AARRR: A Razor-Focused Pirate Framework to fuel your Product Growth

The Humble Beginnings

The AARRR framework, also known as the startup metrics for Pirates, stands for Acquisition, Activation, Retention, Referral, and Revenue and is the gold standard for analyzing and optimizing every stage of your product's growth funnel by focusing on one indicator at a time.

AARRR is a widely used framework that is easy to understand and practical for measuring the growth of your business or product. In 2007, Dave McClure, the creator of San Francisco-based VC Fund 500 Startups, came up with the idea.

The Purpose of the Framework

The customer journey for your product is divided into five phases in this framework: acquisition, activation, retention, referral, and revenue. By breaking down each stage of your customer experience into various phases, we are able to concentrate on the essential metrics needed for each one and fine-tune those specific sets of metrics to achieve growth and the desired results.

Regardless of your product's domain (SaaS, Ecommerce, B2C, or B2B), the AARRR architecture has demonstrated its ability to gauge how well your client funnel is doing.

How does It work?

Let's have a quick look at the visualization below. From the Activation to the Revenue phase, the AARRR structure is shown as a vertical funnel. Each stage has its own measurements, also referred to as the OMTM (One Metric That Matters).

To accomplish the desired results for your product in that specific phase, you give that one metric or set of important metrics your undivided attention for a predetermined amount of time. Let's take a closer look at each of the phases listed below one at a time and attempt to determine the important OMTMs for each one given that our SaaS product is web-based and has a subscription business model.

Acquisition

The first A in the AARRR framework, acquisition, defines how consumers discover your product and eventually become customers.

The OMTM (One Metric that Matters) for a SaaS product's acquisition phase is to get customers to the website, ensure they visit the landing page, and get them to sign up. The growth and product marketing teams employ many techniques to get customers to the landing page, including:

• SEO: Optimizing the organic presence on search engines.
• Social: Be active and visible on blogs, communities, and social media sites. Publish material that readers will enjoy.
• Advertise online using search engines like Google, social media like Facebook, Instagram, and Reddit, and display and programmatic advertising.
• Create referral schemes to encourage word-of-mouth advertising.
• Sales: Strong physical sales push and lead generation.

Some of the crucial metrics to track and measure during the acquisition phase would be:

• CTR (Click through rate) from a LinkedIn Ad to the website landing page
• Number of Visits on the landing page and the dropout rates.
• Conversion Rate from the Landing page.
• Channels driving the most traffic (#)?
• Best Performing channels with the lowest CAC (customer acquisition cost).

Activation

The second A in the AARRR framework, Activation, outlines the customer's next set of activities after completing the first touchpoint of your product and arriving at your website. Driving traffic to your website is just the beginning; ultimately, you want visitors to take action and become trial or paying clients.

In this phase, the OMTM (One Metric that Matters) would be to maximize conversion rates and take steps to lower dropout rates by:

• Applying a solid content and design strategy to showcase the value of your product while the user is on the landing page.
• Reducing the no/of steps and frictions and creating a smooth onboarding process.
• Adding live chat widgets and exit popups (with moderation).

Retention

Retention in the AARRR framework specifies what tactics to concentrate on to get the consumer to return to the platform for recurring usage once the customer completes the desired action and is converted into a trial/paid user.

In this phase, the OMTM (One Metric that Matters) would be to cut the churn rates and maintain them below your CAC (Customer Acquisition Cost) by taking some of the following actions:

• Easy to access and well-written In-app user guides to educate the user about your product’s features and how they can derive value.
• Implementing CRM strategies like drip email campaigns, push notifications, or even retargeting ads.
• A strong customer support/success team tagged with the customers to educate, and assist the customer about the product.
• Ample in-app measures to gather feedback and insights from the customer about their product usage experience.

Referral

Making your customers into your brand's ambassadors is the best strategy possible to spur growth. Instead of spending a lot of money on marketing, strong word of mouth is a great technique to attract new clients and make your product or service known.

The OMTM (One Metric that Matters) in this phase would be to increase your product's virality while also establishing trust with your clients through your product.

• Creating a well-incentivized referral program is often a great strategy to generate word of mouth. Optimizing the inviting and sharing mechanisms is a key to success.

• Strong NPS (Net Promoter Scores) are a great way to showcase your customer’s loyalty and satisfaction with new prospects.
• Paying attention to the Viral Coefficient, the # of users a customer refers to you.

Revenue

Your revenue will flow smoothly for you if the aforementioned steps are well optimised. For a SaaS product to succeed over time, a well-thought-out monetization and revenue generation plan is essential.

The OMTM (One Metric that Matters) in this phase would be to keep your CLV (customer lifetime value) rising and your CAC (customer acquisition cost) down throughout this phase.

• Customer lifetime value (CLC) is the amount of revenue you earn from a customer during their lifetime or rather the lifetime as a customer of your company.
• Customer acquisition cost (CAC) is the amount of money you spend on acquiring your customer. That includes the cost of marketing, sales, meetings, fancy dinners, or whatever it takes to get your customer to convert.
• As a thumb rule, the desired ratio of CLV vs CAC should be 3:1 but more is always better :)

Closing Summary

The most efficient technique to measure and maximize your company's product growth is with the AARRR framework. Your customer funnel can be optimized, which can have a long-term beneficial impact on your business, by allowing you to concentrate on the OMTM/s at every point.

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