Nir’s Note: In this guest post, Abhay Vardhan, discusses how to measure the strength of user habits with cohort analysis and retention rate. Abhay is a founder of Blippy.com and blogs at abhayv.com. Follow Abhay on Twitter @abhayvardhan.
Imagine an entrepreneur showed you the graph to the right for his new app called, “PinterestForDogs.”
You would think PinterestForDogs is doing quite well, right? Well, it depends.
A common mistake entrepreneurs make is to focus too much on user growth. Instead, it is often more important to ask: “Is the product creating a habit so users keep coming back?” and “How do we measure the strength of such a habit?” These questions are crucial because without establishing user habits, it is impossible to sustain a healthy user base. Eventually, all user acquisition channels saturate.
I learned this the hard way with our first product, a walkie-talkie app called blip.me that allowed users to record and share audio clips. Initially, we saw good viral growth as users invited others. User retention, however, was not so great; people were excited initially but dropped off within a few weeks. So how did it end? The app was downloaded by millions, but used by few.
Given the importance of establishing a user habit, how do we track it? In my experience, the best way to do this is by measuring retention rate through cohort analysis. Let us define these terms.
The truly great consumer technology companies of the past 25 years have all had one thing in common: they created habits. This is what separates world-changing businesses from the rest. Apple, Facebook, Amazon, Google, Microsoft, and Twitter are used daily by a high proportion of their users and their products are so compelling that many of us struggle to imagine life before they existed.
But creating habits is easier said than done. Though I’ve written extensively about behavior engineering and the importance of habits to the future of the web, few resources give entrepreneurs the tools they need to design and measure user habits. It’s not that these techniques don’t exist — in fact, they’re quite familiar to people in all the companies named above. However, to the new entrepreneur, they largely remain a mystery.
I’ve learned these methods from some of the best in the business and put together an amalgamation of them that I call “Habit Testing.” It can be used by consumer web companies to build products that users not only love, but are hooked to.
Habit Testing fits hand-in-glove with the build, measure, learn methodology espoused by the lean startup movement and offers a new way to make data actionable. Habit Testing helps clarify three things: 1) who your devotees are; 2) what part of your product is habit forming, if any; and 3) why those aspects of your product are habit forming.