AARRR Framework. The Definitive Guide to Pirate Metrics.
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What are AARRR metrics?

The AARRR framework is one of the most popular models for Start-ups and SaaS companies to measure growth and success. It was introduced by David McClure, founder of Practical Venture Capital, and is also called the Pirate Metrics or Pirate Framework. It splits your customer life cycle into 5 phases and matches them with related metrics – starting from the first touch point up to the point, a potential customer becomes a paying customer. This will give you a clear insight into which parts of the customer life cycle are performing well and where you have potential to improve your conversion funnel.

What does AARRR stand for?

AARRR stands for the 5 phases in your customer life cycle. These are:

• Acquisition: Where are customers coming from?
• Activation: How to turn acquired customers into active customers.
• Retention: How to make potential customers come back.
• Referral: How to get customers to recommend your service.
• Revenue: How to turn potential customers into paying customers.
Visualization of the AARRR funnel

Let’s break down a typical customer life cycle of a SaaS company offering a fitness app.

Acquisition phase:
A potential customer reads your fitness blog and finds value in your app. The potential customer then opens the app store and navigates to your app.
Activation phase:
The potential customer downloads the app and completes the onboarding process.
Retention phase:
The potential customer opens and uses your app in the first month more than 10 times.
Referral phase:
The potential customer refers your app to at least one friend.
Revenue phase:
The potential customer becomes a paying customer.

Lets dive deeper into the 5 stages.
Street with forest and cars from bird's eye view
Ask yourself. How can I make potential customers find me?
2 steps to find the right customers
First figure out who your customers are
Second figure out where your customers are
Focus on marketing channels with the lowest CAC and the highest return
Measure the following metrics in the acquisition phase
List of metrics: CAC, conversion rate, reach per channel, click through rate, cost per click
Nice to measure metrics: Quality of leads, dwell time on website, bounce rate on website

Acquisition: Where are your customers coming from?

Acquisition is the first phase in the customer life cycle. It is about making potential customers discover you and your service. The key to acquisition is not to find as many customers as possible, but rather the right customers. Getting the right customers is a 2 step process. Leave these steps out and you will develop a service nobody wants.
First figure out who your customers are
Step 1: Figure out who your customers are.
If you want to craft a compelling solution, you need to know your customers. Instead of providing a service for "everyone", start focusing on specific buyer personas. That will help you save money and communicate effectively. To learn more about your target group, answer these powerful questions:

• What keeps my customers up at night?
• What motivates my customers to solve their problem?
• What's the desired future state for my customers?

Personas are the sound foundation for every successful service and will help you make thought-out decisions. Therefore, you need to understand what your target audience is trying to achieve and what success means for them.
Second figure out where your customers are
Step 2: Figure out where your customers are.
Getting customers is tough and many SaaS companies and Start-ups fail due to a lack of new customers. Hence, it is necessary to identify marketing channels with traction. Traction describes the momentum that shows up when your strategy is working out. One of the best frameworks to identify traction channels is the “Bullseye Framework”, developed by Gabriel Weinberg.
Gabriel has identified these 19 traction channels:

• Viral marketing
• Public relations
• Unconventional PR
• SEM
• Social and Display Ads
• Offline Ads
• SEO
• Content marketing
• Email marketing
• Engineering as marketing
• Target Market blogs
• Business development
• Sales
• Affiliate programs
• Existing platforms
• Trade shows
• Offline events
• Speaking engagements
• Community building

Each of these channels has already worked for SaaS and Start-up companies before, but not every channel will show the same results for different companies. However, there will be at least one channel, that brings traction to your business. The Bullseye Framework is a 4 step process.
4 steps to find your best marketing channel
Outer ring: What possible channels are there to get customers?
Middle ring: Move the best traction channels to the middle ring.
Quick testing to determine which channel in the middle ring could move the needle
Bullseye: Move the best performers to the inner ring.
Focus your marketing on the bullseye.
4 steps to find your best marketing channels:
1. Brainstorm ideas for each marketing channel and put them in the outer ring.
2. Move potential traction channels to the middle ring, considering your experience or knowledge.
3. Test the channels in the middle ring to find out which channel could move the needle.
4. Move the best performing channel to the inner ring and focus on this channel.

