How to Optimize Customer Journey with “Pirate” Funnel AAARRR (A3R3)

Why are pirates great marketers?

’Cause they have killing AAARRR-guments!

The AAARRR (A3R3) funnel, or growth funnel, is a marketing scheme [sequence of steps] that offers a comprehensive, structured approach to understanding and optimizing the customer journey. With this tool, it becomes possible to identify strong and weak points of interaction with the user, as well as to develop a systematic process for improving them. By specifying “gaps” and the potential for growth, you can focus on any step of the funnel and achieve consistent company growth.

The AAARRR framework has become a valuable tool for full-stack marketers to optimize customer acquisition and retention strategies. Each stage has specific metrics that help track and improve business performance, identify growth opportunities, make data-driven decisions, and contribute to the company’s continuous development.

Research shows that on average, only 1 out of 3000 innovative ideas become thriving within a product strategy. Of course, the ratio of successful to unsuccessful ideas will depend on your niche, specificity, and market context. Still, transparent analytics and a conscious approach to the customer journey are necessary basic steps without which you reduce the likelihood of prosperous consolidation and growth of your positions.

Want to understand where your company is losing most customers but need help knowing where to begin? The “pirate funnel” will be an excellent starting point. To find the weak links in your business’s customer path, go through all 6 steps of AAARRR:

1. Awareness. What audience do you cover? Quantitatively, in terms of basic geographic and demographic data, etc.
2. Acquisition. How many unique users visit your site and platforms, as well as take the first actions? Who are they in quality? To which ICP can you assign them?
3. Activation. How many of them started interacting with your business: testing the product, converting to the first payment, adding items to the cart?
4. Retention. How long do customers stay with you, what is the ratio of one-time and regular transactions?
5. Revenue. What percentage of customers start paying you, and how much do they pay once, as well as over the average term of their “life” with you?
6. Referral. How many people recommend your company to others, and what feedback do you receive about your business?

Different companies and marketers may interpret the A3R3 funnel and its stages differently. For example, switching “Retention” and “Revenue” depending on the business model and company priorities. Or reinterpret “Acquisition” and “Activation”, where a new customer ≠ a new website visitor, and activation is just an AHA! / WOW! moment instead of the usual registration.

Yes, the stages and their order can differ significantly, and like any framework, there is room for variability here. The idea is to adapt the approach to your company and ensure sufficient data visibility at each stage of the user path.

Let’s go into each of the 6 stages to better understand the structure and operating principles of the AAARRR funnel.

Stage 1: Awareness

Is your target audience even aware of the existence of your company? At the first stage of the customer journey, businesses or brands seek to inform people who are most likely to be interested in their products and/or services about their existence. This involves creating strategies to attract the target audience and developing campaigns aimed at increasing coverage and recognition.

How to increase awareness

Instead of not always relevant traditional billboards, print, TV, and radio, growth hackers prefer to use such digital channels for interaction:

• SEM. Paid advertising campaigns on popular search engines.
• SEO. Website and content search engine optimization for keywords.
• Content marketing. Creating valuable, engaging content for the target audience.
• Influencers. Partnership with opinion leaders with a relevant audience.
• Word of mouth. Promotion through trust and personal recommendations.
• Drip marketing. Personalized autoresponders with reminders.

Of course, the channels can vary greatly, and I know examples where the same strategies for working with print media, TV, and radio can be several times more effective than digital PR. It all depends on the niche, direction, and specifics. For this reason, the above list is just examples of channels that are used quite often and are averaged for the main business models.

Metrics to track

At the Awareness stage, metrics that allow you to evaluate coverage, as well as sources, volume, and quality of traffic, are important for the business. Tracking them will help understand the effectiveness of attracting an audience and forming awareness of your brand, product, or service.

Again, there is no “one-size-fits-all solution,” and the set of metrics may vary, but here are a few popular examples:

• Impressions. The number of times your ad or publication has been viewed.
• Clicks and CTR. The number of times [and in what proportion to the coverage] users click on your banner and/or follow the link.
• Traffic. The number of sessions and users (as well as sessions per user) can indicate the level of interest. Evaluating which channels and landing pages this interest is distributed to can provide enough food for thought.
• Engagement. Average time on site, scroll depth, and number of pages viewed per visitor help assess how effectively your site not only captures but also retains attention.

