What Are AARRR Metrics? Pirate Metrics Framework Explained
What is the AARRR metrics framework?
AARRR, also known as pirate metrics, is a framework companies use to drive product growth. It involves grouping and tracking relevant metrics associated with each stage of the user journey:
- Acquisition – Users visit your product or website for the first time and choose a free trial (or demo).
- Activation – Users engage with key features and find value in your product.
- Retention – Users keep returning to your product to gain more value from it.
- Referral – Users are satisfied with your product and find it worthy of recommending to others.
- Revenue – Users exhibit some kind of monetization behavior, such as signing up for a paid plan or renewing their subscription.
AARRR metrics framework background: Who created it and why?
The AARRR metrics framework was first introduced in 2007 by Silicon Valley investor and founder of 500 Startups, Dave McClure. He developed the concept when he realized that many early-stage startups prioritized vanity metrics like social media followers over key growth indicators.
The idea behind the AARRR framework is to help companies identify and focus on metrics that directly impact business health. It’s now become one of the most widely used product metrics frameworks and can be adjusted according to your business nature and stage.
How can the AARRR framework help your business?
With the AARRR framework, product managers and marketers can develop a deeper understanding of the customer journey. It allows you to track and measure your progress at each stage, from customer acquisition to customer retention, with the help of the right metrics. With it, you can evaluate the effectiveness of your marketing, sales, and product development efforts.
Plus, you can set specific goals for each stage of the user journey, analyze the associated metrics, and optimize the funnel. Also, you can identify steps that drive users away and implement measures to deliver a frictionless experience.
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AARRR: What does it stand for?
AARRR is an acronym for a set of metrics associated with different stages of the user journey. These include acquisition, activation, retention, referral, and revenue.
Depending on your business stage and competition, you can also modify it to the RARRA (retention, activation, revenue, referral, and acquisition) framework. Likewise, product-led SaaS businesses can add another stage—adoption—making it AAARRR.
Let’s take a closer look at each stage.
Acquisition
The acquisition stage marks a user’s entry point to your product. They show interest in your product and sign up for a free trial (or book a free demo). These users are keen to give your product a try and experience its value and can be classified as marketing qualified leads (MQL). You can use various marketing channels and strategies to acquire these new customers.
For instance, at Userpilot, we focus on creating product-led content that’s optimized for search engines. We also publish product-led YouTube videos and host webinars to demonstrate our platform’s value to potential customers. Our email marketing strategy focuses on sending newsletters featuring product rants to keep leads engaged and drive customer acquisition.
Finally, we host conferences with industry experts and thought leaders to attract more potential users. In fact, our latest conference, Product Drive, is happening soon in October. Save your spot today.
Activation
The user activation stage is all about letting new users experience your product’s value. The idea is to provide the handholding they need to engage with key features and reach the “Aha! moment.”
Successful user activation happens when you deliver a seamless, personalized onboarding experience. Use a welcome survey to segment new users based on their goals, job roles, or pain points.
Next, launch interactive walkthroughs tailored to each segment’s expectations and needs. These can be instrumental in encouraging new users to try relevant features. In fact, our client Attention Insight improved user activation by 47% with walkthroughs!
You can also use onboarding checklists to help users understand what steps to take next. It helps them navigate your product without feeling overwhelmed and elevates customer satisfaction levels.
Adoption (for SaaS)
The adoption stage starts after a user crosses the activation point. It’s characterized by the user actively using the product to meet their goals. Users who reach this step are more likely to convert into long-term paying customers.
If you want to increase product adoption, the first step is to recommend the right secondary features based on a user’s goals and pain points. You should also help users with contextual tooltips and banners to show them how they can unlock greater value from your SaaS platform.
You could also include live chat functionalities within your product for real-time customer support or an extensive in-app resource center that can further help users understand how they can use the secondary features to accomplish their tasks.
It’s worth noting that the adoption stage is only applicable to SaaS companies. It may not be particularly relevant to other businesses, such as professional services or online stores.
Retention
The focus of the retention stage is to encourage users to continue using your product and paying for it to boost your customer lifetime value (CLV). A high retention rate indicates that users see sustained value in your product and are happy with the experience.
When it comes to user retention strategies, the key is to make your customers feel valued. Start by launching a loyalty program to reward long-term customers. Also, celebrate key milestones, such as when they complete a year with your business. A simple thank you note with a discount code like the one below can do the magic.
You could also introduce customer success roles in your team to specifically cater to those who encounter issues. When you receive negative feedback from a customer, offer to set up a meeting with a customer success manager to address their concerns. It can go a long way in boosting customer retention.
Referral
During this stage, your existing users turn into loyal brand advocates. They’re so satisfied with your product that they start recommending it to others, helping you bring the customer acquisition cost (CAC) down.
So, how can you make the most out of these advocates? Start by launching NPS surveys to identify promoters. Then, ask them to leave a positive review on various third-party platforms like G2.
You can further skyrocket word-of-mouth recommendations by incentivizing referrals. A free upgrade, discount code, or even an award can do just the trick.
It’s also a good idea to integrate social sharing icons into key product experiences. That way, users can share their success stories as they happen.
