To effectively market your product to your entire customer base, a fair bit of spying is necessary.

You need to know:

  • Where do your customers come from?
  • Are they happy with their customer experience?
  • Will they come back after trying out your product?
  • Would they recommend your product to their moms?

Now, it may seem like you'd need to employ multiple analytics tools and blow out your marketing budget on seasoned professionals to help you figure out the answers to those questions—but you don't!

With the AARRR metrics, you can get all these answers efficiently and utilize them to improve the customer journey and increase your revenue per customer.

  • What Is The AARRR Framework? 🤷‍♀️⚔️
  • Why AARRR Metrics Are Important For Businesses 💁‍♂️
  • How Can A Startup Apply The Whole Set of AARRR Metrics 🪄
  • Final Thoughts - Why It's Important To Be Data-informed And Not Data-driven 🧑‍💻
  • Important disclosure: we're proud affiliates of some tools mentioned in this guide. If you click an affiliate link and subsequently make a purchase, we will earn a small commission at no additional cost to you (you pay nothing extra). For more information, read our affiliate disclosure.

    What Is The AARRR Framework? 🤷‍♀️⚔️

    The AARRR (also known as Startup Pirate Metrics because the acronym sounds like a popular pirate expression) is a startup metrics model developed by the entrepreneur and angel investor, Dave McClure.

    These metrics represent customer behavior patterns and can help you understand them better as well as optimize user experience for your clients.

    They allow you to better measure conversions and focus on the correct channels.

    The best thing about AARRR is that this framework doesn’t require any technical knowledge as it's not a complex process, so it’s easy to understand for both experienced business people and newbies with fresh startups.

    Basically, it’s there to help you make more data-driven decisions and reach success by optimizing every one of the five metrics.

    • Acquisition Metrics
    • Activation Metrics
    • Retention Metrics
    • Referral Metrics
    • Revenue Metrics

    The aim is to move potential customers from one step to the other, i.e. from signing up for your product or service (Acquisition) to paying you for it (Revenue).

    Now, let's break them down so you know exactly what each rung on this ladder entails.

  • Acquisition 🧲
  • Activation ▶️
  • Retention 👥
  • Referral 🗣️
  • Revenue 💸
  • Acquisition 🧲

    💭
    What channels do your users/customers come from?

    In the acquisition phase, you want people to sign up for something.

    Your marketing team's acquisition efforts should ensure qualified leads are directed to your site and social media platforms.

    You don’t need huge lead volumes to get customers if you have a solid number of targeted visitors each month.

    Define your audience and start a marketing campaign to create excitement before the launch. It will be easier to acquire more users when there is buzz created around the product.

    Next, find out where your audience hangs out – is it on Instagram, Facebook, Reddit, forums, or blogs?

    Use SEO and SEM, as well as, PR and newsletters to attract customers. You can also leverage social media and targeted ads as part of your marketing efforts.

    This will help you insert yourself into the conversation.

    For your advertising to have an impact, you have to offer your audience value.

    For instance, if you’re offering an email marketing automation service, an online community for email marketing specialists is a great place to start the conversation.

    💡
    You can create engaging posts and suggest email marketing growth hacks to warm up the audience and subtly introduce them to your product.

    There are numerous options to connect with your targets on their platform of choice. You’ll just have to find what works best for you and brings the biggest return on investment.

    To figure out what channel fits your business the best and how to optimize your strategy, try answering these three questions:

    1. What channel has the highest volume (#)?
    2. What channel performs best (%)?
    3. What channel requires the lowest investment ($)?

    Another method would be to use Gabriel Weinberg's bullseye framework. It's a process that helps you determine which marketing channel is best for your acquisition efforts.

    Figuring out the best channels for user acquisition will help you prioritize and focus on the right thing. Remember, the client acquisition process is crucial and should be constantly tweaked.

    Even a good product can't save you if you haven't generated enough interest around your offering.

    When communicating with customers, reduce uncertainty. Be as clear as possible in your website copy, onboarding emails, FAQ, etc. Make sure your customers can get a taste of your product.

    And when the deal is done, get back to your customers to see how everything is going. Let them rate your product via an app, email, or a designated section on the website.

    Activation ▶️

    💭
    What percent of users/customers have a “happy” initial experience?

    Okay, so you have people signing up for your product, but them clicking around randomly isn’t enough. It's time for activation conversion.

    Many of the people who sign up never use the product itself, which is why you have to make sure people see your value proposition and understand how it can be of use to them.

    Here, content marketing, social media, and well-thought-through onboarding will help you turn potential customers into loyal clientele.

    Get a solid idea of what a “happy” user experience would be, and move towards it. Use analytics: see what pages/features your customers spend the most time on, and what makes them close your website or app.

    In earlier days, it was common to try out different onboarding strategies, but experience shows that it’s better to work out one solid onboarding strategy and then just refine and adapt it along the way.

