We use AARRR to provide our startup clients with high-level metrics for each stage of their customer and growth funnel. If done right, when we look at AARRR, we should be able to see progression, conversion and measurable, achievable metrics.
AARRR stands for Acquisition, Activation, Retention, Referral, and Revenue. It is pretty much the bee's knees when it comes to understanding users, their journey, and optimizing our funnel as well as setting some valuable and actionable metric goals for the product.
For designers, we need to understand the product we are building, and who we are building it for. That helps us set the right tactics and measurable metrics at each stage of the AARRR.
While defining the AARRR Framework, don't forget to focus on the components of Lean Canvas. Think of the path from top to bottom of the funnel as a journey. The journey begins when users encounter the product, realize the values of the product, use the product to solve their problems, refer the product to others, and finally, the journey completes when users pay for the product.
1.Acquisition — “Where Are Our Users Coming From?”
Acquisition describes how people find the product. We know where potential users are and how to reach them, we have channels where they can easily find us.
That means not just looking at site visitors but also at how many and how those site visitors convert to users. We track every step of the customer journey in the funnel not just look at the final conversion to a paying customer. Every micro-conversion along the way counts.
2. Activation — “How good is the user’s first experience?”
Activation describes the first experience users have with the product. It is not enough to get people to download the app or even sign up, if they are going to stop using the app right after. That's why it's crucial to get users to the "Aha Moment". This moment usually comes when people realize values of the product or service has to offer.
3. Retention — “How many of users are we retaining and why are we losing the others?”
Retention means people users the product frequently and for a good amount of time. For e-commerce, retention means buying the products multiple times, not just once. For an app, retention means users keep coming back and opening / using the app. For SaaS businesses, retention means means people subscribe to your software, use your software often and stay subscribed.
4. Referral — “How can you turn your customers into your advocates?”
The absolute best way to drive growth is through referral. Why would we have to spend large sums of money on marketing to people's deaf ears if we can have people they trust rave about our product to them?
5. Revenue — “How can we increase revenue?”
If we've optimized according to the four AARR metrics above, revenue should already be flowing in nicely. This stage is dedicated to measuring the amount of paying customers and the money we make. There are also two collateral metrics:
- Average order value per use
- Customer lifetime value
However, for this phase to work, we have to make our potential users understand our value proposition.
After creating the AARRR framework, designers will optimize the product in each phase, to ensure the best user experience while using the product, and meet the business goal as well.
However, AARRR isn't just about product design. We could also involve other roles (stakeholders, marketing, sales…) in the process of creating AARRR, to best optimize every phase of the product.