The Famous Conversion Funnel (AARRR)
Today, we invite you to discover the most precious secret of Growth Hackers : the AARRR framework of Dave McClure (entrepreneur and founder of 500 startups). A real treasure map for gold-thirsty pirates. AARRR is a Lean framework, based on 5 crucial steps (Acquisition, Activation, Retention, Reference, Revenues) on which companies must focus in order to develop and consolidate their growth.
The 5 steps AARRR in terms of objective:
- Acquisition: attract new users.
- Activation: persuade them to take action.
- Retention: convert them to a regular user.
- Reference (or Referral) : Encourage them to invite other users.
- Revenue: Generate and increase revenue per user.
A like Acquisition. You must focus on acquiring new users. It’s the base, the users represent your business potential. To capture new users, you need to focus primarily on the “free” SEO, Social, Referral, and SEA traffic.
Main qualifying criteria to follow by traffic acquisition channel :
Volume, focus on the channels that bring the most new users.
KPI: number of users. Compare the number of users in each channel.
Performance, focus on the channels that bring the most qualified new visits.
KPI: activation rate per channel. Achievement rate of the goal correspondingto the activation action, such as the subscription to the newsletter.
The cost, naturally favor the channels whose ROI is positive.
KPI: cost per user. Total costs (budgets, time spent) invested per channel divided per channeled user.
A like Activation. Now that you have invested in traffic acquisition, you have to start converting them from suspect to prospect. The goal is retention, so the activation action must aim for that goal. Feel free to score the activation between interest and desire.
Example of activation KPI
Use an indicator that clearly illustrates a behavior of interest for your offer. KPI example: retention rate (inverse of the bounce rate), average session duration> N, N type of page views / session …
Use an indicator that clearly illustrates a desire behavior for your offer. An action that should bring the user back to the site, such as registration to a user account, an information flow (newsletter, alert, RSS, Social), a useful feature (services, games) …
KPI example: rate of use of a feature, rate of subscription to the newsletter, the RSS feed, information request …
R as Retention. Now that you’re getting better interest from your new users, it’s time to turn them into active users. Depending on the usage cycle of your offer, it is important to focus on the frequency of your users’ activity. Activity often rhymes with value. Targeted emailing is often your best lever for reactivation, but also, the “targeted” post on your blog, on your social pages …
Example of retention KPIs.
We will try to measure and improve the frequency of use of activated users.
KPI example: N days since the last visit or activity, N visit per month …
R as Reference. Increase your user base, but instead of investing in the acquisition, encourage your active users to play the ambassadors. There are many levers to increase your audience at lower cost. Social sharing must certainly be the easiest lever to put in place. Feel free to implement referral features by rewarding users who invite new users and even more those who recruit qualified users.
Example of Reference KPIs
Virality is a good indicator we might want to monitor at this point
KPI example: N social share per user, N new session post social sharing per user ….
Sponsorship is another one.We try to measure the number of godchildren by godfather. KPI example: N godchild by active user, N active godson by active user ….
R as Income. Now that your engagement process is well oiled, you will be able to focus on revenue. You can focus on improving the conversion rate from users to customers / subscribers / leads and increasing the average revenue generated per user.
Analyze and improve the factors that affect the conversion of user to customer, subscriber or lead. Example, price structure, promotion, understanding of supply, persuasion, technical problem …
Example KPI: user to client conversion rate.
analyze and improve the average revenue per customer by encouraging the move upmarket, by creating new sources of income (premium option, advertising …)
KPI example: average revenue per customer.
In summary, the AARRR approach allows you to easily determine your key performance indicators to improve your growth. The indicators of each AARRR perimeter can be adapted to your business and their optimization can be entrusted to a dedicated person or team.
