The Pirate Metrics Framework (AARRR)

What is the AARRR (Very weird to pronounce; just say it out loud 😅. Hence, also called the Pirate Metrics Framework)?

The AARRR is an acronym for “Acquisition, Activation, Retention, Referral, Revenue”. This is a framework that is used by many product-led companies to devise their business strategy.

Acquisition — This step talks about acquiring your customers, or creating awareness among them about your product (assuming that initially, they’re not aware of your product at all). How are your customers discovering your product?

Activation — In this step, your customers will start using your product. Are your customers using your product the way you want them to?

Retention — Are the customers of your product using your product on a regular basis?

Referral — Are your customers liking your product enough to refer it to their friends and relatives?

Revenue — Are your customers willing to pay for your product?

It is important to attach some measurable metric to each of these steps and try to optimize those metrics along the way.

For example — say, you’re running an e-commerce D2C business. Suitable metrics for each of these steps can be the following:

Acquisition — CAC (Customer Acquisition Cost), Visitors per channel, Click through rate

Activation — % of acquired customers who have done 1 or 2 purchases from your app, No. of new accounts created, Average time spent by customers (who have done 1 or 2 purchases) on your app

Retention — % of acquired customers who have done 3 or more purchases from your app, Churn rate, Customer lifetime value, Average days between transactions

Referral — % of acquired customers who have referred your app to a friend/family/acquaintance. Measuring this can be slightly tricky as there are various ways to refer your app — referral link generated through your app, word of mouth, etc. Nonetheless, referral percentage, whatever is captured, should be measured. Other metrics to be measured — Net Promoter Score, Social media tags, Ratio of Positive reviews to Negative reviews

Revenue — Revenue generated per type of channel, Revenue by customer type, Average order value, Revenue by new vs. repeat customers