Last updated on
2024年7月6日
What are the main benefits and drawbacks of using the AARRR framework for customer acquisition?
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AARRR stands for Acquisition, Activation, Retention, Referral, and Revenue. These are the five stages of the customer lifecycle that the framework tracks and analyzes. The idea is to measure how well you are converting your prospects into loyal and profitable customers, and how you can optimize each stage to increase your growth rate. The AARRR framework was coined by Dave McClure, a prominent angel investor and founder of 500 Startups, who wanted to simplify the key metrics that startups should focus on.
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AARRR is an acronym that represents Acquisition, Activation, Retention, Referral, and Revenue. It makes it easy to monitor the various stages of the customer journey. This has the advantage of providing a clear line of sight to measurable targets and analytical reasoning. But these disadvantages are inflexibility and sometimes, lack of focus on brand development initiatives. To apply the AARRR framework, one has to identify targets for each of the aspects. For example measure website traffic under Acquisition and customer attrition rates under Retention. I found out that although AARRR framework is helpful in organizing the process, it is still necessary to use other models and qualitative analyses to get a broader perspective.
The main benefit of using the AARRR framework is that it helps you align your customer acquisition goals with your business objectives. By breaking down the customer journey into five stages, you can identify where you are losing customers, where you are creating value, and where you have opportunities to improve. The AARRR framework also helps you prioritize your actions and experiments based on the impact they have on your growth. For example, you can test different channels and sources for acquiring new customers, different ways to activate and engage them, different strategies to retain and delight them, different incentives to encourage them to refer others, and different pricing and monetization models to generate revenue.
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Throughout my journey, using AARRR has acted as a roadmap, paving the way for a more structured approach to our objectives. It’s allowed us to keep our focus across various customer lifecycle stages, even when surrounded by chaos. It’s a beacon. It's been pivotal in fostering alignment around the user lifecycle. It’s granted the teams the clarity to see the "bigger picture," enabling decisive actions when necessary. It’s made sure every team member comprehends how their efforts impact the customer journey, encouraging collaboration and swift actions to enhance user experience and satisfaction, ultimately fueling growth and revenue. ??
The AARRR framework is not without its drawbacks and limitations. One of the main challenges is that it can be difficult to define and measure each stage accurately and consistently. For example, what counts as an acquisition? Is it a visit, a sign-up, a download, or something else? How do you track and attribute your sources and channels? How do you define activation? Is it a specific action, a level of engagement, a time period, or a combination of factors? How do you measure retention? Is it based on frequency, duration, recency, or churn rate? How do you calculate referral? Is it based on word-of-mouth, social media, referrals programs, or viral loops? How do you measure revenue? Is it based on lifetime value, average revenue per user, gross margin, or net profit? These questions can vary depending on your business model, your target market, your product, and your goals. Therefore, you need to be clear and consistent about how you define and measure each stage of the AARRR framework, and how you align them with your key performance indicators.
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One of the major problems that I see with the AARRR framework is that it doesn't have enough focus on the top of the acquisition funnel. This means that a pure focus on Acquisition, Activation, Retention, Referral, Revenue doesn't consider a key aspect, which is creating general awareness for your product. You have to keep in mind that for many products and categories, a large share of buyers is currently not "in market." That means if you focus purely on AARRR, you might miss creating awareness for future buyers. We see this with many businesses that focus too much on the bottom of the funnel but don't invest enough at the top.
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It shouldn't be difficult to measure any of these five steps. The four-step, referral, will need to be managed in a way that can track where referred business is coming from. Often, that is in the form of a discount to the new customer and the referring customer. The company/brand must also have a system in place to "ask" the new customer where they heard of the company.
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What I've experienced 1. AARRR is not one size fits all and changes based on both a) Size of the company and b) Type of business model (ecommerce is different from SaaS) 2. The emphasis in the framework is on the AA, focussing on acquisition and activation, and less on retention per se, which can contribute back to acquisition, through WOM for eg. It operates "AA" independantly away from the "RRR".
To use the AARRR framework effectively, you need to follow a few steps. First, you need to map out your customer journey and identify the key actions and milestones that correspond to each stage of the framework. Second, you need to set up your tracking and analytics tools to collect and analyze the data that reflects your customer behavior and outcomes. Third, you need to establish your baseline metrics and benchmarks for each stage of the framework, and compare them with your industry standards and best practices. Fourth, you need to identify your gaps and bottlenecks, and prioritize your hypotheses and experiments to optimize each stage of the framework. Fifth, you need to test, measure, and iterate your customer acquisition strategies based on the results and feedback you get from your experiments.
The AARRR framework is not the only customer acquisition framework that you can use. There are other frameworks that have different perspectives and approaches to measuring and improving your customer acquisition process. For example, the Lean Startup framework focuses on validating your product-market fit and finding the right customers for your value proposition. The Growth Hacking framework emphasizes finding creative and scalable ways to grow your user base and revenue. The Customer Value Journey framework emphasizes creating a memorable and delightful customer experience that leads to repeat purchases and referrals. The Jobs to Be Done framework emphasizes understanding the underlying needs and motivations of your customers and how your product helps them achieve their desired outcomes. Depending on your context and goals, you can use one or more of these frameworks to complement or supplement the AARRR framework.
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