To get a holistic view of each traction channel, answer these questions for each individual channel:

• How much are the customer acquisition cost per channel?
• How many customers can I reach through this channel?
• Am I targeting the right customers in this channel?
Identify your customers and focus on marketing channels with the lowest customer acquisition cost and the highest return.
To summarize the acquisition phase, identify your customers and focus on marketing channels with the lowest customer acquisition cost and the highest return.

Questions to answer in the acquisition phase:

• What keeps my customers up at night?
• What motivates my customers to solve their problem?
• What's the desired future state for my customers?
• How can I make potential customers find me?
• How much are the CAC per marketing channel?
• How many customers can I reach with this marketing channel?
• Am I getting the right customers in this marketing channel?

Helpful frameworks in the acquisition phase:

Personas = identify your target audience.
Bullseye Framework = identify marketing channels with traction and the best ROI.
PVP Index = identify the most promising market segment.
Journey Maps = identify customer touch points and the customer journey.

Metrics to measure in the acquisition phase:

• Customer acquisition cost (per channel)
• Conversion rate
• Traffic driven to the website (per channel)
• Click-through rate
• Cost per click
• Dwell time on website
• Bounce rates
• Quality of leads
Learn more tips how to get new Customers !
Customer activation. How fast can customers find value in your service?
Ask yourself: How can we turn acquired customers into active customers?
Get customers fast to the...
...AHA moment.
Aha moment is the moment when customers first realize the value in your service.
Longer time to value means more likely customers will churn.
Measure the following metrics in the activation phase.
List of metrics: Time to value, visitors to registration ratio, conversion rate, how many customers reached the AHA moment
Nice to measure metrics: Drop off rate, dwell time on website, viewed pages on website

Activation: How fast can customers find value in your service?

The activation phase is about providing an exceptional customer experience. Therefore, it is important to figure out your products' AHA moment. The AHA moment is the moment when customers first realize the value of your service. This moment decides whether your customers engage further or churn. The AHA moment is an emotional event that should happen early in the customer journey. Keep in mind that the longer your time to value is, the more likely it is that people will churn.
This is how you find your products' magic moment.
Value is not always obvious. Therefore...
Get customers fast to the...
...Aha moment
Aha moment is the moment when customers first realize the value in your service.
Emotional event that should happen early in the user journey.
Reach out to top customers and ask what they value most.
Each persona will likely have their own journey to their own AHA moment.
Visualization of three different user journeys
Create a list of behaviors that correlate with retention.
Did customers who convert...finish the onboarding process, interact with the core feature, connect with other customers?
2 pro tips...
Ask churned customers what they were looking for but did not find in your service.
Longer time to value means more likely customers churn.

How to find your services' AHA moment

To find your services' AHA moment, first reach out to your top customers and ask, what is most valuable to them. However, it is likely that each persona will have an individual journey to their own AHA moment.

After evaluating customer feedback, create a list of behaviors that correlate with customer retention. Use this list to define your activation-metrics. These metrics are individual and vary from service to service. Examples for activation metrics are "10 app usages per month" or "adding 2 friends within the first week".

Ask yourself if customers who regularly use your service
• finish the onboarding process?
• interact with the core feature?
• connect with other customers?

Once you complement your customer feedback with your analytics data, it should be clear where people find value in your service. One of the best methods to bring customers fast to the AHA moment is onboarding.
Onboarding. How to get more customers to use your service.
2 step process
First get customers fast to the AHA moment.
Second reduce the barriers to your service as much as possible.

