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As some of you know, I have spent the last few years working on product adoption, user activation, user retention and driving revenue for mid to late-stage technology companies. While I’ve focused largely on financial services software providers(fintechs), I see a massive problem across the entire software industry.

So what’s the problem I’d like to talk about? It’s called Retention. Let me paint a scenario: A software company embarks on a large (and often expensive) user acquisition campaign, acquires as many customers as possible, but somehow, it still fails because it doesn’t drive enough value to those customers, or it doesn’t drive value often to those customers.

Whenever revenue stops and companies hit a wall, the temptation is to ‘expand ’, and that leads to acquiring new customers. Some companies approach this through geographic expansion, while others try to expand in other ways.

The truth is that it’s far easier to please shareholders, the board, and leadership by embarking on a fancy rebrand, new tagline, website, or bold logo. These things are public-facing and look good. Unfortunately, they’re driven by our vanity for shiny new things, not by impact.

While we have successfully acquired customers and they have signed up for our product, platform, or app, we still have a leaky bucket. What happens here is that customers sign up for our product but don't take actions that drive value for themselves or our software business.

Other times, the customer takes action, but only one action, not a series of actions, so we’re limited (not maxxing) in our revenue drive. Simply put, we're not making as much money as we could because we aren't putting in enough effort to engage the customers we've already acquired, and our competitors may be more successful if they do this and are absolutely maxxing.

It’s like pouring water into a basket and hoping the water stays in the basket. You can only do this if the basket is drowning - this is not a good thing!

A few years ago, I took a retention course at Reforge. And the summary is simple - while customer acquisition is hard and useful, retention is the biggest predictor of a software company’s success. If a company acquires millions of users who don’t use its software often, it will eventually run into problems.

In this case study, I’ll share frameworks that have helped me think better about retention and drive success in my work.

I came across this concept thanks to friends on the Afrobility podcast. I wrote about this a few years ago. Here’s an excerpt:

At the core of a computer's life is the operating system. Operating Systems are a critical analogy for tech businesses. An operating system on any computer is the most vital piece of software. It manages the computer's operations and is charged with deciding: how the computer manages resources efficiently, how files are shared & accessed, what administrative privileges are available for the user, what types of software are allowed, how it accesses the internet, how different communication protocols interact with each other and a bunch of other controls. Coincidentally, OS class was one of my favourite classes in university - truly remarkable and fascinating stuff.

Product and Growth professionals must think of their products as Operating Systems for the customer. How can you continually enable the customer to achieve their goals within your niche? How can a healthcare service allow easy transfer of information between hospitals as patients move or allow sharing of information(securely) with a patient's fitness app? How can a savings app let customers access loans since it already knows their savings habits? How can an invoicing app for SMEs enable its customers to receive payments?

Operating System thinking not only provides value to your customer but also helps companies create large moats, making it more difficult for customers to switch to a competitor or alternative service provider.

How can you make your product like an Operating System? Imagine your smartphone or computer without Android, iOS, Windows or macOS? Core to the user's life and inseparable.

Product-Led Growth, or PLG, is a strategy in which the product itself drives customer acquisition, activation, retention, and expansion. This framework involves deep collaboration across the business to build journeys that deliver value to customers while ensuring the business earns high income from product usage.

Canva’s templates and Figma’s collaborative experience are some good examples of PLG motions. The core point of PLG is to drive customer retention.

I really like this image from Product School.

Some software products default to seasonal or infrequent usage because of the problem they solve or social interactions that influence product use. Global travel peaks in the summer, while gifting peaks in the winter. Parents create bank accounts for their children during the holidays. Founders and company leaders should consider this when thinking about growth.

This brings us to the next idea or framework.

Because many companies already have a ton of users, a Yoruba proverb best describes this situation: What you are looking for in Sokoto is in your ṣòkòtò. This means companies already have customers and a product suite but don't communicate these features to customers. Many software companies don't welcome new customers, teach them how to use their products, or introduce them to new features. Product leaders say things like “It’s just intuitive”, which is ridiculous. What is intuitive about pixels on a screen?

Thankfully, we’ve got the tools. Tools like Hubspot, Customer.io, and Braze help us build messaging to communicate with customers within a lifecycle - i.e as they use our software products. These tools let us reach customers on their devices via push notifications, in third-party channels like SMS and WhatsApp, or through the software itself. They also help us build automated workflows that ensure we can reach any customer who interacts with specific parts of our software products.

Other tools, like Meta and Google advertising suites, enable us to introduce new products and features across the web. Please respect your country’s digital privacy regulations when you use these tools.

There are lots of arguments about who drives retention. Is it the product team, the growth team or marketing? My answer is simple: It depends. I generally avoid us-vs-them arguments because they're pointless and waste everybody’s time, but retention is the result of collaborative work across a software company’s functions. While some teams are customer-facing in their delivery, every function is involved in driving growth through retention.

Focusing on retention does not mean rejecting customer acquisition or throwing the concept away. Customer acquisition might get them in the door, but retention is what keeps customers coming back. Poor customer acquisition still results in a leaky bucket: we might not have the right customers. However, thinking about retention helps us get a holistic view of growth for software companies.

I’ll write more about this in the coming months and share some great examples. If you’ve got any ideas or products I should look at, please reply to this email and let me know.

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