In the high-stakes world of software as a service (SaaS), it’s not just about winning new customers—it’s about keeping them. Why? Retaining customers is significantly more profitable than acquiring new ones. In fact, a 5% increase in retention can lead to a profit boost of up to 95%, according to Bain & Company. Yet, many product leaders focus too heavily on acquisition and not enough on keeping the customers they already have.
Retention tells you how well your product keeps users coming back, turning casual visitors into loyal customers and advocates. It isn’t just a number on a dashboard—it’s a powerful indicator of product success, customer satisfaction, and growth potential.
To uncover why retention should be every product manager’s obsession, we spoke with Ryan Salomon, Pendo’s senior director of product analytics. In part 1 of this 2-part series, Ryan shares why retention is the secret sauce to growing a SaaS company, how it intersects with other key metrics, and surprising insights about Pendo’s own user retention research.
Q: Why should product leaders care about user retention?
A: Retention is the clearest indicator of product-market fit and long-term customer satisfaction. It’s what’s led founders like Uri Levine of Waze to create $1 billion apps. Retention tells you how well your product resonates with users beyond the initial adoption phase. If you’re only focused on acquisition without retention, you’re filling a leaky bucket—you’re constantly bringing users in at the top, but they’re slipping out at the bottom.
When you see high retention rates, you know that you’re solving a problem or fulfilling a need that keeps users engaged and coming back. Low retention, on the other hand, is a sign that something is off, whether it’s the onboarding experience, product usability, or the perceived value of the offering.
Q: Who should own the ‘retention’ metric?
A: User retention is a team sport. Everyone, from the CEO down to the customer success teams, should care about retention. It shouldn’t just be the responsibility of product team, it should be the responsibility of the entire company.
- For product managers, retention is a direct indicator of how well your features and updates are resonating.
- For marketers, retention is a measure of the quality of users being acquired and whether they are aligning with ideal customer personas.
- For customer success and support, retention data is typically the main focus. It highlights areas where users are getting stuck or encountering friction, and signals overall churn risk when retention rates are low.
“Retention reports are invaluable for Customer Success teams. They not only reveal how customers interact with our product over time but also help us gauge the impact of our customer initiatives. By tracking these patterns, we can see if new customer engagement or education strategies are truly driving adoption and growth. And with Pendo, we can further segment customers by metadata—such as book, personas, and verticals—allowing us to analyze usage more deeply and tailor our approach to different customer segments.”
— Stacy Osorio, Director of Customer Success, Pendo
Pendo pro tip: Keep your retention reports centrally located across teams on your Dashboard in Pendo.
Q: How does user retention correlate with other KPIs, like customer lifetime value, churn, and adoption?
A: Retention is the bedrock upon which other key metrics are built. If you increase retention, you’re directly increasing customer lifetime value (LTV). Meaning, customers who stick around longer inherently spend more on your digital product over their lifetime.
And when your customer lifetime value (LTV) rises, this allows you to invest more in acquiring new customers while maintaining a healthy LTV/CAC (customer acquisition cost) ratio. In practice, if a SaaS company increases its retention rate by 10%, lifting LTV from $10,000 to $11,000, it can afford to increase acquisition costs from $2,000 to $2,200 per customer—enabling more aggressive growth strategies without compromising profitability for the company. This is why companies who nail retention often become unstoppable growth engines.
For churn, retention and churn are inversely related. Meaning when retention is low, churn is high. This is again why it’s important to remember that initial adoption doesn’t always equal long-term success. And retention is the only true measure of sustained value.
Q: What are common mistakes you’ve seen PMs make when tracking and improving retention?
A: One common mistake I’ve seen is treating retention as a static number that you just monitor periodically. Before we, at Pendo, really focused on retention, it was merely a block on our dashboard that got updated now and then. If your user retention reporting isn’t visualized and constantly in your face, it’s easy to ignore.
Another mistake is incorrectly segmenting your retention data. You need to look at retention rates across different cohorts—whether by user type, behavior, or the feature they’re using—to uncover the nuanced story behind the numbers.
Lastly, PMs often don’t take advantage of the opportunity to learn from churned users. While it’s natural to focus on engaged customers, reaching out to those who leave can reveal valuable insights you can use to inform your positioning, roadmap, or customer education strategies.
Pendo pro tip: You can pull the list of your unretained users right from your retention report in Pendo.
Q: How does focusing on retention help long-term growth and customer loyalty?
A: Companies that prioritize retention are essentially prioritizing customer success. When you focus on what keeps users engaged and satisfied over the long term, you’re naturally improving customer experience, reducing churn, and fostering loyalty.
This loyalty turns into advocacy, which is one of the most powerful growth drivers. In fact, word of mouth drives $6 trillion in annual global spending and is responsible for 13% of all sales. As Airbnb co-founder and CEO, Brian Chesky, has referenced, it’s better to have 100 customers that love you, than a million that just sort of like you. Because loyal customers are more likely to refer others, leave positive reviews, and expand their usage over time. It has a compounding effect.
Start building a culture where retention is everyone’s job, and watch as your product goes from good to indispensable. Benchmark your user retention against others in your industry and region.
