High PMF Score, but Low Retention? Fixing the Hidden Problem

Yesterday, I had a fascinating 15-minute call with a founder who connected with me via Intro.co/seanellis. Their startup has a strong product-market fit (PMF) signal, with 55% of surveyed users stating they would be "very disappointed" without the product. This score is significantly above the 40% threshold I recommend as a key benchmark for PMF. Yet, they were struggling with a low retention rate—another critical indicator of product-market fit.

During our conversation, we uncovered a key insight that reshaped how they approached the problem: their retention analysis was based on including users who had little or no meaningful interaction with the product. While they were surveying users who had significant product usage (and these users provided glowing feedback), their retention metric included a large number of people who churned shortly after signing up, often before even experiencing the product's core value.

This led us to an important question: Do they have a retention problem or an activation problem?

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Retention or Activation: Uncovering the Core Issue

Retention and activation are closely linked but fundamentally different. Without clear definitions and data, they can easily be conflated:

• Retention Problem: Users experience the product’s value but still churn over time. This indicates a potential mismatch between expectations and long-term value delivery.

• Activation Problem: Users churn before they even experience the product’s value, often dropping off during onboarding or before reaching the “aha moment.”

The founder came to me believing they had a retention issue, but this was actually caused by an activation issue. Many users were dropping off before they had a chance to truly use the product.

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Cohort Analysis is Essential

When and how are users included in your retention analysis? Measuring retention from signup often paints an incomplete picture, especially if users churn before reaching the product's core value. Aligning cohort timing with surveyed users ensures more accurate results.

In this case, the founder surveyed users with significant product usage, which naturally biased the results toward positive feedback. Meanwhile, the users who churned before activation were left out of the conversation.

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The Importance of the Aha Moment

Retention depends on how quickly and easily users reach your product’s “aha moment”—the point where they experience its core value.

• What is your aha moment?
  In this case, the product’s "aha" moment seemed to occur after users uploaded a large file and began working with the software. However, the process of uploading a file was delayed, creating friction. Many users never reached this milestone.

• Does your retention tracking begin before or after the aha moment?
  Tracking retention from signup (rather than after activation) can mask an activation problem. Once we adjusted the cohort analysis to measure retention starting after the aha moment, the metrics likely looked much healthier (though our phone call was too short to confirm this during the conversation).

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From Insights to Action

This call reinforced the importance of asking the right questions and acting decisively on what you learn. I covered the importance of curiosity in this article.

Here’s the roadmap we outlined:

1. Segment Retention Metrics: Separate retention tracking into pre-activation (signup to aha moment) and post-activation (after aha moment). This provides a clearer picture of where the problem lies.

2. Optimize Activation: Identify and remove friction in the user journey leading to the aha moment. For this product, streamlining the file upload process was a key opportunity. Equally important is enhancing the user’s desire to reach the aha moment by clearly communicating the value they will experience once they get there. By combining reduced friction with increased motivation, you create a smoother and more compelling path to activation.

3. Build Trust: Address concerns about exporting data or other potential barriers to long-term engagement (such as what might be available in a free version). Transparency and reliability are crucial for driving activation and retention.

4. Survey Early Churners: Ask users who drop off early why they didn’t continue. Their feedback can reveal critical bottlenecks in the activation flow or issues in the core product experience.

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Retention or Activation? The Answer Shapes Everything

For startups, low retention metrics can feel alarming, especially since it is a key indicator of PMF. But as this case illustrates, the solution often lies in reframing the problem. Before assuming you have a retention problem, ask: Are users even getting a chance to experience the product’s value?

Retention isn’t just a downstream metric; it’s one of the clearest indicators of whether your product has truly achieved PMF. This simple but powerful shift in perspective helped this founder clarify their strategy. By focusing on activation, they’re now better equipped to bridge the gap between early excitement and sustainable engagement.

This entire conversation took just 15 minutes and cost $275. Yet, those 15 minutes uncovered key insights that helped the founder refocus their precious time and resources on the core issues needed to succeed. If you're struggling with retention, activation, or growth strategy, let’s work together to uncover insights that can save you time, resources, and frustration. Connect with me at Intro.co/seanellis, and let’s unlock your product’s full potential.