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AARRR

The AARRR metrics framework, also known as the Pirate Metrics or the AARRR funnel, is a set of startup metrics used to monitor user behavior to support business growth.

The five user-behavior metrics business owners should be tracking include: acquisition, activation, retention, referral, and revenue.

These metrics help companies understand how potential customers discover them and what they do once they learn about their offering. They provide insights into whether their user base is being acquired, activated, retained, referred, and converted into paying customers.

For whom is the AARRR framework designed?

The AARRR framework was developed to provide CEOs and founders with a straightforward, universal strategy for developing a business model based on customer behavior. By examining how customers and prospects engage with a brand, companies can then refine their growth efforts and improve marketing initiatives.

The end goal? Help business owners, product managers, marketers, and investors track the performance of growth drivers when creating a scalable and sustainable business.

AARRR pirate metrics framework: How does it work?

The AARRR framework is one of the most popular frameworks used by founders and growth teams to understand where they stand in terms of sales growth, marketing performance, product development, and customer support.

It responds to a set of questions that all founders should address to position their businesses for success.

  • Acquisition: How are potential customers finding out about our offering or business?
  • Activation: Are they interacting with our business how we want them to?
  • Retention: Are our active users still engaged with the product or are they losing interest?
  • Referral: Are customers likely to recommend the product to others?
  • Revenue: Are our target personas eager to buy this product?

What is the step-by-step process?

1. Set the business goals

Setting broad goals is the first step in every business strategy since it establishes the organization's definition of success and provides a standard by which to gauge its progress.

2. Identify the AARRR pirate metrics

The following phase is to determine the conversion metrics for each stage of user behavior. Below are some examples for each of the five stages.

  • Acquisition metrics: The acquisition stage includes the evaluation of all possible channels for introducing users to the product; such as SEO, social media, marketing campaigns, or advertising, among others.
  • Activation metrics: Users are said to be at the activation stage when they take the desired actions or next steps. The activation phase metrics track customer experience and behavior such as looking at more pages, trying more features, signing up for the newsletter, or signing up for a free trial.
  • Retention metrics: After the activation stage, businesses want to keep track of how many of these users are still showing interest in their solutions. This can be achieved by monitoring variables such as how often customers come back to the product over time, how frequently they visit the website, and how many times they open the business' emails or RSS, to name a few.
  • Referral metrics: This stage refers to how users recommend a business or product to others. Because consumers use so many different channels to spread the word, these are some of the hardest indicators to monitor. However, there are a few techniques that may be set up to track referrals such as contests for referrals, NPS surveys, or emails with integrated referral promotions.
  • Revenue metrics: Businesses must finally measure their clients' actual revenue targets. This means determining whether or not the costs associated with customer acquisition, activation, and other initiatives lead to profitable growth. Minimum revenue, break-even revenue, CLV, and revenue over customer acquisition cost are some indicators that can help assess the growth generated by customers.

3. Establish a tracking system to evaluate the AARRR pirate metrics

Once all of the data from each stage of the AARRR framework has been collected, company executives must build a monitoring procedure to analyze the data and determine whether or not their product management and marketing efforts are effective.

4. Test user behavior and consider alternative approaches

Finance managers can identify customer journey optimization opportunities by conducting A/B tests. Which should also result in higher retention rates by paying attention to what potential customers and engaged product users prefer.

5. Improve operations based on outcomes

Lastly, business teams have a unique opportunity thanks to the AARRR framework to not only learn what works and what doesn't but also to act and modify their operations and initiatives in light of the findings from behavioral tests.

AARRR

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