jamie quint - retention is king
TRANSCRIPT
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!