Stage 2: Acquisition

The second stage of the AAARRR funnel is crucial for ensuring profitability and sustainable business growth. Here, companies build their customer base, aiming to turn informed consumers into users. At this stage, it is very important to work out the ICP and be proactive in testing different hypotheses, identifying the most successful audience conversion strategies. The goal of this stage is to stimulate action, to convert.

How to attract new customers

This is a question that does not have a simple and universal answer. Each business at different levels of development and with different market contexts will have its own set of effective channels, mechanisms for their configuration, and approaches to nurturing strategies.

In general, the process of attracting customers can be divided into Inbound and Outbound clusters.

The Inbound segment includes almost all channels aimed at providing value and solutions at the stage when the customer is looking for a solution. For example, working with SEO is working with potential customer search queries. Your task is to identify relevant segments of keywords and make sure that your content is visible to the audience that already has a certain interest. Different channels imply different stages of readiness to make a decision, but the general idea is that you just appear on the path of an already-searching user.

The popular channels include SEO and content marketing, PPC, social media marketing, email marketing, etc.

Outbound marketing is the traditional method in which the company initiates a conversation and directs its message to the audience through more direct channels. That is, you cannot be sure that the people you are interacting with are really looking for your solution, but through direct communication, you can identify (and sometimes even create) this request.

Examples of outbound marketing include telemarketing (cold calls), email outreach, social media outreach, and so on. To some extent, outdoor advertising, television, and radio commercials can be attributed to this direction.

Metrics to track

Of course, the metrics will vary greatly from channel to channel, as well as depending on whether we are talking about inbound or outbound. However, on average, at this stage, actions are important.

For inbound marketing, focus on User Conversion Rate, the cost of these actions (CPA), their quantity, growth motion, and so on.

For outbound marketing, the reaction matters, and effectiveness can be determined by the Reply Rate, the number of booked meetings, or actions as a result of outbound communication. If we are talking about outdoor advertising, television, or radio format, tracking mechanisms can be through promo code triggers or any other action.

Stage 3: Activation

While the acquisition is aimed at creating interest and the first action, activation is aimed at turning this interest into participation. At the third stage of the AAARRR funnel, acquired users are converted into interested customers who have taken a target (and often paid) action: registration with a credit card, subscription, making a purchase, and so on.

Here, customers begin to actively interact with the company or brand, using its products and services. “Activation” is also characterized by processes of brand perception formation by the customer, education, awakening of interest, and convincing of the need to use the offered goods and services, which is why this stage is also called the customer education stage.

Activation methods

The main thing at this stage is to make the interaction process as simple and comfortable as possible for the customer. It is also important to provide enough opportunities for this, so it is worth regularly conducting research, tests, and experiments. Effective activation methods can vary depending on the characteristics of the business, product, and audience.

Here are just some of them:

• Incentives such as discounts, bonuses, and trial versions encourage action and reduce the decision-making threshold.
• Social proof. Reviews, ratings, and reviews strengthen customer trust and enhance the company’s reputation, increasing the likelihood of activations.
• Personalization. A more personalized experience increases engagement, and thoughtful adaptation and individual recommendations help activate more customers.
• Education. Guides, manuals, webinars, and other educational resources help understand the product and better understand its value.
• Gamification in the form of rewards for achievements and progress indicators also increases engagement and motivates to use the product/service more often.
• Customer support is a powerful argument in favor of choosing your services, especially in conditions of tight market competition.

Metrics to track

• Revenue generated: the amount of revenue generated from activated customers.
• Engagement: to determine the level of user interaction with the brand, divide the number of active customers by the number of acquired ones.
• Feature adoption: the percentage of users who have adopted a new specific feature of your product and started using it.
• Conversion rate from trial to paid: shows the percentage of users who converted into paying customers after a trial.
• Retention rate: the percentage of users who reused your product or service within a certain period.
• Net Promoter Score (NPS): a customer satisfaction and loyalty indicator also used as a measure of activation level.

Of course, this is far from all, and, for example, for a service company and a SaaS product, this stage (as well as metrics for tracking) will be significantly different. The key idea is to have a larger number of acquired contacts move to the active stage of interaction with the business.

