Introduction to AARRR Metrics for Product Performance & Growth

There is no point of creating an online business without defining the performance metrics to measure the success or failure of your product. Otherwise, you’d be spraying and praying for results and you’d be wishing to scale without knowing what is stopping you.

So here comes the beauty of AARRR model, which is a model designed by Dave McClure for startups to measure, optimize and manage products life cycles. By collecting data and iterating fixes quickly with the product; allowing product managers and entrepreneurs to test ideas constantly throughout marketing, designing and deciding which features should go first.

As suggested by McClure, The entire team should be focusing on five key metrics, which are: Acquisition, Activation, Retention, Referral, and Revenue. Each metric is a standalone metric, where users convert through these metrics by one to another to get to the point of making revenues out of the user.

The mean of focus on these metrics is to track product performance from the user perspective to align an easy market driven approach for products. but it requires a longer discussion to explain it in one article, so today I’ll explain the base of each metric, and leave the implementation for another discussion.

Acquisition

Acquisition is the first stage of the model and described as how users were redirected to your website or mobile application page. The efforts of your marketing activities, and the marketing channels that are leading users to your product.

For example, Acquisition for mobile application can be defined as how many users have downloaded the mobile application, and which channel that has stopped them from whatever they are doing on the internet to go to the appstore and download your app.

Activation

Activation is how many users have responded to the call of action of your website or mobile app, it could mean to sign up, subscribe, or even fill your product landing page form.

This stage shows how many users out of the total acquired ones have further interest in learning more about your product, and actually engaged with it. Tracking acquisition with activation allows you to identify the best marketing activity and channel that drives high quality and relevant users. Also, gives an indication if your website or mobile app was designed effectively to allow easy conversion for users to do the call of action you request from them.

For example, developing a landing page with a form for users to fill to download a dedicated ebook is not enough to get leads; you must know how many users have filled out the form and how many were considered as high quality leads. So, If you generate enough traffic to the landing page you have developed but the number of filled forms is low, this could mean either of the following two:

Your landing page is not well designed to allow easy conversion. (form is not showing well, too many text that confuses the users…etc) Your marketing channel is not generating targeted users. (Advertising ferrari F12 on kids magazine, using irrelevant keywords on adwords)

Retention

Retention is as simple as this, how many users have returned to use your product again. (Opened your app twice within 30 days, signed in again to your site, visited your blog 3x within a month…you decide it, as it is relative to the product) all these are examples of retention. Now measuring retention allows you to know the real efforts invested in acquisition and activation. By tracking users from early beginning of the business flow, and understanding the real value users see out of your product.

Referral

As we all know, a positive word of mouth about a product is the best performing ROI of all your marketing activities. As users who refer your product, don’t only like it, but they think that their contact and friends could also benefit from that value your product provides. So referral means how many users have referred your product to their contacts. By only inviting them through social media and emails or by developing an integrated referral program for your product, similar to Dropbox, if you refer friends to use Dropbox, you will get free storage space.

Tracking referral shows how loyal the generated users can be and how much value your product is giving to these users, it also allows you to understand which value of your product you should always communicate and focus on. An A/B test for your product viral loop is required at this stage, because simply, it helps growing your user base exponentially.

Revenue

Revenue is measuring all your business models, and how each user from early beginning has contributed to your revenues. For example, your app has two core business models (Pay as you go and Monthly subscription) tracking revenue would allow you to know which marketing channel does generate leads who like to pay as they go or to subscribe monthly. And what it takes to get them activate and return to use your product again and again till a point where they refer it to their friend, and finally, give you their money because they see great value of your product.

Tracking product performance based on AARRR gives a full view of what is happening with your product, and where exactly users are stuck; so you dig deeper in the problem and fix it as soon as possible.