How to get the onboarding process right

Onboarding does not start with the tutorial screen in an app. It starts with the first touch point your customers have with your service – and first impressions matter. In order to get more customers and increase your activation rate, you need to create an exceptional first impression. Onboarding is a 2 part process.

1. Guide users fast to the magic moment, the AHA moment.
2. Reduce complexity and barriers to your service as much as possible. This might mean leaving out unnecessary forms, sign-ups or long tutorials.
Key to activation is to find what customers value most and use onboarding to help them reach the AHA moment fast.
The key to a successful activation phase is to find what customers value most in your service and use onboarding to help them reach the AHA moment as soon as possible.

Questions to answer in the activation phase:

• How can I provide an exceptional customer experience?
• How fast can customers find value in my service?
• What do customers value most in my service?
• What steps would an ideal customer take?
• What behaviors correlate with customer retention?
• What does activation mean for my service?

Helpful frameworks in the activation phase:

Personas = identify what your target audience values most.
Journey Maps = identify the onboarding process.

Metrics to measure in the activation phase:

• Time to value
• Visitors to registration ratio
• Conversion rate
• How many customers used a crucial product feature?
• How many customers experienced the AHA moment?
• Drop-off rate
• Dwell time + viewed pages
Customer retention. Why should customers come back to you?
Retention means people are using your service regularly.
2 pro tips...
First use regular emails to build up customer relationship.
Second keep in mind that acquisition is much more expensive than retention.
Focus on retention instead of acquisition.
Measure the following metrics in the retention phase.
List of metrics: Retention rate vs churn rate, open rate and click through rate of emails, customer churn, month to recover cac, average retention length.
Nice to measure metrics: Net promoter score, infrequent logins

Retention: Why should customers come back to you?

Retention means that customers are regularly using your service and stay subscribed. If you cannot continuously provide value, people will eventually churn. Most SaaS companies focus on getting the retention part right. There is a simple reason for this: it is much more expensive to win new customers than to keep existing ones.

How to fight customer churn in the retention phase

To fight customer churn, it is important to first monitor early warning signs. Early warning signs for customer churn are for example:

• Infrequent logins
• Taking much longer to complete tasks than average customers
• Shorter visit times

In addition, use the Net Promoter Score to complement your insights for customer churn. This will give you a holistic view, if people like your service and if they would recommend it.
How to keep retention rate high with valuable emails.
Emails help customers find value in your service.
1. Make it personal
2. Communicate benefits, not features.
Feature example: More legroom in airplane. Benefit example: Travel more relaxed.
3. Time emails based on customer behavior.
Give every email a clear call to action.

How to keep retention rate high

Sending valuable emails on a regular basis is a proven way to keep your retention rate high. Your email campaign is an excellent opportunity to build a relationship and to help customers find value in your service. To create powerful email campaigns, use these 4 steps:
1. Make it personal.
The best way to connect via email is to address customers personally. Do this for example by asking for the customer's first name in the sign-up form. Yet, be careful not to ask for too much information upfront. Every extra form field increases drop-off rates.
2. Communicate benefits, not features.
Customers buy benefits, not features. A great example for this is “More legroom in an airplane” = feature vs. “A more relaxed travel experience” = benefit.
3. Time emails based on customer behavior.
Behavior-based emails have a dramatic impact on the retention rate because they support your customers on their journey.
4. Give every email a clear call to action.
Every email should lead customers to the next step in their journey and help them achieve their individual goals.
How to increase customer satisfaction and customer lifetime value.
Kano model helps you prioritize features based on the expected impact on customer satisfaction.
3 types: Basic features, performance features, excitement features.
Coordinate system that shows the impact of the 3 feature types.
Basic features: Are taken for granted, are necessary to be competitive, lead to dissatisfaction if poorly executed.
Performance features: Will increase customer satisfaction the better you implement them. Example: More phone storage.
Excitement features: Can create dramatic customer delight. Might not even be missed if they are absent.
Ask your customers 2 questions.
1. How do you feel if the feature is implemented?
1. How do you feel if the feature is not implemented?
Match the outcome to the kano evaluation table.
Visualization of the kano evaluation table.
Summary of the feature types.

