eAccountable Framework Series
What do pirates and your marketing strategy have to do with each other? The AARRR Framework, that’s what. The AARRR Framework, which is often referred to as “Pirate Metrics”, is a business model used to identify and shape critical user behavior that can grow your business. The pirate association is just a coincidence, of course—you should not run your business like a pirate ship.
What Is The AARRR Framework?
The AARRR Framework was created by Dave McClure, founder of over 500 startups, to provide a simple, universal solution for startups to model customer behavior, improve marketing and development efforts, and focus on the metrics that genuinely contribute to business growth.
So, what does this acronym stand for? AARRR stands for:
- Acquisition
- Activation
- Retention
- Referral
- Revenue
This framework works as a traditional funnel and focuses on key metrics in each of these specific stages of the customer’s journey. If you’re a startup or business looking to accelerate your growth, then the AARRR Framework can definitely be of use to you. Now, let’s take a closer look at each stage of this model.
Acquisition
How do you attract people to your business? How do you reach them with your company’s message and bring them back to your website, app, or landing page?
If you can’t capture people’s attention, your business won’t make any money and cannot grow, no matter how great your product or service is. Remember, the larger the number of people you can attract in this phase, the more paying customers you’ll have at the end of the funnel.
That’s why you need to think about who your audience is and how and where to reach them.
First, you need to figure out your target audience. This will help you figure out where you can reach them.
Let’s say you’re selling locally grown coffee beans. Your target audience might consist of people who drink coffee (of course), people who want to support a local business, and local businesses and coffee shops that want to sell locally-grown coffee.
Now that you know your target audience, think about how and where you can reach them. Here are a few ways you could do it:
- Organic Search – Launch an SEO campaign so your business shows up on Local SEO for people looking to support a local business
- Paid Search – Target consumers searching to buy coffee beans in bulk on Google, Amazon, and any other search engine or marketplace
- Social Media – Build a social media account catering to coffee lovers to build a community around your brand
Find the channels that work best for your target audience, and then focus on your KPIs (Key Performance Indicators) to see what’s working and what’s not. Focus on the metrics—what’s working and what isn’t? This will help you acquire more customers in the long run.
Activation
Now that you’ve acquired some leads, how do you activate them? The activation stage is about turning acquired visitors into active users or customers.
In this stage, you want to be thinking about how you can get people to experience your product. It’s not enough for customers to visit your website, app, or landing page. You need to encourage consumers to learn more about your product or experience it so they can turn into active users.
Back to the coffee bean company. How can you activate your customers? Here are a few ways:
- Newsletter Sign Up – Offer a free sticker when people sign up for your newsletter; this is a great way to pique future customers’ interest. This way, they have a chance to interact with your brand, and they’re much more open to the possibility of buying your product.
- Filling Out A Contact Form – Set up a table at a community event and offer free samples of your coffee in exchange for people’s information. Once people try your coffee and are added to an email or SMS list, they’ll be much more likely to buy it next time they need to restock on coffee.
- Product Demo – Showcase your product in use. Add a video of someone using your coffee beans to your website, social media, or Amazon so your future customers can see themselves using your product.
- Free Trial – Offer a free trial to a coffee subscription where people can sign up, try your coffee, and then have your coffee shipped to them every month.
In this stage, it is essential to emphasize your value proposition. If your value proposition is taste, try to encourage free samples or a free bag of coffee so your customers can experience how tasty it is compared to the competition. If your value proposition is affordability, you could offer a new customer discount to get your customers in the door. Getting the picture?
Retention
It’s one thing to get a new customer; it’s another thing to keep them.
Once you’ve activated users, the next step is to retain them. The longer you can retain customers, the more valuable they become.
But how do you keep your new customers engaged and encourage them to come back and continue using your product or service?
You need to pay attention and measure retention metrics like customer churn rates and the frequency of repeat engagement.
Let’s say you offered a free trial for your coffee bean subscription, but a lot of people deactivate their subscription right after the first or second time. This means you’d have a high churn rate.
Another way to tell if you’re having retention issues is by looking at how many people have bought more than one bag of your coffee.