Stage 4: Retention

In good companies, after a customer makes a purchase, the interaction does not end; instead, the lifetime value grows.

The key goals of the retention stage are to

• maintain and nurture interest;
• strengthen customer loyalty to the brand;
• encourage repeat and additional purchases;
• increase user satisfaction;
• increase customer lifetime and the volume of repeat sales.

In the face of growing competition in customer acquisition, the cost of acquiring a new user, and the general trend towards the complication of mechanisms for effective influence, working on retention helps increase the return on marketing investments. Moreover, the market is limited, and the better you retain the customer, the longer you will “live” [and the stronger position you will manage to take].

How to increase customer retention

Again, the set of mechanisms and tools will be very different, and I have tried to provide examples relevant to different business models.

Examples; the list is not exhaustive :)

• Email retargeting. Email campaigns are used to re-engage customers who have made purchases: exclusive offers, personalized product recommendations, etc.
• SMS retargeting. Instead of emails, personalized messages in messengers and social networks for quick notification of promotions.
• Push notifications for mobile app users.
• Product updates. Optimization of paid service packages and constant offering of more advanced features increases the product value for the user, increasing the company’s chances of retaining them longer.
• Onboarding — automated product familiarization and training.
• Reactivation and retargeting/remarketing campaigns through paid traffic.

Metrics to track

Use these metrics and make data-driven decisions to identify areas for improving your customer retention rate:

• Customer retention rate measures the percentage of users who continue to use your product after their initial purchase.
• Customer Lifetime Value (CLV) is used to measure the total revenue that can be generated by a customer throughout their lifetime. One of the most important metrics in e-commerce (and beyond), as it helps identify the most valuable customers for the business and focus efforts on retaining them.
• Churn rate. The percentage of customers who stop using a brand’s products and services over a certain period of time. Another key, direct indicator of the effectiveness of a company’s customer retention efforts.
• Contract renewal rate. A key metric for the service industry. It measures the percentage of customers who renew their service package payment and indicates their satisfaction with the quality of the service provided.
• Net Promoter Score (NPS). A customer satisfaction and loyalty indicator (usually ranging from -100 to 100). If in the previous step it indicated the level of “Activation,” here it also shows the likelihood that your customers will recommend your brand to others.

At this stage, the choice of key metrics can especially vary depending on the industry, model, product characteristics, target audience, etc. I will tell you more about the North Star Metric and the AAARRR funnel in the E-commerce, SaaS, and Mobile Apps industries in other publications.

Stage 5: Revenue

This is where your business actually earns revenue from customers, monetizing its products and services, while also aiming to increase the average purchase value and the lifetime of a paying customer. To maximize revenue, marketers develop and implement strategies to boost the value of products and services, such as premium features, more effective pricing models, loyalty programs, opportunities for additional sales, and so on.

It is important to understand that “Revenue” is closely related to all other stages of the AAARRR funnel and shows how successful they have been. It is necessary to identify and eliminate any obstacles to the customer’s path to purchase.

How to increase company revenue

The main methods of increasing revenue will vary depending on the industry, business model, market niche, etc. They can be aimed at encouraging the customer to purchase through mechanisms such as: conducting promotional campaigns, optimizing order processing and payment processes, reminders of abandoned carts, product/service updates, increasing subscription base, more personalized service, etc.

• Promotions. Limited-time/quantity promotions, seasonal sales, package prices, and discounts are used to attract new customers and encourage existing ones to make additional purchases.
• Customer base expansion. Attracting new customers through advertising, marketing campaigns, content marketing, and improving website conversion.
• Reducing customer churn. Implementing and developing customer loyalty/retention programs, including improving user experience and support.
• Increasing average purchase value. Stimulating existing customers to make additional purchases through upselling, cross-selling, premium packages.
• Freemium. Free and freemium basic versions of the product.
• Product updates and bundling. Adding premium features, removing ads, creating product or service bundles at a reduced price.
• Abandoned cart flows is a popular method among e-commerce brands. Customers who have added items to their cart but not completed the purchase receive an email or message reminder, preferably with a discount.
• Checkout flows. Another method of increasing revenue and recovering lost sales in e-commerce. Involves reducing the number of steps required to place an order and optimizing them. It also includes improving website page speed, increasing payment security, creating FAQs, and step-by-step instructions.
• Business process optimization. Increasing the company’s profitability and profitability can also be achieved by increasing the efficiency of operational processes and reducing costs.

