Great podcast with growth expert Andrew Chen, VC Jeff Jordan and editor Sonal Chokski talking about metrics for market places.
They explain the value of the DAU/MAU metric, which gives you in insight in the frequency in which your product is used. This can help explain the behavior of your users. Especially when you break this up in cohorts and add profiles to these cohorts.
Retention is the amount of users that you keep. Engagement is how active your users are on your product. Which is basically frequency and time spend. A weather app for example is low frequency and high retention. You keep the weather app installed, but you only use it like once a day to check the weather. Games or e-books have very high engagement, because people enjoy the game or want to finish the book but low retention. You don’t go back to the game or book once you are done with it.
In the beginning of every new product you have to focus on acquisition, but as your market get more saturated – or you’re running out of new users – you have to start focussing on engagement and retention. Retention and engagement can really vary in different markets, products and user cohorts.
How do you get your users to be more engaged?
1: Content and education. Explain how to use your product.
2: Use incentives to use the app. Like Free Time to Think or extra loyalty point through an app booking.
3: Refining the product. Add, kill or improve features.
To understand your users:
1: Frequency: how often do users use your product. Regardless of the length of the session or intensity.
2: DAU/MAU ratio. Which gives insight in the amount of daily users compared to monthly users.
3: L28: histogram which shows how many users have used your product on how many days over the last 28 days.
Growth vs engagement“It is relatively easy to brute force your way in to growth. But if all your new users, don’t actually start using the product. You still don’t have anything. That’s why investors are skeptical about growth, but really look at engaged users”.
“The better companies, just rip apart their metrics. Understand the dynamics of their business and figure out ways to improve the business through that knowledge. That knowledge can feedback into new product execution, new marketing strategies or new something. It’s a constant iteration, but it’s formed by the data, that at a level that we see at the best companies. It really really deep”