Revenue
The revenue stage is all about maximizing financial returns through add-ons and upgrades. When it comes to SaaS businesses, the goal is to expand paid user accounts and boost customer lifetime value by identifying the right cross-selling and upselling opportunities.
The key here is to adopt a targeted approach. Instead of recommending random add-ons, monitor customer behavior and personalize your recommendations. For instance, if a user has engaged with a specific set of features, you can recommend related tools and integrations to maximize cross-sells.
Userpilot allows you to track user behavior and launch personalized upsell modals at the right moments. Here’s how you can upsell features when users hit their creation limits:
Leverage Userpilot To Boost AARRR Metrics
AARRR metrics you should track at each stage of the customer journey
The pirate metrics you should track will vary based on the stage of the customer journey. Here are the right product KPIs and metrics you should consider tracking:
Acquisition metrics
Monitoring and analyzing acquisition metrics helps you evaluate the effectiveness of your marketing campaigns and lead nurturing efforts.
Metrics to track during this stage include:
- Customer acquisition cost (CAC) – The amount you spend to acquire a new customer for your product or service.
- Number of new sign-ups – The number of people who sign up for a free trial in a given period.
- Website traffic – The number of people who visit your website in a given period (day, week, or month).
- Conversion rate – The percentage of users who take a desired action (such as opting for a free trial or product demo).
Activation metrics
User activation metrics indicate the extent to which users find value in your product. Consider the following:
- Activation rate – The percentage of new users who successfully reach a pre-defined activation milestone during onboarding.
- Time to value – The time it takes for a new user to experience your product’s value; it’s calculated from the time of sign-up.
- Onboarding checklist completion rate – The percentage of new users who complete all the steps in an onboarding checklist.
- Free-to-paid conversion rate – The percentage of free trial users who sign up for a paid plan.
Adoption metrics
Monitoring feature and product usage is crucial to understanding user adoption. The following user adoption metrics come in handy:
- Product adoption rate – The percentage of users who have adopted your product within a specific period.
- Feature adoption rate – The percentage of active users who use a specific feature within a given period.
- Average session duration – The average time users spend engaging with your product in a single session; the longer the average session duration, the more engaging and valuable the product experience.
Retention metrics
User retention metrics help you understand whether users continue to find value in your product and are willing to pay for it. Commonly used retention KPIs include:
- Retention rate – The percentage of users who continue to pay to use your product in a given timeframe.
- Churn rate – The percentage of users who cancel their paid subscription or stop using your product within a given period.
- Daily/monthly active users – The ratio of daily active users (DAU) and monthly active users (MAU) gives an idea of user stickiness, i.e., how often customers use your product in a month.
Referral metrics
These metrics are an indicator of user sentiment, satisfaction levels, and customer loyalty. Some referral metrics you should track include:
- Net Promoter Score (NPS) – A measure of how likely a user is to recommend your product; it’s calculated by subtracting the percentage of detractors from the percentage of promoters (based on data collected in an NPS survey).
- Number of referrals – The number of new sign-ups you receive through word-of-mouth recommendations from existing customers.
- Cost per referral – The amount you spend to get each new sign-up from referrals; it helps evaluate the return on investment (ROI) of your referral program.
Revenue metrics
Revenue metrics help measure the impact of your marketing, sales, and product development efforts on business growth and bottom line. The following KPIs come in handy:
- Monthly recurring revenue (MRR) – The predictable revenue that your company expects to generate from all customers in a month.
- Average revenue per user (ARPU) – The revenue generated from each active user in a given period; you can calculate it by dividing the total revenue by the total number of users within a specific timeframe.
- Revenue growth rate – The rise in your company’s total income over a given period; it’s usually calculated quarterly or annually.
- Customer lifetime value (CLV) – The average revenue you expect to generate from each customer over the course of their relationship with your product.
How does the AARRR Pirate metrics framework work?
So, you’ve determined that AARRR is the right product metrics framework for your company. Here’s how you can make it work for you:
Identify your AARRR Pirate metrics
Start by choosing the right set of pirate metrics to measure and optimize at each stage of the user journey. Select only those success metrics that are relevant to your product goals, or risk wasting resources tracking metrics that won’t have an impact.
For instance, depending on your acquisition strategies, you could track the number of website visitors, webinar registrations, cost-per-click, etc.
Track and analyze the metrics you have chosen
Next, use a product analytics tool of your choice to consistently monitor and analyze the selected AARRR metrics. Ongoing analysis can help you keep an eye on feature and product usage trends. That, in turn, can help you understand how users move through the customer journey and identify bottlenecks or areas of improvement.
Product usage dashboard in Userpilot.
Use the insights to improve customer experience
Once you’ve analyzed the selected metrics, you’ll have a clear picture of friction points in the user journey. Use these insights to identify and implement the right product improvements and take the customer experience up a notch. It’s the key to improving user sentiment and satisfaction.
Conclusion
The AARRR framework serves as a comprehensive user monitoring strategy and gives you insight into the entire customer journey. But its right implementation is everything.
Userpilot provides accurate and real-time analytics to help you make the most out of your AARRR framework. Book your Userpilot demo today and see how the platform’s product analytics capabilities can help you.
Implement AARRR Metrics To Drive Product Growth With Userpilot