Essentially, this is the stage of the funnel that forces reflection on the previous stages and seeks mechanisms to optimize them, as well as ways to scale the initial stages without quality losses in the BoFu.

I cannot say that this stage is characterized by specific isolated channels and methods. All stages are interconnected, and “Revenue,” in my opinion, is most indicative of this — it is the core of any business.

Metrics for measuring revenue

Some metrics that will help the company understand the level of generated revenue, as well as identify any changes and trends over time:

• Revenue. There is specificity related to the business model. For example, for SaaS, these could be MRR, ARR, New MRR/ARR, NET MRR/ARR, and so on, while for service businesses (even with a retainer model) or e-commerce, the set of profit-related metrics will be significantly different.
• Profit, as well as profit margin.
• Customer Lifetime Value (CLV).
• Return on Investment (ROI).
• Conversion to paid customers.
• Average Order Value (AOV) is the average amount spent per purchase in the store.

And many others, of course. The process of measuring revenue depends on the business model and the envisaged monetization mechanisms, which can be very diverse, sometimes heterogeneous (combined).

Stage 6: Referrals

At the final, referral stage of the AAARRR funnel, companies motivate their customers to recommend the product to others, thereby directing new customers to the company.

It is very important here to establish connections and build long-term relationships with customers. Then, "Referrals" become a way to increase awareness and attract potential customers with lower costs than other traditional methods.

For this, marketers work on improving the customer experience and develop entire referral programs with a system of incentives and rewards for various actions to attract new customers: bonuses, discounts, cashback, vouchers, trial periods, etc.

Methods for attracting referrals

• Loyalty program with a well-thought-out system of rewards and incentives helps to attract a larger number of referrals.
• Word-of-mouth referrals remain relevant.
• Social media campaigns. Encourage followers to share information about you. Conduct contests, prize draws, and promotions among your referrals.
• In-app prompts or referral links for users.
• Email campaigns. Segment customers and ask paying customers for referrals.
• Partner marketing. Transparent commissions and/or various incentives for existing customers to bring in new customers.
• Influencer marketing. Collaboration with influencers helps increase brand awareness, which also helps increase the number of referrals.

Metrics for tracking the effectiveness of the partner system and/or referrals

• Click-through rate on referrals: the percentage of users who clicked on a referral link and visited the website, landing page, or app page.
• Number of acquired customers: the number of new customers invited by your current customers thanks to referrals.
• Conversion rate of referrals: the percentage of these acquired customers who actually made a purchase, registered, subscribed, etc.
• Retention rate of referrals: the percentage of these acquired customers who made a purchase continued to buy from you and/or use your services.
• Customer churn rate: the percentage of customers who stopped using the company's products and services over a certain period.
• Social media sharing. The number of people who shared information about your company and its products on social media, including outside the referral program.
• Revenue from referrals: total revenue from customers acquired through referrals.
• Lifetime value of the referral: total revenue obtained from a customer referred over the entire time of their relationship with the brand/company.

In conclusion

Any modern company should strive to build a transparent, structured scheme of interaction with customers. The "Pirate" framework AAARRR, or the A3R3 funnel, is best suited for evaluating and optimizing the work of stable companies and startups that focus their efforts on increasing customer lifetime value.

The AAARRR funnel will be useful for a business that wants to understand where it loses the most customers, how to simplify their path to purchase, and how to improve its acquisition/retention metrics to ultimately achieve revenue growth and more stable development.

The importance of the funnel stages and even their configuration can vary depending on the characteristics of the business and its growth hacking strategies. It is important not to forget that funnel optimization is a continuous process, the key role of which is played by data analysis, interpretation, and iterations, taken on a constant basis.

Work on understanding and deeper studying your audience, clearly define your key metrics, and experiment to find the optimal approach to optimizing the customer journey.

In the final part of the long read, I will step by step, with examples, show how to implement the AAARRR framework into your growth hacking strategy!