How to find benefits, not just features.

Customers love your service not because of the features, but because of the benefits they get. One of the most powerful frameworks to find features and benefits is the Kano Model. The Kano Model helps you to rank feature ideas based on the expected impact on customer satisfaction. The model differs between 3 major feature-types:

• Basic features
• Performance features
• Excitement features

Basic features are taken for granted and are necessary to even be competitive. If basic features are executed poorly, this will lead to massive dissatisfaction. Performance features will increase customer satisfaction based on their execution. The better the execution, the happier the customers. A good example of performance features is phone storage space. More phone storage space means higher customer satisfaction. Excitement features are not necessarily missed if absent, but bring pure delight to your customers if they are well executed. These features help you stand out from the crowd.

To know which feature ideas belong to which category, ask your customers the following 2 questions:

1. Dear customer, how do you feel if the feature is implemented?
2. Dear customer, how do you feel if the feature is not implemented?

The Customers then select one of the following answers:

• I like it
• I expect it
• I’m neutral
• I can tolerate it
• I dislike it

Use the outcome of the questionnaire and match it to the Kano Evaluation table you find below. The example shows the adjusted Kano Model I use. However, there are other versions on the internet as well.
Visualization of the kano evaluation table.
• B — Basic
• P — Performance
• E — Excitement
• I — Indifferent (Customer don't care if the feature is present or absent)
• R — Reverse (If the features is absent it brings delight, if it is present it brings dissatisfaction)
• Q — Questionable (Unclear results)

The Kano Model is a brilliant tool to help you determine, which features are most appreciated by your target audience. This framework will allow you to provide more value and retain your customers over the long run.

Questions to answer in the retention phase:

• How long are customers active?
• How long are customers using my service?
• What does customer retention mean for my service?
• What is most valuable to my customers?

Helpful frameworks in the retention phase:

Kano Model = find out, which features are most valuable to customers and which features to implement next.
Journey Maps =  identify the complete customer flow in your service.

Metrics to measure in the retention phase:

• Retention rate vs. churn rate
• Open rate of emails
• Click trough rate of emails
• Customer churn
• Month to recover CAC
• Average customer retention length (time people stay active customers)
• Net Promoter Score
• Infrequent logins
Learn more tips how to retain your Customers !
Referral. Why should customers recommend your service?
Word of mouth dramatically reduces customer acquisition cost.
2 steps to get massive growth...
1. Reach out to your top customers.
2. Reward them for inviting their friends.
Pro tip: Shorten the time it takes customers to invite friends.
Measure the following metrics in the referral phase.
List of metrics: Percent of customers who refer friends, referred customers, total purchases by referred customers, lifetime value of referred customers.
Nice to measure metrics: Positive reviews, social media shares, sent invitations and successful invitations, viral coefficient and viral cycle time.

Referral: Why should customers recommend your service?

Referral means that people like your service so much that they recommend it to others. When existing customers use word of mouth, your customer acquisition cost for referred customers will drop to zero. This will generate massive growth. To get referrals going, reach out to your best customers and reward them for inviting their friends. However, to really accelerate growth significantly, you need a viral loop.
How viral loops help your saas company to immense growth.
Viral loops comprise 3 steps.
1. A customer discovers and uses your service.
The customer tells his friend about the service.
The friend becomes a customer as well.

How viral loops help your SaaS company to immense growth.

Viral loops comprise 3 steps.

1. A customer discovers and uses your service.
2. The customer tells his friend about the service.
3. The friend becomes a customer as well.