    You set a goal for the end of the onboarding process, map out the steps to activation (what do you want the user to do after they install your app?), identify where and why users may get stuck, and build actions that will help them get through it.

    Don’t forget to test, measure, and optimize your data as you go to turn activation into growth.

    💡
    Oh, and by the way, something the product management team often overlooks when searching for that “happy” experience is the fact that there can be more than one “aha!” moment for a customer – and that those moments can vary for different groups of customers.

    Improving the activation stage and moving down the customer funnel also means reducing friction by:

    1. Removing unnecessary form fields
    2. Decreasing visual friction
    3. Cutting down the number of steps users have to take
    4. Clarifying the onboarding language
    5. Improving site/app performance frequently
    6. Bonus - Improving product education

    Retention 👥

    💭
    Do customers come back and/or revisit?

    Congrats! You’ve got people buying your product or service! Now, you have to make sure they come back regularly to use it.

    Customer retention is probably one of the most important AARRR Pirate Metrics. Keep in mind that retention rate measurements can vary among different products and services.

    For example, some apps or websites may expect only two to three logins per month, while others will send you notifications inviting you back after only 2-3 days.

    But even if you feel like you’re failing to retain people, don’t give up. Try to stay in touch with them, keep showing them the value of your product or service, make special offers, and send newsletters or useful information to let them know you still exist.

    So as not to scare people off with spam, try to find a good schedule and automate emails every 3, 7, or 30 days, or come up with an individual life cycle for the product, if necessary.

    💡
    Why are retention metrics so important?

    It’s not just about not losing followers and giving yourself a pat on the back for every new user who joins in or buys your product.

    Retention is the core of your growth model.

    • Retention drives acquisition through invites, shares, or word-of-mouth.
    • Retention drives monetization. The more users you have, and the longer they use your product, the more money you get.
    • Retention gives you a competitive edge. Following the previous two steps, you will afford acquisition channels you couldn’t use earlier.
    • Better retention makes the payback period shorter, and you can re-invest in your marketing budget sooner.

    Amazon, for example, made use of special offers to their customers. It was rather unusual for a commodity-based business to start a subscription service, but it soon proved to be an excellent service offering.

    Amazon introduced Prime, a monthly or yearly subscription that was originally created to offer users faster delivery only. After some time, it also included the use of Amazon’s Instant Video platform and music streaming services, providing access to exclusive content and virtual events that increased Amazon’s retention.

    But if you’re going to follow Amazon’s example, make sure you give people what they want and what they need. This is why you have to understand your audience’s desires.

    Referral 🗣️

    💭
    Do customers like your product or service enough to tell their friends?

    This one’s pretty big. If you get people to talk about your product and, better yet, refer it to their friends, it’s a major success.

    At this step, you’ll be able to find out how many people are using and referring your product. This is your chance to drive organic growth.

    Start loyalty programs and make your content easy to share. You could also create affiliate programs so that customers have an incentive to share your offerings.

    A prime example of a successful referral program is Dropbox. Did you know they won over 4 million users in 15 months?

    According to Dropbox CEO & Founder Drew Houston, customer referrals increased signups by 60%.

    Let’s understand why it was so successful.

    1. It combines the referral program with the onboarding process. The referral process is part of the setup/registration process.
    2. Customer benefits come first. Words are crucial. It’s not “Invite friends”, but for example “Get more storage space.”
    3. The referral process is easy as pie. They suggest inviting friends via one click on email, link, or different social media sites.
    4. Referral CTA is clearly visible. Users must see what you’re offering, right?
    5. There’s a tab for referral and reward status. Build trust by letting users see that their referral worked and they were rewarded for it.
    6. Referral emails encourage people to refer more. When sending out the email thanking new users for accepting the invite, encourage them to refer more friends to get more storage space.

    Revenue 💸

    💭
    Can you monetize any of this customer behavior?

    Here we are, at the final step of your customer journey. People love your product or service, they’re using it and paying for it. However, it’s not the end of the road.

    Keep taking care of your customers; offer discounts, create attractive annual plans, and offer high-quality customer support.

    A great way to improve your revenue is to align prices with customers.

    Set different prices for smaller- and bigger-volume customers. However, on the inexpensive end, don’t set the price too low. Low-paying customers may not be very profitable and unreliable in terms of paying bills in time or at all, so later on you’ll just lose money on them.

    You should also offer discounts as many customers have now come to expect them from brands.

    Game developer Valve once decided to run discounts, and a 75% cut led to a 293% increase in revenue.

    But be careful with your discount strategies, as some product users may shop with you only when you lower your prices.

    Why AARRR Metrics Are Important For Businesses 💁‍♂️

    Established companies use these pirate metrics instead of vanity metrics when trying out new platforms or using new marketing channels.

    They need measurable goals that new audiences and their needs bring, and the AARRR metrics provide scalable solutions.

    💡
    So, why are they crucial for startups?

