Maximizing Customer Engagement: Understanding the Key Metrics

How to Utilize DAU, MAU, Stickiness, and Retention Rate to Boost Your Product's Success

Co.Lab Team
January 12, 2024

As virtually everything can now be done online, the impact of digital products became more important than ever. Understanding customer engagement and how they use your product is crucial to your company’s success. The key lies not just in attracting users but also in ensuring their consistent interaction and commitment to your platform.

But how do we gauge this engagement effectively? Through metrics.

Delving deep into metrics like Daily Active Users (DAU), Monthly Active Users (MAU), Stickiness, and Retention Rate, we'll unveil the secrets behind customer behavior and how it can be leveraged to enhance your product's market stance. Throughout this article, we’ll try to understand these critical metrics and why they matter.

Let’s dive in.

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Common Customer User Engagement Metrics

1. Daily Active Users (DAU) - this metric refers to the number of unique users ‘interacting’ with your product in 24 hours. Note however, that your definition of ‘interaction’ and  ‘active users’ will vary from company to company.

For the majority of web and mobile-based software, DAU considers each instance of unique log-in as daily interaction. That said, consider the case of mobile banking apps. Log-in alone is not necessarily indicative of any useful activity. In fact, it costs the company something for the user to operate the app, but does not deposit, withdraw, or transfer money. In this case, it’s perfectly reasonable for the product manager to define ‘active user’ as someone who has completed a transaction instead of log-ins.

Similarly, the same is true for education apps like Duolingo. If a user logs-in, but does not interact with the app and promptly closes it - does that count as an ‘active user’? Again, it’s up to you as product manager to consolidate these considerations in a holistic and systemic strategy.

2. Monthly Active Users (MAU) - this metric is similar to DAU, except it’s tracked per calendar month. There are instances when monthly tracking is preferred to daily tracking. For example, tracking monthly active users provides you with insights on certain larger marketing initiatives spanning weeks.

Photo showing the formula of DAU, MAU, Stickiness

3. Stickiness - this metric refers to the tendency of a user to go back to your product. There are many reasons for this. Some of these potential are:

  • Your product is solving their pain points effectively
  • Your product is convenient or cheap or both
  • Your product has great marketing and has established loyal customers
  • Your product is providing satisfactory customer support

This is important to track because the longer a user interacts with your product, the longer is your window of opportunity to offer add-ons, higher-tier subscriptions, adjacent services, and other profit-generating opportunities.

4. Retention Rate - this metric refers to a product’s ability to turn customers into repeat customers. As a general rule, higher retention rate equates to higher profitability. So product managers are incentivized to keep this number up. In some sense, a comparison on retention rate with other similarly situated companies will provide you a performance metric relative to your industry.

Inversely, tracking the percentage of customers who stop being your customers is called Churn Rate. They’re both sides of the same coin and are helpful in getting a pulse check on your customers’ satisfaction.

Photo showing the formula of Retention Rate & Churn Rate

Product Management is Understanding Product Metrics

Mastering customer engagement metrics is more than just a numbers game; it's an art that intertwines understanding customer behavior with strategic product decisions.

As we've explored, metrics like DAU and MAU provide a window into daily and monthly user interaction patterns, while Stickiness and Retention Rate highlight user loyalty and commitment.

Importantly, the interpretation and application of these metrics should be tailored to the unique characteristics and goals of your product. By doing so, product managers can make informed decisions, drive user satisfaction, and ultimately, ensure sustainable profitability.

Remember, in the ever-evolving digital landscape, staying attuned to your customers' needs and behaviors is not just beneficial — it's essential.

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