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How do you know if you have product market/fit? It's great to focus on 90 days retention numbers, but how high should they be? 0.5%, 1% 5%? I assume 10% is tota

How do you know if you have product market/fit? It's great to focus on 90 days retention numbers, but how high should they be? 0.5%, 1% 5%? I assume 10% is totally nailing product/market fit, but how low can a number go and still be considered product/market fit. Edit: Sorry, I got confused, I'm taking about conversion rate instead of retention. Sorry for the confusion. But I assume product/market fit is also measured by conversion and not retention alone.

x0x0 11y ago
At 10% or under retention, you can't afford to acquire users -- the total customer lifetime value would occur in 3 months or less. You'd have to charge a lot to make that a viable business. edit: from your above comment, you're using a nonstandard definition of retention. For your business to work, CLV must be greater than acquisition costs. My guess would be you need lifetime value / acquisition costs to be greater than 3 to have a particularly viable business.
navanit 11y ago
For B2C products, once word-of-mouth and customer referrals become a significant (~10%) chunk of your customer acquisition, it's safe to say you have good product/market fit.
patio11 11y ago
Depends heavily on what you're making. SaaS sold low-touch with a 30 day free trial followed by a credit card should have 90 day retention past the credit card in the ~90%ish region to account for the high churn rate expected early in the customer lifecycle, after which MTM retention should be about 98%. The numbers you are quoting sound like they're coming from a free B2C mobile application to me, where user attention wilts extraordinarily quickly. Even with that proviso, they feel low. For a business which is transactional in nature, with plausible repeated transactions, I've heard numbers in the 25 to 40% range quoted for "good performance in encouraging first-time customers to use the service again." i.e. Given 100 orders from distinct new users today we'd like to see 40 distinct customers place additional orders in the next 90 days. One of the reason Uber is such a great business is that they have extraordinarily high retention numbers, both in terms of "percent of riders who will ride again in X time period" and in "number of rides they'll take on average in X time period."
- koonsolo 11y ago
  Yes, I'm really talking about the ratio going from a website visitor to 90 day retention user (edit: I now realize this is conversion instead of retention, sorry about that!). I would think getting users as far as pulling out their credit card should also be part of the equation. Your value proposition is part of the product/market fit I would assume. Retention alone doesn't seem to completely cover product/market fit.
  - ThomPete 11y ago
    It kind of does because it helps you establish a fairly predictable gaining v.s loosing customers. Which then allow you to calculate the cost of acquisition per customer/user which then in turn allow you to stabilize your growth. The goal is that your revenue will help pay for your growth.
paraschopra 11y ago
I think more important is that the figure should keep improving month-over-month, year-over-year. Ultimately, churn/retention is related to value a business is expected to create in future assuming your customer acquisition becomes zero.
potatolicious 11y ago
I don't think conversion is that important of a metric when it comes to determining product/market fit - high conversion indicates you are good at convincing your customers are good at solving their problem, which is more of an indicator of your marketing prowess than actual product quality or usefulness (though obviously these are not entirely independent variables). Retention is the ultimate number - i.e., for people who we have convinced to use the product, do they actually find it valuable and worth the money. As for how high your retention numbers should be? Ideally as high as possible, in reality the floor is going to be the lifetime value of the user (retention_time * revenue_per_time) vs. the cost of acquiring the user. As long as the user's lifetime value exceeds their acquisition cost, your economics at least (barely) work.

x0x0 11y ago

At 10% or under retention, you can't afford to acquire users -- the total customer lifetime value would occur in 3 months or less. You'd have to charge a lot to make that a viable business. edit: from your above comment, you're using a nonstandard definition of retention. For your business to work, CLV must be greater than acquisition costs. My guess would be you need lifetime value / acquisition costs to be greater than 3 to have a particularly viable business.

navanit 11y ago

For B2C products, once word-of-mouth and customer referrals become a significant (~10%) chunk of your customer acquisition, it's safe to say you have good product/market fit.

patio11 11y ago

Depends heavily on what you're making. SaaS sold low-touch with a 30 day free trial followed by a credit card should have 90 day retention past the credit card in the ~90%ish region to account for the high churn rate expected early in the customer lifecycle, after which MTM retention should be about 98%. The numbers you are quoting sound like they're coming from a free B2C mobile application to me, where user attention wilts extraordinarily quickly. Even with that proviso, they feel low. For a business which is transactional in nature, with plausible repeated transactions, I've heard numbers in the 25 to 40% range quoted for "good performance in encouraging first-time customers to use the service again." i.e. Given 100 orders from distinct new users today we'd like to see 40 distinct customers place additional orders in the next 90 days. One of the reason Uber is such a great business is that they have extraordinarily high retention numbers, both in terms of "percent of riders who will ride again in X time period" and in "number of rides they'll take on average in X time period."

koonsolo 11y ago
Yes, I'm really talking about the ratio going from a website visitor to 90 day retention user (edit: I now realize this is conversion instead of retention, sorry about that!). I would think getting users as far as pulling out their credit card should also be part of the equation. Your value proposition is part of the product/market fit I would assume. Retention alone doesn't seem to completely cover product/market fit.
- ThomPete 11y ago
  It kind of does because it helps you establish a fairly predictable gaining v.s loosing customers. Which then allow you to calculate the cost of acquisition per customer/user which then in turn allow you to stabilize your growth. The goal is that your revenue will help pay for your growth.

paraschopra 11y ago

I think more important is that the figure should keep improving month-over-month, year-over-year. Ultimately, churn/retention is related to value a business is expected to create in future assuming your customer acquisition becomes zero.

potatolicious 11y ago

I don't think conversion is that important of a metric when it comes to determining product/market fit - high conversion indicates you are good at convincing your customers are good at solving their problem, which is more of an indicator of your marketing prowess than actual product quality or usefulness (though obviously these are not entirely independent variables). Retention is the ultimate number - i.e., for people who we have convinced to use the product, do they actually find it valuable and worth the money. As for how high your retention numbers should be? Ideally as high as possible, in reality the floor is going to be the lifetime value of the user (retention_time * revenue_per_time) vs. the cost of acquiring the user. As long as the user's lifetime value exceeds their acquisition cost, your economics at least (barely) work.