Most startups and small business entrepreneurs have heard the term “pirate metrics” thrown around. It’s not some lofty snake oil-style methodology — in fact, startups and entrepreneurs can get a lot out of the AAARRR funnel.
But what exactly is it, how can one use it, and what are some examples of the funnel in action? This guide to AAARRRGH (AAARRR+Growth Hacking) will detail it all, so you can apply it to your own project endeavors right way.
What is AAARRR funnel?
The AAARRR Funnel is a type of framework that was developed way back in 1992. Often times, this funnel is called Pirate Metrics. Tongue in cheek, of course.
AAARRR has helped a ton of large enterprises grow and remain successful through the course of time. The framework is considered one of the greatest business tools out there and is an excellent point to start with when building up your own company’s growth plan.
AAARRR metrics stands for Awareness, Acquisition, Activation, Revenue, Retention, and Referral. Older forms of this formula didn’t include Awareness (and was referred to as AARRR) but now it is considered an integral part of all AAARRR applications.
These six stages of the funnel can individually be tracked to see how well a business is doing, as well as how stable its growth remains throughout the business’s lifespan.
The volume of people you reach is vital. Getting people to visit your website or become aware of your product or service is the first real step in the product lifecycle.
The goal of awareness is (surprise!) brand awareness, but it is also much more than that. Awareness in the funnel is a tactic that is used to bring more users and customers through the marketing funnel. The first goal of Awareness is to build up the brand and introduce it to the market. It can be difficult to track, especially for businesses that aren’t in the digital marketing realm, but it’s very important to consider first on the AAARRR funnel.
With awareness, one would want to track impressions, website visits and google searches with your brand name.
Acquisition can be seen as the “gather customer personas” stage. This step gathers information from your leads that include demographic details such as names, emails, and geographical locations. This information is able to be taken once a user is properly identified through interactions with the website and facilitates the reach for even more information like email newsletters and promos.
The information gathered in this step of the funnel allows marketing specialists to craft ideal customer personas. These personas let brands know how they should be positioned to properly fit into the target market they need to be in.
Ad campaigns can be crafted to fit customer personas through this step. Tracking email subscribers and social media leads can also help facilitate this step.
Activation happens when a specific lead spends a specific amount of time on your brand’s website, views a handful of pages, uses a promo code, or uses a free trial offered by your brand to new customers.
The most important part of this step is that your brand is offering up a solution to your protention customer’s problem or need. For example: A consumer requires a skincare product that treats dry skin. Your beauty brand has released a dry skin product. Through an ad campaign, the consumer finds your website, views the different types of dry skin products you have, and adds items to their cart with a promo code you’ve displayed via a popup for a 10% discount. Your solution and the consumer’s needs match up, and they’re engaging. That’s activation.
You can track activation by tracking event actions and buffing up your website’s user-friendliness and user experience.
As a business, you want to keep your leads as close by as possible after they have purchased your products or signed up for emails. This isn’t just for posterity — acquiring a single brand new customer is several times more expensive than keeping an existing one. It’s pricey to bring in new customers.
Retaining customers is the most inexpensive but vital part of the retention step. The best way to keep customers usually involves sending email alerts for new products, events, and time-restricted sales or features. Updating social media and blog content is also key to retention.
Getting your customers to act as brand ambassadors and refer your product or service to other potential customers is massively beneficial to your business. In a sense, it’s (somewhat) free marketing and proof that you’ve established your brand presence in a tangible and respectable way. Customers are also a lot more likely to purchase from brands or businesses that their friends and family recommend.
Word-of-mouth isn’t an old-school concept that doesn’t have space in the digital age. Word-of-mouth is hugely useful and can be a long-term tool for getting leads. You can encourage these types of referrals by encouraging customers who have had very positive experiences with your brand. Talk to your brand ambassadors through referral programs or social media campaigns. Contests are also popular in many cases as well. Who doesn’t like a challenge?
Revenue is a way of describing the money that remains after the customer acquisition costs, also known as CAC. The CAC is defined by the money you’ve spent on advertising, sales, and any other relevant costs used to get your customer’s attention (awareness and acquisition.) The CAC is compared to the business’s lifetime value (LTV) to determine what needs to change in order to build revenue and grow the business going forward. Ideally, the ratio of CAC to LTV should be around 1:3.
