AARRR is not just for pirates!
If you are a product manager who has never heard of the AARRR metrics, this article is for you. If you have heard of it before, then I can safely assume that you either love it or hate it. So what exactly is the AARRR framework? And why should you care about it?
But we’re also going to dive deeper and provide some excellent resources to get you up and running with the AARRR framework, such as templates, strategies, funnels, and metrics!
Let’s gooo!
Table of Contents
Firstly, what is the AARRRR framework?
The AARRR framework is a model that was developed by Dave Mclure, of 500 Startups. He came up with the AARRR model to help him describe his startup process in a more exciting way (rather than boring metrics like CAC and LTV). AARRR stands for :
- Acquisition – how a startup gets new users (think SEO and PPC)
- Activation – how you convert those users into active users (for example, email campaigns)
- Retention – keeping your current customers (monitoring and customer support tools help with this dramatically).
- Referral – how you get your users to tell more of their friends about your product (contests and referral programs help with this).
- Revenue – finally, a startup needs to make money off all those users!
The AARRR framework is a great way to guide a product manager’s thinking process. However, rather than getting into a spreadsheet and analyzing the current funnel step in your startup, it is also a great way to think about future product features.
What about the pirate model? Is it the same thing?
Unless you’re referring to sexy pirates (in that case, who can blame you), the pirate model refers to the same concept as the AARRR model or framework and can be used interchangeably.
How useful is AARRR?
Okay, another framework – yay! But don’t worry, this one is actually good. Product managers should love the AARRR framework because it is backed by some pretty impressive statistics.
In a study of over 200 startups, Sean Ellis found that only 30% of companies had an activated user rate above 50%. And only 3% had an activated user rate above 90%.
This means that if you can focus on improving your activation metric, you’re more than likely to see a positive impact on your overall business.
Funnel visualization is also a great way to improve retention rates. In a study conducted by Mixpanel, they found that increasing retention rates by 5% can increase profits by 95%.
And finally, as mentioned earlier, measuring revenue is key for any startup – no matter how small. If you can focus on improving revenue, it is likely that your business will flourish.
Considering the AARRR framework focuses on some of these key concepts, we think it’s a framework worth considering!
AARRR metrics: Pirate metrics
Whether you call them AARRR metrics, pirate metrics, or something else – you need to make sure you’re measuring the right KPI. Let’s look at some of the most popular ones to include in your marketing report.
Acquisition rate:
The acquisition metric is about how often a user finds your product through a channel. You calculate this by taking the total number of new users who came from that channel, and dividing it by the total number of new users in a given time period. This can be used to measure what is working and what isn’t. For example, you could split your budget between PPC and SEO – if your acquisition metric shows that more users are coming through PPC than SEO, then you can cut back on the latter.
Activation rate:
The activation rate is about how likely a user who sees or uses an offer (lead) will purchase it. You calculate this by taking the total number of converted users and dividing it by the total number of new users. This can be used to measure the effectiveness of your email marketing – for example, if you have an open rate which is relatively low, then you will want to look into improving that metric.
Retention rate:
The retention rate is the amount of users who return to your product in a given time period. You calculate this by taking your total number of returning users, in a given time period, and dividing it by the total number of new users who signed up during that same period. This can be used to see your strengths and weaknesses – for example, if you have a low retention rate, but a high conversion rate, then you’re doing something right.
Referral rate:
The referral rate is about how likely a user is to recommend your product to someone else. You calculate this by taking the total number of users who have recommended your product and dividing it by the total number of new users in a given time period. This can be used to measure how word-of-mouth marketing is going – for example, if you have a low referral rate, and the average rating of your product is below 4 stars, then you will want to consider improving that metric.
How about the pirate funnel or the AARRR funnel?
Acquisition, retention reactivation – that’s the motto of the AARRR framework. So, how can you build a product funnel to support this? As mentioned earlier, it’s one of the most popular ways to visualize your funnel.
A typical product pirate funnel includes the following:
– Acquisition: The process of getting new users to sign up for your product.
– Activation: The process of getting a user to use your product for the first time.
– Retention: The process of keeping a user coming back to your product.
– Referral: The process of getting a user to recommend your product to someone else.
– Revenue: The amount of money that a user spends on your product.
The pirate funnel is a great way to visualize the steps that your users take throughout their journey with your product. However, it’s important to remember that the process of onboarding is ongoing and iterative – as such, an ongoing focus on improving all of these metrics (and more) will be crucial for the success of any startup!
At each stage you should develop strategies, campaigns, and techniques to either acquire, retain or reactivate. Let’s look at each stage in-depth and some common ways to make the most out of that stage in the user journey.
Acquisition
In the acquisition stage, some common tactics to acquire users include :
– Paid advertising on marketing channels such as Adwords, Facebook Ads, LinkedIn.
– Organic marketing through content on marketing channels such as Medium and Quora.
– Networking events to get your product in front of potential users.
– Content marketing – for example, writing a blog with tutorials on how to use your product.
– Search engine optimization (SEO) – for example, optimizing your metadata and your website copy to rank better on Google and other search engines.
Retention
In the retention stage, some common tactics to retain users include :
– Email marketing campaigns with a clear call-to-action and a personalized tone of voice.
– Push notifications with a clear call-to-action for users to return to your product.
– Ongoing development and iteration of new features to keep users engaged with your product.
– Creating content that your users will find valuable and interesting.
– Cross-product marketing – for example, doing a joint promotion with another product in your network.
Referral
In the referral stage, some common tactics to get your users to refer other people include :
– Integrations with other products or apps that are popular among similar audiences.
– Creating valuable content that users will want to share on their social media channels.
– Providing incentives for referred users – for example, giving the referrer a discount once the new user has bought their first product or service.
– Reaching out personally to your biggest fans and evangelists to get them involved with your company culture.
Revenue
In the revenue stage, some common tactics to get your users spending money include :
– Removing or reducing free options – for example, removing your free plan if your paid plans are resonating well with your customers.
– Offering discounts on different phases of a user’s journey in exchange for a commitment – for example, offering a discount on the first month of your premium plan if a user signs up for a year.
– Offering discounts or credits on purchases that require multiple steps – for example, offer free shipping when buying multiple items.
– Loyalty programs where users are rewarded based on their engagement with your product.
– Providing a personal touch – for example, being available on live chat 24/7 to answer user questions.
These are just some of the common tactics that have been proven to work well. I’m sure there are many more successful techniques out there.
Final thoughts on the AARRR framework
Whether you’re excited about implementing this new AARRR framework, or you just love to read about pirates we hope this article quenched your thirst for AARRR knowledge. As a quick summary of the AARRR framework, it includes a five-step process: Acquisition, Activation, Retention, Revenue, and Referrals.
