Maximizing User Retention: How to Calculate Daily Active Users

Contributors: Amol Ghemud
Published: January 5, 2023

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Introduction

One of the critical metrics in a SaaS business or a subscription-based company is tracking the number of active users on a daily basis. A company would simply be flying blind without paying attention to this metric. Growth in the scale of Daily Active Users (DAU) indicates that new customers are joining the business, and previous ones are actively using the products and services. However, if this number declines, companies need to look after their planned strategy and upgrade or make changes wherever required. 

Measuring user retention appropriately and using the data to improve the product and services provided is a vital part of every business strategy. Maximizing user retention not only helps businesses gain profitability but also helps them in acquiring loyal customers for a more extended period.

What does Customer Retention mean?

Customer Retention is a simple metric used by multiple businesses to measure their customer loyalty and gauge their overall business success over time. Various businesses and companies come up with well-planned strategies and tactics to better customer experiences, retain them for a more extended period and reduce customer loss.

How can one calculate Customer Retention Rate?

Customer Retention Rate has a very straightforward formula as given below:

Customer Retention Rate = (Total number of customers at the end of the time frame – New customers acquired) / Customers at the beginning of the period

The Customer Retention Rate calculation remains incomplete without knowing customer churn. Customer churn is essential for businesses as it helps them understand the percentage of customers who no longer use the products or services during a specific time frame. Customer churn rate can be figured by dividing the customers lost during a time frame by the number of customers a business had at the beginning of that time frame.

What are Daily Active Users (DAU)?

The simplest way of explaining daily active users is the amount of time customers spend utilizing the services or products provided by a particular sector. For example, an e-commerce app could define user interaction as adding items/ products to the cart. In contrast, an online banking app may define DAU as the transfer made by a particular customer. User interaction increases the business’s profitability, success, and overall growth.

How can one calculate Daily Active Users (DAU)?

Calculating Daily Active Users (DAU) is quite simple, but it can vary depending on how the activity is defined for a particular business. DAU is defined as the total number of users per day. Every business has its own credentials that qualify as an active user. 

Once the user is defined, total daily active users (DAU) can be given as:

Total Daily Active Users (DAU) = (Unique New Customers) + (Unique Returning Users)

The factors, unique new customers and unique returning users determine and measure how fast a platform attracts new users. A company can create a benchmark based on the previous DAU performance and results. An increase in DAU is a sign that a product or a service has made ‘stickiness’ among the users, whereas a decrease in DAU means that the business will run into a churn.

How to increase Daily Activity Users (DAU)?

  • In-app texts

In-app texts provide maximum relevance. They are the best segments that help users gain real-time updates to personalized content. In-app texts are not intended for communicating but are very helpful in providing information related to version updates, app issues, or even payment failures.

  • Using Push Notifications

Push notifications are one of the quickest and most effective ways to engage users with the app. For a rise in DAU, it is essential to determine which push notification might work the best and which wouldn’t.

  • Using Messages and Emails

Occasional messages and emails are another way to serve the users and keep them engaged with the platform. They work as a reminder for the users to remain active and consistently use the services daily.

  • Deep linking is the heart

Deep linking is one of the most efficient ways to build a firm and long-lasting relationship with users. A hassle-free user experience will enable users to have a friendly user journey and make them stick to the platform for longer.

Wrapping up Daily Activity Users (DAU)

The prime of businesses and companies is to keep the user engaged with the platform for as long as possible, and not just for a particular day but on an everyday basis. Calculating DAU can be straightforward, but it can turn more complicated depending on how the user activity is defined. Including some factors like re-engagement campaigns, emails, and push notifications offer users a tailor-made value, increasing user engagement, followed by user retention.

FAQs

1. What is a good percentage of daily active users?

A healthy daily active user rate is expected to be over 20 per cent. The higher this threshold, the better it is for businesses. This value can make companies understand their marketing tactics’ overall health and effectiveness.

2. How are monthly active users calculated?

Monthly active users (MAU) refers to the number of people who have engaged in a particular platform in some way in the past 30 days. 

Monthly active users can be given as:

MAU = Number of active users in a month 

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Why Customer Lifetime Value Is the Most Crucial Metric for Your Business

The Importance of Accurately Calculating Deferred Revenue

Compounded Monthly Growth Rate: Understanding and Calculating Compounded Monthly Growth Rates

Calculating Your Company’s Total Addressable Market (TAM): A Step-by-Step Guide

Measuring Monthly Recurring Revenue: Expert Tips and Advice

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About the Author

Optimizer in Chief

Amol has helped catalyse business growth with his strategic & data-driven methodologies. With a decade of experience in the field of marketing, he has donned multiple hats, from channel optimization, data analytics and creative brand positioning to growth engineering and sales.

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