There are a number of ways to increase a brand’s LTV and lessen their CAC. Understanding how customers are moving through the AAARRR funnel and detailing each step for improvements is a good start. Looking at the product pricing and how it aligns with the target customer base is another way to improve that ratio.
Why is the AAARRR funnel worthwhile?
The funnel is useful because it is effective at getting brands to ask themselves the right questions. The AAARRR funnel makes businesses look at what the actual steps in their sales funnels are, how to measure the effectiveness of each part of the funnel and increase the effectiveness of each individual step to craft a wholely successful business model.
The only way to facilitate growth in a company is to divvy up the consumer’s experience from the start the finish, and improve every step of that journey — — AAARRR makes it possible to analyze those steps, needs, and changes.
Is AAARRR for everyone?
The AAARRR business framework is an excellent tool that, more or less, can be applied to just about every niche business in every industry. However, there are some specific situations in which it may not be fully ideal.
Software as a service companies can find huge benefits in using the AAARRR funnel. The same goes for consulting businesses and various other industries. However, different businesses have different funnels. Even businesses that are within the same vertical may have totally different funnels between them. There is no such thing as a single solution to mapping out an individual business’ funnel.
While AAARRR is great for most, businesses should do their best to experiment with it in addition to other business funnels and adjust them as needed for their individual company’s needs. Many businesses can have a variety of funnels at the same time as well — for example, many e-commerce websites with have a social media funnel, a content marketing funnel, and a general sales funnel all at once. Each of these funnels has different stages and conversion going on that directly result in reaching different business goals.
Use the AAARRR funnel and see how it works for you — but don’t only apply it to one aspect of your business, or settle for using it for all of your business’s unique funnels.
Growth hacking each step of the AAARRR funnel
Maxing out what the AAARRR funnel can do with you can be a challenging, but very rewarding, process.
“Growth hacking” essentially refers to using different strategies and tactics to help your business grow each step of the funnel with the ultimate goal of total business growth.
Let’s look at a few ways you can growth hack each step of the AAARRR funnel.
1. Growth hacking awareness
Awareness is arguably the easiest part of the AAARRR funnel. Establishing a brand presence tends to be the most creative aspect of the journey — you’ve figured out who you are as a brand, who you want your customers to be, and how you want to put yourself out there.
To effectively growth hack awareness, you’ll need to understand and establish:
- Who and what your brand is
- How your brand is resonating with your existing audience
- Who your target customer base is
There are a few examples of how to get all of this awareness-based information.
Example One: Go for channels that your competition isn’t using. Establishing a brand presence means standing out in comparison to other brands that are trying to get the attention of your mutual target demographics. One way to stand out is to experiment with new and exciting channels in the ever-changing digital marketing world. Work hard, but also work smart. Your competition may be also looking into new modes of communication, so get to them first. One way to do this is to invest more time into communicating directly with your audiences, rather than funneling all of your budgets into ads and beta groups. Currently, Quora and Reddit AMAs (“Ask Me Anything” question and answer forums) are a popular new way of spreading brand awareness and getting your potential customers excited about and aware of who you are.
Example Two: Think like a publisher, rather than focus on the advertising specifically. When a business starts looking into the end-game of their content, rather than the ads campaigns themselves, it is easier to envision what your target audience is really thinking when they view your brand on blogs, videos, and elsewhere. Consumers aren’t as easily swayed as they used to be in the context of supporting just any company or product. Advertising in a way that doesn’t push the “buy now” pressure onto customers is a good direction to go in. Do this by crafting marketing media that is valuable and useful to your audience — a recipe book if you’re a food and wine company, a tutorial for makeup application if you’re a beauty brand, etc.
Example Three: Establish your tone immediately. This tends to not be done as immediately as it should be when establishing a brand, so this example is very valuable as advice. Your marketing to real human beings here, not companies or robots or even that conceptual buyer persona that isn’t quite fleshed out yet. Establish how you sound — are you authoritative? Relatable? Ready to take on challenges and find solutions?
2. Growth hacking acquisition
How people find you and transform into customers relies heavily on what you provide them. These examples of growth hacking acquisition require real labor and effort to achieve.
Example One: Utilize email hunting, the tried and true method of finding the right people that hasn’t gone out of style quite yet. Gather a list of businesses and individual consumers that could be part of your target customer base. Establish your email signup on your website and promote it across social media. Consider putting incentives into email signups — such as free content, coupon codes, trials, etc. Consumers won’t simply sign up for your emails because you seem kind of interesting. People want something in return for something. Research the people who are signing up through their social media profiles if possible. Who are there? Where are they from? What do they have in common? These commonalities will help you build personal details in your campaigns that will make acquisition explode across your marketing mediums.
