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by • October 25, 2011 • Business modelsComments Off111

Divorce lawyers and surgeons don’t care about retention

Subscription software arose when somebody realised they could re-sell their product to the same customer every month. In large part, that’s what the “relationship” block on the canvas is for.

SaaS has been a hugely successful business model. And so much great guidance exists for SaaS that some of those best practices have begun to misrepresent themselves as Universal Startup Truth.

SaaS = Relationship + Revenue

Increasing retention to infinity (and beyond) is Very Important for SaaS. It’s generally easier to continue selling to an existing customer than to go out and find new ones.

It is not identically important for all businesses.

Businesses which hate retention

If you were printing CDs or DVDs, would you spend your precious energy trying to get customers to play the same disc on repeat, every day, forever?

I posit that you would not!

Instead, you want customers to grow bored of their purchase as quickly as possible (while remaining excited about other products within the same category).

Would a divorce lawyer stress over their retention rate? Not unless they also ran a dating site.

Don’t take metrics for granted

The AARRR funnel is awesome. The clarity Dave added to the startup world through it is impossible to overstate.

That being said, like all startup frameworks, it’s a starting point (which happens to have SaaSy assumptions baked into it).

Similarly, it’s fun listening to someone high profile articulate how important retention is.

But unless you spend a moment re-contextualising it to your own startup, it’s dangerous fun, like competing in the bear rodeo.

Transitional products

There are lots of specific situations where you’d do well to turn your back conventional startup wisdom and best practices. I’m going to highlight two cases focused on retention.

Transitional products exist to get you through a sticky period and then leave you wide-eyed, blinking, and alone on the far side.

You can think of this as Software-as-a-Chore (not a very good acronym) or Software-as-an-Experience.

Transitional products will help you sell your house, get married, find an emergency room, or pay your taxes. You don’t want to be dealing with that stuff every day.

The key metric for designing transitional products has nothing to do with retention and everything to do with the percent of users who reach the value proposition (which is probably correlated with how quickly you can make the value proposition pop).

That means that the longer a user spends with your app, the worse you may be doing.

The best possible dating site would only keep its users for about a minute before shuffling them off toward being happily married for life.

Completionist products

Completionist business models don’t activate until users “finish” the product.

If your product relies on viral sharing or offsite activities (like affiliate purchases), retention may be the wrong priority.

Let’s say you are working on a game where all your growth comes from players beating the game and then excitedly sharing what they’ve built. Your growth trigger happens on the completion of some chunk of content. You may be naturally tempted to make the game “better” by making it longer, deeper, and more challenging. But every minute of extra gameplay is giving players a chance to get interrupted and miss your completion sharing/revenue trigger.

Similarly, if you’re helping Americans do their taxes and are focused on retention, you’ll end up adding a bunch of features for managing cashflow and fiddling with budgets. And people might like it! You might increase retention from essentially 0 to a respectable number.

But by blindly chasing retention, you’ve just optimised your way into a different business (a SaaS utility instead of a pain-relief purchase). That may be okay, but it certainly shouldn’t be done accidentally.

Caveat empor, grain of salt, etc etc

Now let me clarify that this depends on so many factors I can’t even begin to enumerate them. Please don’t throw out the default advice and then blindly follow this set. Best practices are going to be correct in majority cases, so go that route if you’re committed to rolling the dice.

I’m just saying there are exceptions to the conventional wisdom, and if you’re business is one of them, you’re going to be a lot happier if you’re aware of that.

Very good advice which doesn’t quite apply is particularly sneaky, since it’s working so well for everyone else and lots of people will overlook the subtleties of your business and recommend you do the same.

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