    Basically, they are a way to get your feet wet, find out if your business model works, and whether the product is finding its way to the audience.

    New businesses generate all sorts of data in large amounts, and to understand and analyze it, you have to know your metrics. This way, you can figure out your baseline performance and work on improving it over time.

    Startups can provide all kinds of services and deliver physical products directly to consumers and other businesses. To understand them better, it's a good idea to segment them into:

    • Direct sellers - These either manufacture and sell their own products or ship them from their own or someone else’s warehoused stock.
    • Online intermediaries who act as the middleman between website visitors i.e., the consumers) and the businesses whom it represents.
    • Businesses using advertising-based models that employ specialized sites to attract consumers through advertising placed on these sites.
    • Community-based models use websites devoted to particular interests to place their advertisements there and derive revenue from them.
    • Fee-based models present content online and rely on its value to bring them revenue.

    As you see, there are numerous types of businesses, and each of them generates different customer behavior.

    Going back to the topic of metrics – it’s important to know how to collect your data, what channels to use, and most importantly, how to analyze the data that all these diverse businesses generate.

    And for startups, it’s crucial to learn how to do so, as this is what their success depends on.

    How Can A Startup Apply The Whole Set of AARRR Metrics? 🪄

    The AARRR method is easy to master.

    It works smoothly with web-based startups, no matter what they offer – whether it be services, apps, online products, courses, or e-commerce.

    It’s also possible to apply them to new products that used to be brick-and-mortar only, as well as new applications developed by a famous brand.

    So far, we’ve been dealing with this theory of the AARRR model. But for you to understand it better, let’s check out a case study and see how a business can apply all of the steps described above.

    Let’s say you offer an app that helps people stick to healthy eating by buying the right foods.

    Users can fill in a form, and tell the app how they want to live – e.g. avoid gluten and lactose – and the app will get them there.

    💡
    In this case, the AARRR metrics are perfect for keeping track of your customer lifecycle – it’s a lean and pretty straightforward framework that helps entrepreneurs navigate their way to sustainable revenue.

    When it comes to the acquisition stage, it’s possible that many customers will come directly from Google searches if you take care of your SEO and brand recognizability.

    In this case, by simply searching for, “healthy lifestyle” or “healthy eating”, they will land on your website.

    However, it’s also a good idea to invest in influencer links.

    👉
    Invite bloggers to try your app and share their results, through referral reward programs, social media, and partner email campaigns.

    To figure out what channel works best for your startup, monitor every acquisition channel individually:

    • Per channel: by the ratio of acquisition cost to revenue
    • Social media: by cost per purchase
    • Affiliate partners: by the cost of traffic generated
    • Email campaigns: by micro - conversions and actual conversion rates

    Analyze your customers to determine which are the most effective conversion tricks.

    Was it a coupon from a partner store that let your users get a discount? Or a referral from a happy customer who got rid of a bad health issue thanks to your app? What features do they use more, and what features do they use less?

    To stay in touch with the clients, send out newsletters via email or as pop-up app notifications.

    Instead of sending out sales texts convincing users to buy your ebook on nutrition in all CAPS, put together valuable emails with call-to-actions.

    As for the other important aspect, retention, you and your team could try to personalize users' product experience.

    Learn as much as you can about your users and exploit this data to adjust the nutrition facts and recommendations you present accordingly.

    Use their location to recommend locally grown products and suggest places to purchase them, or even let them buy products they need through your app as a monthly subscription.

    Final Thoughts - Why It's Important To Be Data-informed And Not Data-driven 🧑‍💻

    AARRR Pirate Metrics are without a doubt, a valuable tool for product management and business development.

    And as a new business owner, it’s easy to become overly data-driven and let data fully guide your decision-making process.

    This case of data-driven business goals can limit your view of the bigger picture as you’re looking to ship faster or blindly try to get more likes for your product, without being able to turn those likes into actual orders and purchases.

    Let’s not forget that metrics are merely a reflection of a strategy you’ve implemented. They only show what is here and now. You need to include your intuition and the ability to read people into the process of making decisions to be successful with your service offering.

    Simply put, you have to be data-informed. This means that you understand and realize that you only have a limited amount of the information you need to make a successful product or provide a service.

    Who knows – maybe, in the future, your product will target other audiences or gain an entirely different set of features. But if you learn to base your startup’s development on the data you get and use data extensively to inform your strategic decision-making, this means you become data-informed.

    💡
    The data you get from the metrics won’t tell you exactly what your product should look and feel like or how it should work, but it is data that will tell you whether a particular design or feature helps your customers reach their goals and solves a problem.

    And this is exactly where AARRR comes in handy. You have to remember that your audiences differ and their preferences differ. To overturn slow growth and keep your user base happy, you need to know who they are and where they come from.

    Having a more personal relationship with your client will not only help you successfully market your product on a variety of marketing channels but also sustain satisfaction throughout the customer lifetime.