Example Two: Utilize something called the “411 technique” or the “411 strategy.” This technique is a method of social media marketing that involves divvying up your content in a way that improves customer acquisition through social media interactions. The method follows this pattern: Cycle your content in patterns of sixes. The first four pieces of content or posts will need to be content that targets influencers and ambassadors in your niche industry via posts and tags. After that, one post should be extremely creative, original, educational, and on-brand in relation to who you are and who is running your business. Use inside looks into your business, such as tours of your facility or interviews with your CEO to make a more personable piece of content your potential customers can relate to. The sixth post should be sales-focused, such as a discount code, an attractive deal, a promotion, referral incentives, etc. Use CRM software to automate the flow of content so that it is consistent and create the content to follow this pattern.
Example Three: Establish trust. This shouldn’t be an example of growth hack, but it is — not enough businesses are taking trust into consideration when it comes to customer acquisition. Millennial consumers and even Generation Z consumers are much more discerning about who they support with their money — trust needs to be built between a customer base and a brand to not only create brand ambassadors but to get any customers at all. There are many different creative ways different brands can build trust in the acquisition stage. Go to where people are talking about you and talk to them on social media by responding to their comments, rather than talking at them. Take the time to look at review aggregate websites as well. Respond to negative reviews with an admission of your flaws, an apology, and an offer to remedy situations. Responding negatively is a great way to sever ties with customers who could be interested in giving your brand another chance. This can also be helpful for activation as well.
3. Growth hacking activation
Activation and acquisition tend to overlap a bit. Acquisition is getting customers and potential customers to interact with your brand, while activation focuses on the first experience your customers have with your actual product or service. Activation is tricky — while acquisition is getting people to download your store app, activation is getting them to not delete that app after using it once. There are a number of ways to achieve this.
Example One: Craft product tours that help, not hinder. Have you ever used a digital product that opened up with a tour of the app, but the content in that tour was long-winded, confusing, and rushed? This is a great way to fail at activation. Instead, craft product tours that are genuinely helpful. Right after logging, use popups that let users skip the tour if they want. Use simple graphics and instructions that are brief and avoid technical language. Short copy, easy-to-follow steps, and extremely direct CTAs are what can keep a user instead of scaring them away, resulting in a quick uninstall.
Example Two: Don’t force your users or customers toward their definitive “aha!” moment. Your activation rate is so valuable for long-term growth and success for your product, so it’s understandable that a brand would want to push their users straight towards that conversion. However, forcing them to do so is a surefire way to sabotoge the conversion completely. For example: If a blog platform described an activated customer as one who follows at least five people, but initially forces the new user to follow five suggested people, there isn’t actually any activation taking place. The user doesn’t care about these people — they want agency and to choose who they’re following. As such, let things go naturally. In the context of the blog platform example, the business could focus on making its search functions very user-friendly so users can easily find their favorite people, rather than forcing them to follow anyone. That would result in real activated users.
Example Three: Keep a keen eye on where your drop-off points are. A big part of what makes the AAARRR funnel so useful for businesses is that it makes it easy for brands to identify their flaws. Look at where exactly on your projected activation timeline that most people are abandoning the product, service, or app altogether. Is there a roadblock that makes it difficult to perform a certain function in the app? Is there a point at which using the product does not serve as a solution to the consumer’s problem? Identify drop-off points and experiment with solutions to fixing them, and track what increases activation. This can go hand-in-hand with retention is some scenarios.
4. Growth hacking retention
Retention measures how many customers you’re keeping around, and how many are dropping your product altogether. Why are they leaving? What’s keeping the others dedicated? Retention tracking can be tricky, but there are some metrics examples to consider.
Example One: Look at how often you’re directly communicating with your customer base. Are you sending them emails and surveys after they’ve been using your products for a while? In the context of digital consumers, are you using push notifications in your application to spark a conversation with your established users? Obviously, getting a customer to just buy your product and then never return again is not the way to do business — keeping customers is cheaper than streaming in new ones. There’s also more integrity in viewing business this way. Look at how you can communicate new exciting things to your established customers, such as hot new offers, surveys, badges, gifts, anything! Make it clear you’re still invested in their support to build trust.
