More than 14 years ago, Dave McClure, one of the most important figures in Silicon Valley and one of the largest investors of start-ups in the United States and a consultant-founder of more than 500 new businesses, introduced the world to a 5-step framework for Growth Hacking.
Four wood AARRR or the same measure of pirates!
McClure introduced the AARRR measure with a dual purpose:
First, it shows different businesses how they can shift their focus from unimportant metrics to metrics that are effective in growth and development.
Second, it will show start-ups how they can use different and useful information to evaluate their success in product design, marketing, and customer lifecycle.
Table of Contents
What is AARRR?
As mentioned in the introduction of the article, the AARRR framework stands for 5 very important words:
- Acquisition criteria: How do users find our product, service and brand?
- Activation criteria: Do these potential customers take the action we want?
- Retention criteria: Do our users use our product again?
- Referral criterion: Is our product good enough for us to be introduced to others?
- Revenue criteria: Are our customers able to pay for the product and is our revenue model designed correctly or not?
How are the AARRR criteria reviewed?
1) Acquisition criteria
In the AARRR framework, brand awareness refers to all the marketing channels we use to promote ourselves and our products:
This metric tells you what channels you used to find your potential customers. In this step, which starts with the correct recognition of the persona, part of the path is obtained through trial and error.
Which channels bring you the most traffic and added value, or have a low acquisition cost, is a matter that is usually achieved through market research and trial and error.
- cost per click
- CPL / cost per lead
- СTR / Click Rate
- Bounce rate
2) Activation criteria
Activation means that users, after encountering your product, website, application or advertisement, do what you want, for example, click on a link, download a file, provide you with a communication method, or the best way to buy your product.
At this stage we should try to measure the quality of the user’s first experience with the product. That he communicates with the product after performing our desired action is an issue that can be analyzed and investigated in different ways and extracted quantitatively by defining specific kpis.
- CPA – the cost per acquisition: registration, subscription, a transition from free to paid version
- Engagement / duration of each interaction
- Bounce Rate
3) Retention criterion
After you have convinced users to take the desired action, it is time to monitor their interactions. How many of these users are still interested in your product?
This interest is possible through:
Returning to your services, products and generally your site or application at a specific time
Send a message to product support
- Session duration
- Customer return rate
- Customer churn / how many users refuse to use your product.
Note: In addition to the branding and quality of your products and services, it can guarantee the return of users. You can also improve your return rate by using different reminders such as email marketing, SMS marketing, retargeting, etc.
4) Referral criteria
The fourth measure of the AARRR model is dedicated to users who are satisfied with you and introduce you to their friends and acquaintances. Although this part is out of your control to some extent, you can significantly increase your referral customers by using gamification, sales collaboration systems, competitive campaigns, and smart advertising and bring them to your marketing funnel. Which can sometimes be done for the purpose of branding and sometimes for the purpose of sales.
- CSI / user satisfaction rate (obtained through testing)
5) Revenue criterion
Finally, one of the most attractive parts of the AARRR system is the revenue issue.
The revenue discussion includes all of your financial activities for one-to-one advertising, campaigns, ROI, customer lifetime value, user acquisition, and activation, return, and referral costs and can be measured in the short and long term. It is measurement and investigation.
- ACV / average value of contracts
- LTV / lifetime value of camel engagement
- All expenses and incomes within a certain period
AARRR framework tracking and analysis process
After you understand what types of data you need to collect for each AARRR, you need to implement data analysis tools and methods.
Using data management and analysis tools such as Google Analytics, integrate, visualize, automate, etc.
Also, the use of machine learning systems for quantification and better analysis of data can be very helpful in this sector.
With a new SaaS business, starting with the AARRR model makes the most sense. The reality is that no business can maintain an audience it doesn’t have.
Because you want to continue to grow naturally and retain the customers you already have. Awareness, attraction, activation, recovery and finally calculation of income can be an optimal path for you.
But this process also has problems.
The big problem is that businesses often choose a strategy and stick to it for a long time. If you are constantly entertaining the customers you have, you may not even notice that there is something wrong with your strategy. You need to stay on the pulse of your business performance to watch out for any small or large changes that cause a shift in strategy.
Does the customer journey end here?
The answer is negative. This is just the beginning of the story!
The AARRR funnel framework is a good start. It helps to see the entire process of the customer journey, to see the problems of the user in the customer journey and to plan for the marketing of our product.
As it is known, we definitely cannot evaluate our long-term performance and measure our indicators in short periods of time by relying on these criteria. Apart from the fact that the period of time in which our business is located is important, the goals and scope of our work are also very important. Keeping all the above things in mind, along with reasonable quotienting to the criteria, can provide us with a beacon of hope in the path we are on.