Complete Steps to Apply AARRR (Pirate Metrics) for Your Startup

Ahoy! Let’s trouble the water! In this post, I’d like to outline the powerful Pirate Metrics and show the real value of this concept on the example of a popular dating application.

Applying Pirate Metrics to your business will help to determine where you should focus on optimizing a marketing funnel to make the most of your time. Who would ever say they have enough time?

What is AARRR and what do pirates have to do with it?

Pirate Metrics is a framework for online startups created by Dave McClure — the successful entrepreneur and co-founder of 500 Startups. According to him, a founder or CEO should focus on just five key metrics, or KPIs to be successful. Sometimes people expand these metrics (up to 10) to allow for multiple conversion criteria within each stage.

The framework is also well known as the AARRR acronym. It stands for Acquisition, Activation, Retention, Referral, and Revenue. All these parts of the acronym summarize the stages of the customer lifecycle for a startup. Together these principles are easy to remember as A.A.R.R.R.!

The AARRR framework describes a sales funnel. At the beginning of the funnel, new potential customers sign up and catch the AHA-moment. They buy some services, recommend a product to somebody and then come back to the product with some purpose.

The primary goal is to turn people who start using the product into the people who make purchases several times and attract more friends’ attention to the product.

The Pirate Metrics framework makes employees measure their sales funnel in numbers. It helps to improve product metrics on each phase of a sales funnel. It can be explained with the example of a mobile app. It can be explained with the example of Tinder mobile app.

How to optimize a mobile app using Pirate Metrics framework?

Acquisition: generate new users

Acquisition means the first contact point with a visitor and your product. There was a success of your marketing efforts as you have attracted the attention of this potential customer.

The crucial thing is that you should check how engaged your acquired visitors are. Many people break down the Acquisition stage into two components: visitor landed, and visitor engaged.

At this step, the main question for you is “Where do the users come from.” In the case of Tinder, they may come from the Apple Store or Google Play. They get there from social media advertising (Facebook or Instagram), Google search, contextual advertising in Google AdWords, various ad networks (AdMob or AppLovin). Every channel has its conversion.

For example, the Facebook ads platform has the following metrics: Cost Per Click (CPC), Click Through Rate (CTR), Cost Per Impressions (CPM), CPM Frequency, Relevance score (how good does your advertisement resonate with the audience), Cost Per Registration (how much does one registration in the app cost), ROI (what the profit a company received from advertising, taking into account all costs), ROAS (profit from campaigns/ costs for campaigns — that is how many dollars you earn for each advertising dollar).

Users click on a Facebook banner and get to the Apple Store, where they see the app page with all required information. They look at it and decide to download the mobile app.

• Downloads/ impressions is a metric that means how many people from those who viewed the page in the Apple Store downloaded the app.
• Registrations/downloads is another metric at this stage that means how many people from those who downloaded the app were registered.

The users have registered, and now they can use the app.

What you should do next is to make the users catch the “Aha!” moment to feel that the app can solve their problems.

Activation: visitors understand it and want more

Activation is the stage where people use the app. Someone may think that everyone who fills in a registration form will use the product. However, the activation rate is often <25% for online business. It is a common situation with SaaS startups and mobile apps as well.

Having someone to sign up is only the first step. There will be many people who will sign up and never use the app. Activated users are the people who are using your app. They logged in and started to use it. Onboarding does matter, and it’s important for people who log in to quickly understand the value proposition and realize how this app might be able to help them.

The users understand the value of the dating app when they get a mutual match with someone. The new couple exchanges messages and starts a dialogue.

Making sure that many people get a mutual match is a critical goal. Then you’ll have to measure the number of the matches per user.

Your next step is to track how people communicate after a mutual match and measure the number of dialogs.

How to improve these metrics?

• The number of mutual matches per user. You can create a tutorial to teach users how to choose those who are admired and miss those who are not of interest.
• The number of dialogs: to suggest the first message and send the stickers. It will make the first step easier.

Retention: make visitors stick around

Of course, you want the people who started using your app to use it regularly. They will add more data and realize your value proposition.

The main question is how to return users to make them activated or make a purchase as well as push them to recommend the app to their relatives. In the mobile app, the primary tool is push notifications.

The metrics you need to measure are the following:

• Subscribed /requested is about how many people switched on Push notifications from all who have been asked to switch on them.
• Opened /sent is about how many people clicked on Pushes and got the app from all to whom they were sent.
• Retention rate is about how many people return on the 1st day after registration, on the 7th and 30th (in percentage).
• Stickiness will show how many days a week people use the app.

These metrics can be improved in the following way:

• Asking users to sign up for Pushes not immediately after registration, but when they have a match and want to know about a new message.
• Conducting A/B tests the push notifications’ texts
• Adding emoji into the texts of Push notifications
• Performing A/B tests of the sending time of Push notifications.

This step means that you get monetization.

Revenue: you have to pay the bills

Now people are using the application, understand the value and pay for it. Although the number of clients you have is primary, it is not representative of your business’ health.

How does the app make money? In the case of Tinder, its basic functionality is free. There are extra proposals that help the app to earn:

• Abolishing swipe. It means that when you say “no” to a person and then change your mind, you should pay.
• Ability to make an unlimited number of likes.
• Ability to hide age.
• If you travel often and you feel lonely.
• If you are annoyed by advertising.

These options are sold in a package (Tinder Plus), not separately.

Here you have to define why users buy this VIP subscription and what are their reasons to do it.

The following metrics can be helpful:

• ARPD
• ARPU
• ARPPU
• Average Check
• LTV

Referral: users like the app and they tell about it others

The goal of this stage is to count the number of people who are talking about the app and invite their friends. It is the perfect step to drive viral growth. When one user attracts two users into the app, it tells about the exponential growth.

For example, all chats have built-in virality, and you need to invite your friends to the app to communicate.

Tinder has the following built-in viral features:

Recommendation of a profile. If a potential partner is not for you, he/she can be good for your friend. You can send a link to the profile and your friend will have to register to see this potential partner. When the suited profiles are ended, Tinder shows a request — Invite your friends.

The virality factor should be continuously measured, and you should always think about how to make your application more viral.

Takeaways

People often talk a lot about analytics but few businesses correctly apply it. Pirate Metrics are aimed at helping business owners and marketers focus on the most critical metrics.

The AARRR framework simplifies a complex process and breaking down the KPIs into this method helps marketers to prioritize efficiently and stay on track.

Pirate Metrics framework covers the following questions: “What are my sales funnel steps?”, “How to measure the effectiveness of these steps?”, and “How to increase different metrics?”

When you answer these questions, your product or startup become more data-driven. What is your experience of using Pirate Metrics?