Implement AAARRR Framework in Your Business In Just 5 Steps

Visualization and analysis of the customer journey using the AAARRR framework allow companies to identify weak points in customer interaction. The 6 stages of the AAARRR funnel are the starting point for startups in order to optimize the customer journey for sustainable business growth.

Silicon Valley investor Dave McClure developed “pirate” metrics for analyzing and making product decisions based on data, to separate KPIs that do not align with business goals from those that are “worth their weight in gold.” Tracking them will give your product team a clear understanding of where to focus their efforts to remove obstacles for paying customers and manage their behavior more effectively.

Who Needs AAARRR funnel

The complex part is that the AAARRR framework is far from universal. It will benefit tech startups and platforms, e-commerce, media, and social media companies, in B2B and SaaS spheres. However, it may be irrelevant for physical stores or companies with a long sales cycle, where different metrics are important and where the AAARRR framework does not provide a proper representation of business effectiveness.

Moreover, the value for business and even the configuration of the AAARRR funnel stages can vary significantly depending on the industry, audience, product, goals, and other realities of the company. Here are some illustrative examples.

AAARRR funnel for an online store (e-commerce):

1. Awareness — the consumer first sees advertising for your website on social media, other platforms, or through other channels.
2. Acquisition — they visit the website, register, subscribe to the newsletter, explore the assortment, and become a potential buyer.
3. Activation — starts adding items to the cart or favorites.
4. Revenue — purchases as a paying customer.
5. Referral — directs other people to your online store, using word of mouth or referral links for bonuses and discounts.
6. Retention — returns for new purchases if satisfied.

AAARRR funnel for mobile applications:

1. Awareness — the consumer undergoes initial familiarization with the application through advertising or descriptions in the app store.
2. Acquisition — downloads and installs the application on their device.
3. Activation — begins to familiarize themselves with and use the application’s features.
4. Referral — if intrigued, shares the application using the button.
5. Retention — uses the app for an extended period as an active user.
6. Revenue — makes purchases in the application, chooses a paid subscription to unlock premium features, or remove ads.

AAARRR funnel for a SaaS company:

1. Awareness — a potential user comes across your lead magnet in search of a solution to their pain/problem.
2. Acquisition — leaves you their contact information, becoming a lead.
3. Activation — starts using the free/trial/demo version of the product.
4. Revenue — buys a plan/subscription package for the full paid version.
5. Retention — if satisfied with the product, service, and support, renews the subscription monthly/annually.
6. Referral — directs friends and acquaintances to you for bonuses or discounts.

Here’s an example of a large, stable company that has already found a profitable model and formed a business, successfully using the AAARRR funnel to enter new channels or develop a new digital platform.

In 2014, Nescafé decided to launch its mobile app — a video alarm clock with social media features. https://www.facebook.com/WakeUpSammy

https://www.youtube.com/watch?v=ElL8LQ_aS-w

Now it needs measurable goals and benchmarks for a new tactic targeting an audience with different needs.

1. Awareness — Nescafé already has a global audience of 35 million fans, who are being informed about the new app on social media.
2. Acquisition — users download the app to wake up in the mornings not to annoying tunes, but to funny videos.
3. Activation — registration, app installation. Choosing who will wake you up (random user or your friend). Searching for and adding friends.
4. Retention — waking up daily to videos of your friends and acquaintances.
5. Referral — sharing the app with other users on social media.
6. Revenue — Nescafé attracts an even larger loyal audience, expanding its communication and e-commerce offerings, which are now optimized and geared toward mobile users.

Implementing AAARRR Framework and Growing Your Business with “Pirate” Metrics

Being a growth hacker means experimenting and focusing efforts on the most problematic or potentially promising areas of your business. Here is a step-by-step guide on how you can use the AAARRR funnel for growth.

Step 1: Define current business goals and the AAARRR funnel stages of the customer journey

The first step assumes that you understand the chosen business model, know your target audience and niche. As mentioned earlier, the configuration and significance of the AAARRR funnel stages can vary significantly from business to business, as there is no single universal recipe for developing AAARRR funnels.

Therefore, it is important at the initial stage to adequately visualize the long-term goal that your business is striving for. The company’s goals should be relevant, achievable, aimed at stable predictable growth, and in line with your business vision.

As for the stages of your AAARRR funnel and the key metrics, I have detailed each of the 6 stages in this article. The general idea of the AAARRR framework is to create a transparent scheme of interaction with customers and provide visibility of objective data at each stage of your customer’s journey.

Step 2: Now match the goals and stages with your key metrics — North Star and OMTM

The next step will be to separate the wheat from the chaff: you need to identify and track those key metrics that are truly important for each stage of the funnel. Some figures you can find, for example, in Google Analytics and on advertising platforms like Facebook Ads, Google Ads, etc. With end-to-end analytics, it’s a bit more difficult, as critical as such data is, a separate problem is the reliability of their sources. In any case, you will need to discard the so-called “vanity” metrics that do not affect business growth.

In growth marketing for a product company, there is one crucial indicator for achieving growth — the North Star Metric. Details on why this metric is needed and how to find it are covered in this post of mine. In short: the North Star Metric (NSM) illustrates the value of your product or service to the customer. It allows the business to focus on one most important metric in its product strategy for long-term growth and development.

Examples of North Star Metrics from well-known companies and startups:

• Facebook — Monthly Active Users;
• WhatsApp — Total messages sent;
• Gaana — Total listening time;
• Uber — Daily/Weekly ride orders;
• Flipkart — Daily/Weekly purchases;
• PayTM — Daily/Weekly transactions.

