Not all products need or have retention. Some amazing businesses are 1-time or products people pay for but don't need to use or actively engage with.
e.g. Universities, Courses = 1-time use Stocks/Investments = buy them and don't touch them until you sell Insurance = buy it and don't touch it until you renew 1 yr later Plenty of other examples
But every product should be a "Must Have" if it's going to grow.
If I take all registerd people on my platform as "users", I might end up at 0,1%. But if I define a user as someone who is currently using my product >1 month, I might end up at 60%.
You are correct that not all products can have retention. But if you do, the cohort is a better metric in my opinion.
https://www.karma.fm/p/hJibw7y/eric-migicovsky---how-to-talk...
The way I presented it is certainly weird, but Eric's articulation resonated with me. He also describes cohort retention iirc.
Say, people who signed up during a given month = 12 cohorts per year
Or people who signed up during a given week = 52 cohorts per year
Then, given a set of cohorts, what percentage of people per cohort are retained over time?
But assume week 4 has 10% and week 5 has 10%, that curve flattened out at 10%, and so you have product market fit.
Fortunately you have a mathematical equation at your disposal that helps tell you this so that you can feel confident in trying something different and seeing how that effects PMF
I find the 40% rule weird because it highly depends on which people you include as "users". The flattening retention is way more acurate (vs survey question) and already gives more insight into what people are actually doing on your platform.