Five Things to Know About Retention Hacking

In the consumer Internet business, we hear lots of talk about retention hacking – the tricks you can use to keep your customers around. But I’ve often wondered whether this type of artificial virality is the right goal for startups to pursue. It reminds me of the pick-up artist who flirts with as many potential partners as possible without ever making anyone stick around for too long.

Instead, I suggest approaching retention hacking not as flirtation but, rather, as an effort to build strong, lasting marriages.

Here are five tips for developers who wish to foster long-term relationships between products and users:

1) Think of social networks as force multipliers

Leveraging existing users’ active social networks (ASN) can double your user base more easily than any other strategy. For Twitter and Facebook, for example, the magic ASN number is between 8 and 15: if first-time users see 8 to 15 followers or friends when they first log in, they are twice as likely to return to the platform the next day.

Similarly, users of the massive multiplayer online game Clash of Clans are twice as likely to keep playing if they join a clan and interact directly with other users. To build strong connections, rely on the connections that your users already have.

2) Find your magic assets

If you’re having retention problems, consider investing in some magic assets. In Ultima Online, one of the first-ever massive multiplayer online games, users who bought a blueprint and built a castle or house stayed with the game for three times as long as users who did not.

This is true beyond the field of gaming: On LinkedIn, for example, the magic asset is an endorsement from former or current colleagues. On eBay, it is a user’s reputation score. Design and product teams should be thinking about what kinds of assets make users come back to the product – and then should build, defend, and improve those assets.

3) Stop churn with “coming soons”

I first learned about the power of “coming soons” when I talked to former HBO CEO Chris Albrecht. He green-lighted the miniseries “Rome,” whose production costs were famously over-the-top for a show that ended up not doing well with audiences, despite critical acclaim.

When I asked Chris whether it was painful to lose so much money, he gave me an important lesson on retention: between the time HBO announced “Rome” and the actual premiere, there was no customer churn, since everyone wanted to stick around to see the show. Essentially, the production costs were paid for by two months of non-churn among subscribers.

Another example comes from World of Warcraft, in which players know that at level 40 they will get a “speed” that enables them to travel the game’s world three times faster than before. As a result, few players quit between levels 35 and 40 because they are looking forward to their pre-announced reward.

4) Keep costs in balance with benefits for users

It is always useful to learn how much benefit users are getting per minute of use, click or other relevant metric.

Fitness clubs understand this principle: they lock you into long-term membership contracts because they know that there will be a lot of attrition after the first few sessions.

Another example is that as Zynga’s Farmville became more complicated, it required more clicks per second to attain the same level of fun – and the game started losing players. For too many users, the cost-benefit equation no longer made sense.

Developers need to work out a system that keeps costs and benefits in a carefully calibrated balance.

5) Cast an anchor for a better future

It’s critical to give users a sense of the future of your company and how it will improve their lives. The more you help your customers envision what they will be doing in the long-term future – and the more you can tie this vision to your product – the more likely you are to improve retention rates.

Early on during my tenure as an Amazon board member, I sent questionnaires to my friends and family to ask them whether they would be using Amazon more, less, or the same in the upcoming year. None of my respondents said they’d be using it more, 20% said less, 60% said the same, and 20% had no idea. We clearly had our work cut out for us to persuade consumers that to think of Amazon as they planned for the future. This is one reason why we developed Amazon Prime: to encourage people to think a year in advance and consider the benefits of becoming Prime members.

My hope for early-stage company founders as well as leaders of mature businesses is that they learn how to move quickly and effectively from the flirtation stage toward something that looks more like marriage – or at least a significant long-term love affair.

Enough with the flings: let’s build a future together.

Bing Gordon is a partner and Chief Product Officer at Kleiner Perkins Caufield & Byers.