I don't hear growth teams talking about AARRR metrics as often as I used to. But I still think that focusing on these so-called pirate metrics is one of the best ways to increase revenue without increasing acquisition costs.
Here, I'll explain why I use the AARRR framework, and how you can use it for strategic quick wins.
What is AARRR?
AARRR, also called pirate metrics because marketers are just hilarious, is a framework for tracking the most important metrics across the five stages of the customer experience: acquisition, activation, retention, referral, and revenue. These five metrics essentially form the foundation of your business's sales funnel.
I associate each step in the AARRR framework with a question:
Acquisition: How do we attract users?
Activation: How do we turn these users into paying customers?
Retention: How do we keep paying customers for longer?
Referral: How can we generate referrals from these customers?
Revenue: How do we capture more revenue from them?
For each part of the framework, there are all sorts of metrics you could track and measure against.
For instance, the acquisition stage of the user journey might track website visits, bounce rates, scrolling, and button clicks (among many other options). But it will differ for each business and is usually based on the specific funnel structure. An iOS app, for example, will measure app downloads or app store conversion rates in the acquisition stage. A B2B SaaS company, on the other hand, would measure things like time spent on the website or trial conversions from blog posts.
Regardless of the specifics, pirate metrics measure your funnel's performance. That means they can easily tell you which parts of the funnel aren't optimized. From there, you can determine which levers to pull to generate more revenue, based on your business.
For example, some teams might increase ad spend to increase acquisition, while others might find it's more cost-effective to build a referral campaign. It will depend on your business, resources, and appetite for experiments. But whatever you choose, you'll know you're focusing on the right part of the funnel.
The reason I like the AARRR model so much is that it's simple yet comprehensive—and completely customizable. It neatly covers each element of the customer journey, allowing you to track and optimize your funnel.
7 tips for activating and retaining more customers
As a growth marketer, I believe early engagement with customers increases your chances of converting them and sets the stage for a long-term relationship. But it's easy to get caught up in building an acquisition channel and neglect the rest of the funnel.
That's why I try to focus on activation and retention. Without having a reliable way to activate and retain customers, you'll end up with a leaky funnel—all those efforts spent on acquiring users or generating referrals won't be worth much.
The data tends to agree. Small increases in customer retention can increase a company's profitability drastically. Existing customers spend way more than new customers. And loyal customers are worth up to 10x as much as their first purchase.
The strategies below aren't a replacement for running experiments and measuring and optimizing your funnel. But these are the things I've found have helped me increase revenue for various businesses quickly. Think of them as a way to get the juices flowing.
How to improve your activation rates
Send more emails. There is such a thing as sending too many emails, but if you segment well, more emails should lead to higher activation rates. If you're using the AARRR framework, you're likely tracking inactive and dormant users, so set up some automated drip campaigns to re-engage them.
Create sales tasks (calls). Most CRMs will help you automate this, to be sure your sales team is following up with inactive users. Call the dormant or inactive user, learn why they haven't become a paying customer or taken a specific action yet, and see what you can do to change that.
Streamline your onboarding process. If your current onboarding process is mostly automated, consider adding a human touchpoint. A great example of this is Prezzee, a corporate gift card company. I signed up for the service and began following the onboarding prompts to upload a file to create and send gift cards in bulk. During the process, I received a perfectly timed phone call from their support team to guide me through the intricacies I would eventually get stuck on (and probably churn from).
Use incentives. Incentives don't work for every customer, but it can motivate some customers to start doing business with you. The right incentive can push them past any friction they encounter to start transacting.
How to improve your retention rates
Conduct customer interviews. Interviewing customers is almost always a great idea (pirate metrics or not!). I've never run a series of interviews without finding some nuggets that have materially impacted the product, funnel, and retention rate. Once the results are synthesized, there will likely be obvious updates to make to the product, growth, or messaging strategy that will keep customers around for longer.
Add new customer support options. There are two levers you can pull here. The first is making your customer support (or customer success) options more accessible to your users with the right customer support software. I've used tools like Zendesk, Intercom, Userflow, and WhatsApp Business with great results. The second is implementing better service-level agreements (SLAs), which gives your customers confidence that you'll be able to support them when they need it most.
Build additional email sequences. If you can't tell, I'm a massive fan of emails. For retention, you might ask for feedback, send a survey, or schedule a check-in call. It shows existing customers that you care, you're willing to improve, and you listen to feedback.
Focus on pirate metrics (AARRR!)
The first step: start tracking pirate metrics. (You can read this definitive guide for more information on choosing the right ones.) Once you do, you'll be able to see which stages of the funnel are in need of the most TLC, and you can start to fix the leaks and increase revenue. And regardless of how good your metrics are, I say there's always room for improvement.
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