Another important metric, One Metric That Matters (OMTM), is a short-term indicator (usually used over a few months) on which a specific team or department focuses when achieving the NSM.

There are different OMTM indicators that contribute to achieving a single North Star Metric. For example, if your NSM is to reach 1 million subscribers on Instagram, then OMTM can be optimizing hashtags for posts and stories.

Examples of OMTM metrics and how they relate to your NSM

Remember that your NSM and OMTM metrics should be extremely specific, as the more precisely they are formulated, the more effective the team’s actions will be.

Step 3: Explore the funnel and identify bottlenecks

Analytics is one of the most important skills for a growth hacker. Even if you’re not a mathematician, the AAARRR framework makes life easier by helping you identify the most narrow part of the funnel — the so-called “bottleneck” — the point in the customer journey where your business loses the most customers. At which stage of the AAARRR funnel is the percentage of people who have passed through it the lowest? This is the problem that your team should focus on solving the most.

Let’s see how this can look in practice:

• Suppose you managed to tell 50,000 users about your company (stage 1: Awareness).
• Of these, only 10,000 people visited your site — 20% (stage 2: Acquisition).
• More than 3000 successfully completed a target action on it, for example, filled out a form; let’s round it for simplicity — 30% (stage 3: Activation).
• Of these, eventually, 2000 people bought your product, becoming full-fledged customers — 60%! Amazing conversion! It’s a pity that we almost never see such numbers in real life… (stage 4: Revenue).
• For some reason, out of 2000 buyers, only 200 make repeat purchases and 1800 never return — 10% (stage 5: Retention).
• Finally, out of 200 of our regular loyal customers, 50 willingly recommend the brand/company to others, bringing in new customers — 25% (stage 6: Referral)

What does such a picture tell us in the end? There is an important metric called Churn rate. It shows the percentage of customers who have left over time. In our example, only 10% of people who have ever made a purchase have become regular buyers of the brand’s products. Is this bad? This is a disaster!

While in many business areas, attracting new customers is significantly more expensive than retaining existing ones, it is at the “Retention” stage that the funnel above loses 90% of customers. Horrible. This is the fire that we must extinguish first if we want to survive in the market, not to mention stable growth.

Bottleneck, however, is only one side of the coin. The reverse — using the AAARRR framework, you can identify your strongest point. In this case, it is the 60% conversion to a buyer — the most promising direction for applying additional efforts on the path to explosive growth.

Step 4: We’ve found the problem — now we need to understand the cause

We’ve identified where we’re losing most of our customers, and therefore, revenue. It’s time to find out the reason. The point is that the metrics and numbers from steps 1–3 will not directly help us with this. This is the moment when we move from hard data to soft data. Fortunately, today there is a whole arsenal of different tools and methodologies that marketers and growth hackers use to analyze customer behavior at each stage of the AAARRR funnel and identify the reasons for this behavior.

• First, it is worth mentioning web analytics tools such as Google Analytics, Hotjar, Mixpanel, Crazy Egg, Localytics, etc. Heatmaps, click trackers, product analytics, creating dashboards, and reports allow you to track and analyze user behavior on your site and understand at which stage of the funnel you have the most drop-offs and problems. These data need to be tracked at every step.
• CRM systems like Salesforce and HubSpot also help in finding bottlenecks by tracking and analyzing customer conversion processes at different stages. Use such data as purchase history and frequency, average check, etc. to identify trends affecting customer retention and revenue.
• A/B testing — the favorite tool of all growth hackers, which helps find the most effective ways to attract and retain customers.
• To better understand your audience’s motives, pains, needs, and expectations, use feedback: reviews, surveys, interviews, etc. Also, don’t forget to survey your team: sales, support, etc.

Step 5: Start the growth hacking process!

Having defined your AAARRR framework structure, found your North Star Metric and OMTM, identified the Bottleneck, and understood its causes, you can finally start the most interesting part — developing and executing growth sprints, with your AAARRR funnel as the starting point.

Each sprint should have a specific, achievable, measurable goal. The average growth sprint lasts 4–6 weeks. A detailed step-by-step guide to planning and tracking growth stimulation experiments is a topic for a separate publication, which I will definitely cover soon.

In general, the process of growth stimulation experiments looks like this:

1. Brainstorming and collecting ideas to solve current issues/problems.
2. Ranking the generated ideas by simplicity and execution time, potential impact on business growth and development, etc.
3. Planning the experiment (title + description, hypothesis, A/B test options, goals and metrics for tracking, other details).
4. Work! Experimenting/testing and recording the results.
5. Analyzing the results and conclusions — measure, contemplate, scale.

Conclusion Replacement

Optimizing the customer journey using the AAARRR growth funnel requires a bit of work, which, I am sure, will pay off if you approach it wisely and with the right strategy from the start. It is a continuous process that should be led by the team and at all levels. It is based on knowledge of the business model, market niche, and audience, as well as on data-driven decision-making.

Experienced growth hackers go even further and segment their audience: by channels, personas, behavior, devices used, geography, etc. For each individual segment, they create a corresponding AAARRR funnel, gaining an even more detailed view of where to focus their growth hacking efforts.

Unfortunately, there is no universal “pirate” recipe: more businesses means more funnels. In one of the next posts, I will definitely devote the topic to step-by-step planning and tracking growth stimulation experiments in detail.