Example Two: Absorb any and all feedback, exit interviews, reviews, and other negative information that can help you understand why customers are dropping your product or business. This is something that should be the real focus when it comes to growth hacking retention, but it is really hard to sit and read everything everyone hates about your project. It’s an ego thing. But it’s also part of running a business. Nobody is perfect, and even perfect products lose customers because of small nuanced details. Make it very easy for ex-users to leave feedback on your app, respond to exit interviews via email, and communicate your honest regret that your product did not meet the mark. Use this information in your metrics to identify pain points and remedy them. Customers don’t lie.
Example Three: Offer incentives for engagement. While we established the value of losing customers in the above example, there is also massive value in looking at what is working to keep your customers around. One way to keep customers from abandoning your product is to offer incentives to your most engaged customers and brand ambassadors. Try giving your customers that buy the most a shoutout in your newsletter, retweet your active brand ambassadors often, or give your most important users access to special content.
5. Growth hacking referral
Advocates and brand ambassadors are just as much a part of your business as your actual employees. Nurturing them and keeping them is also as important as facilitating them in the first place. Growth happens when people are talking about your product and recommending them to people who trust them, which makes referral the most underrated and important aspect of the AAARRR funnel.
Example One: Be direct and clear with your ambassadors. In your referral programs, be specific about who you want them to invite, such as friends, coworkers, family, etc. Don’t force your ambassadors to think — be descriptive and permissible. The more specific you are, the better the chance of getting new customers becomes. This example isn’t always set in stone, and sometimes it may just not work. However, being specific in referral requests tends to always do better than being outwardly vague.
Example Two: Limit who your ambassadors can invite in your referral programs. This example may seem somewhat counter-intuitive, but it really isn’t. If you have a referral program that will allow users to refer as many people as they want, they tend to just tack everybody on their email list into the program. As a result, there are a ton of referral logs and little to no interaction at all. By setting a limit to how many people someone can refer to in your referral programs, users will be a little more intentional with who they invite. Rather than everybody they know, they’ll sit and think about who would be the most likely to engage and get them their referral reward. The result is more engagement, happier customers in the referral program, and more growth in your business.
Example Three: Offer incentives to get your users to communicate with the people they have referred. You can simply remind your users to remind their tagged friends that they have a referral waiting in their inbox, and some referring customers may take the bait. However, offering an incentive such as badge or additional referral “entry” for each referral reminded offers more of a push. You can experiment with this niche aspect of referral to see what gets results, but don’t badger your referring customers. That would be a great way to turn brand ambassadors into ex-customers.
6. Growth hacking revenue
Ah, revenue. The “end all be all” of the AAARRR funnel. After everything you’ve done in the last five steps of the funnel, you’re ready to evaluate your LTV against your CAC. This first and foremost “hack” is to grow your revenue is to reevaluate your previous five steps in the funnel individually and as a whole, but there are other examples to think about as well.
Example One: Ask yourself “what if?” This kind of analysis is an approach that lets a brand brainstorm what they could implement or overhaul to improve that coveted 1:3 ratio. “What if we added this totally new feature?” “What is if we completely eliminated this aspect of the app?” “What if we overhauled the design?” When completing the analysis of the first five steps have resulted in not a lot of information, it may be time to get risky and try new things.
Example Two: Look at problems that possible customers in your target market may not even know they have. To define a market for proper product-market fit, look at what issues your product can solve that a new demographic may need but don’t really know they need. For example: A project management platform marketed itself as a team business solution and did well, but didn’t grow. When they realized that freelance individual consumers were struggling to find decent work planners, they started marketing to them as well. The freelance group didn’t really know about the problem and solution itself — there was simply the assumption that being disorganized is part of the job. The platform offered a solution that surprised and delighted their new target market.
Example Three: Pay attention to the user experience at all levels of the AAARRR funnel. User experience is the one thing that all levels of the funnel deal with — user ease of social media access under Awareness, user experience with your website under Acquisition, overall product experience under Activation, ease of using the referral program under Referral, and how the user interacts with the product over time under Retention. As such, in the revenue stage, everything that deals with user experience should be heavily examined and analyzed. If you’re losing customers in the referral stage, and all digital and design components don’t seem to be the root of the problem, what could the real problem be? Is it the value of the product and the price? Is there a specific feature that seems to be a red herring in your advertising and users are disappointed in the lack of real focus in the product? Examine everything!