Viral Loops work especially well for services that become more valuable, the more people use it. Communication and social media platforms like Facebook, Instagram or Skype already have built-in viral loops. Mainly because it makes little sense if you are the only one to use them. To measure the effectiveness of your referral phase, use the viral coefficient. The viral coefficient represents the number of additional customers you get for each customer. This is how you calculate the viral coefficient:

Viral coefficient = number of invites sent per customer * conversion percentage

For example, if your customers send out 5 invites and 3 people convert, the math is like this: Viral coefficient = 5 * (3/5) =  3

A viral coefficient above 1 signifies exponential growth. Best practices for immense growth are social media share buttons or the famous Dropbox incentive, which rewards you for every friend you invite. Keep in mind that just because these techniques have worked before, they don’t necessarily have positive effects for your service as well. Before adding generic social media share buttons, think about the ways people would like to share your service. Besides the viral coefficient, viral loops also have a second important component, the viral cycle time. The viral cycle time tells you how long it takes a customer to invite another customer. The shorter your viral cycle time, the better.
Net promoter score. Your early warning for customer churn.
NPS measures customer loyalty and likelihood of churn.
Survey your customers and ask them...
"On a scale of 0 to 10 how likely are you to recommend us to a friend?"
Group respondents into 3 categories.
Promoters = 9-10. Passives = 7-8. Detractors = 0-6.
Formula for NPS: Percent of promoters minus percent of detractors.
Use follow up questions like what was the reason for your score?
Compliment nps with insights from the customer journey to get a comprehensive view.

How likely are customers recommending your service?

An excellent method to learn how likely customers are to recommend your service is the Net Promoter Score. The NPS measures customer loyalty and likelihood of churn.

To figure out your NPS start by asking your customers: “On a scale of 0 to 10, how likely are you to recommend us to a friend?”. Then, group the respondents into 3 categories.

• Promoters 9-10
• Passives 7-8
• Detractors 0-6

Calculate the net promoter score like this:
NPS = % Promoters - % Detractors.

Follow up with open-ended questions about the “Why” for more comprehensive insights (“What was the reason for your score? What would have changed your score?“). Thanks to this you will get great insights on how to increase the likelihood of recommendations.
Provide value, make it easy to invite friends and shorten the viral cycle time.
To sum up the referral phase, provide value, make it easy for customers to invite friends and shorten the time it takes customer to invite friends.

Questions to answer in the referral phase:

• What incentives would customers need to invite friends?
• What do customers like most about my service?
• At which point of their journey would customers most probably invite friends?

Helpful frameworks in the referral phase:

Kano Model = find out which features are most valuable to customers.
Journey Maps = identify at which point of their journey customers would most probably invite friends.

Metrics to measure in the referral phase:

• Percentage of customers who refer friends
• Referred customers
• Percentage of total purchases by referred customers
• Lifetime value of referred customers
• Positive reviews
• Social media shares
• Sent invitations & successful invitations
• Viral coefficient & viral cycle time
• Net Promoter Score
Revenue. Why should customers pay for your service?
Most important metric in the revenue phase...
Customer lifetime value. CLV represents the total revenue generated by a customer over their lifetime.
Compare customer lifetime value to customer acquisition cost.
3:1 ratio is recommended.
Visualization of a healthy 3:1 ratio.
Measure the following metrics in the revenue phase.
List of metrics: Customer lifetime value, customer acquisition cost, monthly recurring revenue, revenue churn, order value per customer.
Nice to measure metrics: How many free customers become paying customers, repeated purchases, expansion revenue.

Revenue: Why should customers pay for your service?

Revenue is the last Pirate Metric in the AARRR conversion funnel. One of the most important metrics in the revenue phase is the customer lifetime value. The metric describes the total revenue generated by a customer over their lifetime. Calculate the customer lifetime value like this:

Customer lifetime value = Average revenue per customer * (1/churn rate)

For example, if your average monthly revenue per customer is 100€ and your churn rate is 5%, this means that your customer lifetime value is 2000€ (100 * (1/0,05)). Be careful not to mix your annual subscriptions with the monthly ones. Otherwise you might lull yourself into a false sense of security.
A good rule of thumb is a customer lifetime value to customer acquisition ratio of 3:1.