If the churn rate is high and repeat engagement is low, you should take a look at these factors:
- Expectations vs. Reality: If you’re overpromising with your marketing and under-delivering with the actual product, you could lose some repeat customers. For example, if you say it’s the “World’s Best Coffee”, and it’s only “pretty good”, people might not come back for another purchase.
- Low Value For The Price: If you overcharge for a product that isn’t of luxury quality, this could turn off a repeat purchase.
- Product Education: If people don’t know how to use your product and you don’t provide enough information, they won’t want to get it again, even if the quality is good.
- Lack Of A Use Case: People might buy your product, and then not know what to use it for. Show them different examples of how your product can be used.
- “Hitchhikers”: There are some consumers you have activated that were never meant to buy your product and aren’t actually in your target audience. These are called “hitchhikers”. They might have just wanted a free trial or bought it on impulse but don’t really have a need or use for it. You aren’t going to win back these customers, and you don’t exactly need to.
Referral
Referral is about turning engaged, repeating customers into advocates for your brand and business. In other words, referrals are about creating word of mouth for your product.
Think about it—who do you trust more? Is a business telling you to buy their product or your friend?
Your friend, of course. Your friend knows you, knows what you’d like, and you trust them.
That’s why referrals are so effective and important for growing your business. According to a Nielsen study, 83% of people trust recommendations from friends and family, and 66% of people trust consumer testimonials posted online.
So how do you authentically create referrals? There are a few ways.
- Referral Programs – Offer your repeat customers a discount or free product incentive in exchange for referring their friends to your product. If you’re in the coffee business, you could offer a 20% discount on your product to anyone who refers a friend who buys the product.
- PR – Get your business featured in a respected publication. For the coffee business, you could get featured in a local magazine talking about “Best Local Coffee Businesses” to spread word of mouth.
- Reviews/Testimonials – Encourage your customers to leave reviews or testimonials through your social media or email newsletter. Sometimes, all you need to do is ask and your most loyal customers will happily leave a review or testimonial to support your business.
- Social Sharing Widgets – Make sure your website has social sharing widgets, which allow customers to easily share products and information about your business to social media.
In this stage, the goal is to leverage your customer’s network, where one customer’s recommendation leads to the acquisition of more customers.
Revenue
After your visitors become activated users, some of them become paying customers too. At the end of the day, the goal of any business is to generate revenue. That’s why the revenue stage focuses on monetizing your customer base.
There isn’t just one way to monetize your customer base, so be intentional about how you do it based on who your target audience is.
- Subscription Fees: If you’re providing a content-based product or a refillable product, then this model makes sense. For the coffee bean company, this is a good strategy for big coffee drinkers who need to refill their coffee habit every month or two months.
- One-Time Purchase: If you’re selling a product that is meant to last a while, like a TV, then a one-time purchase approach is best.
- Advertising: If you run a blog with a lot of traffic, you can monetize it for advertising while providing the blog for free to readers.
What metrics do you need to focus on to see what’s working and what isn’t?
- Annual or Monthly Recurring Revenue (ARR or MRR): ARR or MRR calculates how much predictable revenue you are earning from customers on an annual or monthly basis. This helps you understand how much you can expect from your average customer on a monthly or yearly basis.
- Revenue Growth Rate: This refers to an increase in revenue over a period of time. Seeing how much your revenue has grown or reduced on a month-over-month (MoM), year-over-year (YoY), or year-to-date (YTD) basis can help you understand the financial health of your business.
Customer Lifetime Value (CLV) – You can calculate this by multiplying the Average Order Value by the Average Customer Lifespan. This tells you what the average customer is worth to your business and helps you figure out which stage of the AARRR funnel to focus on.
Work With An Expert Team
At the end of the day, AARRR provides a helpful foundation for startups and businesses to concentrate on the metrics that matter most for sustainable growth. It serves as an essential tool for navigating the uncertain waters of financial success, helping businesses understand and optimize their user journey.
So, AARRR you interested in acquiring, activating, retaining, referring, and earning more revenue for your business?
Well, look no further. eAccountable has used the AARRR framework as a guide to help more than 400 of our clients expand their businesses. Drop us a line here for a free consultation to see how we can help you maximize your customer journey.