Once you have users, how do you keep them engaged, retain them, and even “resurrect” or re-engage them? That’s the focus of this episode of the a16z Podcast, which continues our series on the basics of growth from user acquisition to engagement and retention — covering, as always, key metrics and how to think about them. Especially as many products and platforms evolve over time, so do the users, some of whom may even use the product in different ways… so what does that mean for engagement, and how can startups analyze their users? “Show me the cohorts!” may be the new “show me the money”…
Featuring a16z general partners Andrew Chen and Jeff Jordan, in conversation with Sonal Chokshi, the discussion also covers everything from how network effects come in to play (is there really a magic number or “aha” moment for a product?) to who are the power users (and the power user curve for measuring, finding, and retaining them). Because at the end of the day, you don’t want a leaky bucket that you’re constantly trying to fill up. That doesn’t work, and definitely won’t scale.
Notes from the Podcast
- Driving growth requires diving deep – high level numbers don’t tell you what is actually going on. Need to dive deep to really figure it out, such as ARR vs net adds
- LTV to CAC ratio – 3:1 is the magic number but often miscalculated or misrepresented. LTV should also be calculated for value AFTER costs not revenue
- Network effect – Cohort curves prove a network effect. With a true network effect the later the cohort the less steep the drop off/higher the retention.
- Network effect – can be “hacked” via Facebook, but does not last due to dependence on third parties. Ie. zynga
- AHA moment – requires a bunch of setup and onboarding. Optimizing “Ohhh, I GET this product.” Also known as the magic number, say 10 friends or 10 followers.
- Engagement vs Acquisition – After a critical mass of users is acquired, retention and engagement is a much more efficient way to grow
- Ladder of Engagement – engagement should be viewed as a step function not a curve. “New users” vs “normal user” vs “power users”