Customer lifetime value vs customer acquisition cost

The customer lifetime value shows you how much you can invest to acquire new customers. Therefore, it is crucial to be fully informed about yours. Compare your customer acquisition cost to the customer lifetime value and you will get a decent understanding, whether your company will fail or succeed. A good rule of thumb is to have a customer lifetime value to customer acquisition ratio of 3:1. To find the channel with the lowest CAC and the highest return, apply the Bullseye Framework, which you already know from the acquisition phase.

Most SaaS companies rely on a monthly recurring revenue (MRR). Thus, it is essential to find out which features and benefits make potential customers willing to pay for your service. The Kano Model, already discussed in the acquisition phase, can help you to resolve this issue.

Define the quality of revenue and find out which customer segment is best for your company.

Not all customers are the same, and not all revenue is created equally. It is important to find out which customers are most valuable to you. A great framework to find your best customer segment is the PVP index, developed by Allan Dib, author of the 1-Page Marketing Plan.
How to find customers that make you happy and drive revenues.
Your service is not for everyone - accept that.
Use your marketing budget effectively by using the PVP index.
P = Personal fulfillment. How much do you enjoy dealing with this type of customer?
V = Value. How much does this market segment value your work?
P = Profitability. How profitable is the work you do?
Rate your market segments on a scale of 1 to 10 based on the PVP index.
Matrix that shows an example of the PVP index.
Tailor your marketing message to your ideal customers.
The PVP Index helps you find the market segmentation which gives you personal fulfilment, values your work and drives revenues. Determine each individual market segment and rate them, based on the PVP Index, on a scale of 1 to 10.

• Personal fulfilment: How much do you enjoy dealing with this type of customer?
• Value: How much does this market segment value your work?
• Profitability: How profitable is the work you do for this segment?

Once you have found your ideal customers, you can use your marketing budget more effectively and improve the quality of revenue.

Questions to answer in the revenue phase:

• How many customers become paying customers?
• What is the average order value per customer?
• How many repeated customers do I have and how often do they order?

Helpful frameworks in the revenue phase

Kano Model = identify which features make free customers paying customers.
PVP Index = identify the most promising market segmentation.

Metrics to measure in the revenue phase:

• Customer lifetime value
• Customer acquisition cost
• Monthly recurring revenue
• How many free customers become paying customers?
• Average order value per customer
• Repeated purchases
• Revenue churn
• Expansion revenue
AARRR vs RARRA. Which framework fits your saas company better?
AARRR splits your customer life cycle into 5 phases.
Acquisition, Activation, Retention, Referral, Revenue.
RARRA changes the sequence based on the importance each phase has.
Retention, Activation, Referral, Revenue, Acquisition.
RARRA focuses on retention since...
Most saas companies do not fail because of a poor customer acquisition...
But because of customer churn.
Real growth lies in customer retention not acquisition.

AARRR vs RARRA – What's better?

The AARRR framework describes the conversion funnel each customer runs through. The RARRA framework contains the same steps in the customer funnel but changes the sequence based on the importance each step has. The sequence therefore is not Acquisition, Activation, Retention, Referral, Revenue (AARRR). It is Retention, Activation, Referral, Revenue, Acquisition. The important questions and metrics for each step stay the same. In contrast to the AARRR framework, which does not focus on any particular step in the funnel, the RARRA framework focuses on the retention phase. The reason behind that logic is that most SaaS companies do not fail because of a poor customer acquisition, but because of customer churn. Also, since customer retention is much cheaper than customer acquisition, it makes sense to put more emphasis on the retention phase.

It is not possible to pin down, which of those frameworks works better, since they are both valid instruments. Use the framework that fits your company best. Focus on the important metrics and keep in mind, that the key to real growth lies in customer retention, not acquisition.
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