AARRR enables you to measure and optimize every phase of your customer funnel by optimizing it through insane focus on one metric at a time. The framework got it’s name because the acronym AARRR makes you sound like a pirate (say it out loud!). This is an introduction to the AARRR framework, also known as the startup metrics for pirates.
Dave McClure, founder and troublemaker at San Fransisco-based VC fund and accelerator 500 startups, is the man behind this framework. During a talk he gave in 2007 he presented the AARRR framework as startup metrics for pirates.
The AARRR framework consists of five phases a customer goes through in order to achieve growth and each phase has it’s own set of metrics to focus on. Whether you’re in e-commerce, SaaS or building an app, AARRR is where you turn to if you want to gain more insights about the use of your product. The framework was originally designed for startups, but it’s also proven to be effective within bigger companies and corporates.
Of the 1000 people that visit your website, how many end up as a recurring paying customer?
How to use the framework
The framework is known for measuring the effectiveness of your customer funnel. Of the 1000 people that visit your website, how many end up as a recurring paying customer? Without the framework it’s hard to determine where in the funnel you might lose them. Did your ads gave a wrong impression? Is there a bug in the mobile version of your website that makes it impossible to visit the homepage? Is it too complex to sign up? The AARRR framework helps you to measure every step of the customer journey and helps you to identify leaks and potential loopholes.
Let’s take a brief look at the five phases first, before we dive into the details of how to apply AARRR to your company. The framework is consists of five successive phases, each with their own set of metrics and the OMTM. The metrics vary per phase, based on the type of project you are working on.
The OMTM (One Metric That Matters) is the metric that get’s your full attention within a phase for a specific time. It’s also the metric that’s most important to your learnings regarding the phase you’re in. The OMTM is ideal for getting your team onboard, since they only need to focus one this one metric. All other metrics in a phase of the framework contribute to this OMTM.
Let’s say you build a Tinder-like vegan recipe app where users can swipe through recipes and order the ingredients with the touch of a button. It’s becoming a trend to eat vegan, because our planet happens to have scarce resources. If you are not familiar with eating vegan food it can be a tough challenge to find tasty recipes to impress your spouse. This app is the solution to this vegan recipe discovery problem.
You crafted landing page that’s redirecting to the Google Play and App Store. You are also using Instagram for beautiful pictures of vegan meals, Instagram Ads and there’s an url to the landing page in your bio.
In your acquisition phase the One Metric That Matters is to grow the number of app downloads, because this is the best indicator for people visiting your website. It’s a measurable result of targeting the right audience with messages in your ads and copy. Other metrics for this phase could be:
- Click-Trough Rate (CTR) from Instagram Ad to the landing page and/or app stores.
- Conversion rate from landing page to both app stores
In the activation phase the One Metric That Matters is the number of 1 to 5 recipe swipes, because this is the best indicator for people having a happy first time experience. This is a measurable result for users understanding your application.
These 1 to 5 recipe swipes are based on the AHA-moment, the moment within a customer journey when the user understands what the product is about and why it’s valuable to them. At Twitter they found out that when users followed at least 30 accounts were most likely to stick to the platform in the long run as opposed to users that followed less than 30 accounts. Another famous AHA-moment is the one from Facebook where they discovered that a user is most engaged when they connect to at least seven friends in ten days. Another metric for this phase could be:
- Successful onboarding
In the retention phase the One Metric That Matters is the retention rate, because this is the best indicator for people coming back to your app month after month. This is a measurable result for users that experience enough value to come back to your application. Other metrics for this phase could be:
- Churn rate
- Daily Active Users (DUA) and Monthly Active Users (MUA)
In the referral phase the One Metric That Matters is the number of app installs through referral, because this is a measurable result for users inviting others via the application. Other metrics for this phase could be:
- Net Promoter Score (NPS)
- Number of invitations send to invite friends
- Number of app installs per invite
In the revenue phase the One Metric That Matters is the average order value, because this is a measurable result for users spending money inside your application and a conformation that they understand your value proposition. Other metrics for this phase could be:
- Average order value per user
- Customer LifeTime Value (CLTV)
The AARRR framework is ideal to create order from chaos by focussing solely on one metric at a time. Whenever the learnings from a phase such as acquisition give you enough insights to optimize your sign-ups, you might feel that it’s time to focus on another metric within the acquisition phase. This could be perfect moment to switch to the CTR of your Instagram Ads or the conversion rate of your landing page.
Awesome, I want to use it!
There are several fancy ways of using the framework, but the One Thing That Matters (ba-dum tss) is that it should be easy to use so you can start right away. You don’t need the colors of your brand or automatic updated dashboards that’ll cost you an enormous amount of time to set up. That’s why I recommend you to start off with a simple Google Spreadsheet and build it from the ground up tailored to your company’s needs.
The AARRR framework enables you to measure and optimize every phase of your customer funnel by optimizing it through insane focus on one metric at a time. This insane focus on one metric is what makes AARRR worthwhile and also easy-to-use for every company that wants to be better at what they do.
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