

20% Higher CAC and 10% Higher Retention

Monthly Subscription $20

Monthly Retention 88%

Customer Acquisition Cost $120

Customer Lifetime Value $166.67

Return on Ad Spend (ROAS) 139%

High Retention > Low CAC

Scenario ROAS

Base Case 100%

20% Lower CAC 10% Lower Retention 89%

20% Higher CAC 10% Higher Retention 139%

Retention is King Focus on Long Term ROAS not vanity metrics like CPA!