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.

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."

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.

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.

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.

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.

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.

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.

I get why retention is important but this article seems very light on details. A lot of products typically wont see a customer return in 90 days. Are these bad businesses...?

Let's say you're building a home remodeling marketplace. People aren't doing remodeling projects every month. Your 90 day retention numbers aren't going to be great.

Retention would suggest avoiding this business model...

I think he'd suggest finding the retention number that works for you. In your example, you might have 2 years as a valid retention window for consumers, but for the contractors you might have less than 90 days depending on the size of job.

His point seems to be don't ignore churn and focus solely on growth.

I wonder how you would value sites like Rap Genius this way. It is pretty much an SEO play, so I would expect only a very small fraction of users to come back.

it's risky to build the core of your business on someone else's platform. You could argue Quora is doing something similar and I'm just as confused by them...

Not sure it's the case with Quora. I'm just guessing here, but I would say they have high rates of direct visits and many reasons for users to keep coming back every day (or at least every week) because of quality of content and some of their gamification elements.

Speaking of which: I am having trouble finding the link to opt-out of Apple Music before the paid period starts. Help?

I would add that employee retention is also a good sign.