pirate-metrics

Dave McClure’s Pirate Metrics: The AARRR Funnel In A Nutshell

Venture capitalist, Dave McClure, coined the acronym AARRR, which is a simplified model that enables us to understand what metrics and channels to look at each stage for the users toward becoming customers and referrals of a brand. This is a simple tool for business growth.

How does the AARRR (pirate) funnel work?

This funnel goes through:

  • Acquisition
  • Activation
  • Retention
  • Revenue
  • Referral

It is important to highlight that this is a model, and as such, it doesn’t represent the actual behaviors of users or customers. Instead, that is a simplification that helps identify the crucial actions and marketing tactics to implement to make sure a user becomes a paying customer.

Acquisition

How do potential customers get to know us?

The acquisition stage is usually when a user or potential customer gets to know a brand. A single touchpoint isn’t often enough at this stage. That is why organizations use several channels to gain visibility. Some of those are:

  • SEO or search engine optimization is a critical channel as it enables us to gain visibility through Google, primarily. When a user finds your website or service through Google, it is a great first touchpoint to bring it closer to the activation stage. Again the process is not given, and it might well happen that users acquired through SEO might become customers right away. In general, though SEO is a good starting point. 
  • SEM, or search engine marketing, is the ability to gain visibility through Google by paying the search engine to show up on specific queries that users type. For instance, if you sell clothing and shoes, you might pay Google to enable your site to show up on its search results pages when people search for “shoes” or “sport’s shoes.”
  • Social networks have become a massive distribution channel for most companies. That is why organic and paid campaigns on social are critical to gain visibility and traction for the brand
  • Blogging has become a critical element for brands to build trust with their audience. That’s because ongoing blogging is a good substitute for an ongoing conversation with a broad audience. People get to know your brand, intimately. 
  • Email marketing is also a key distribution channel in the acquisition stage. 
  • BizDev is about creating the proper distribution for your product and services to scale up the business. 

Other channels for acquisition comprise:

  • PR
  • Affiliates
  • Apps and Widgets,
  • TV, and more…

Activation

How do potential customers get to try our product?

At this stage, you need to make the acquisition concrete by enabling users to start playing around with your product or service:

  • A homepage that converts, and that is optimized is essential to activate as many users that land on a site. 
  • Landing pages also help you create a controlled experience for users to take a set of actions you want them to take. 
  • Product features empower your clients, but they also work as a magnet for new, potential customers. 

Retention

How many potential customers will stick around?

At this stage, it’s essential to look at the user engagement and how to make her stick around:

  • Emails & Alerts, to enable users to understand the benefits of your product and help them benefit from it, thus reducing the churn at this stage, which brings the user closer to becoming a paying customer.
  • Blogs and content help build that kind of trust and ongoing relationship with the audience, to make your product sticky
  • System Events and Time-Based features.

Revenue

How many will actually become customers?

At this stage, it is essential to focus on how to make the potential customer or the users that are already engaging with your app, service, or site to become a paying customer:

  • Ads and switching on the paid engine at this stage makes sense to speed up the growth process. 
  • Lead generation and a continuous stream of qualified prospects are critical to keeping the business going.
  • BizDev operations help a business capture as much business value as possible. That is even truer for enterprise businesses. 
  • Subscriptions and more

Referral

Will those customers invite other potential customers?

At this stage, you want to make sure to trigger network effects so that existing customers can bring you more customers too:

  • Campaigns,
  • Contests,
  • Emails & widgets

The full presentation below:

Platform business models

digital-platform

Platform business models have a different logic compared to more traditional, or symmetric models. 

Indeed, network effects are key growth drivers:

network-effects
A network effect is a phenomenon in which as more people or users join a platform, the more the value of the service offered by the platform improves for those joining afterward.

That is why, when it comes to growth, you will hear the term “flywheel” rather than “funnel.”

From funnels to flywheels

flywheel

When you look at platforms like the Amazon business model, you realize how the company used a flywheel model (what Amazon called a virtuous cycle) as the main thinking tool to understand the growth of its ecosystem.

etsy-flywheel

The same applies to the Etsy business model

liquidity-network-effects

And how Uber generated growth by unlocking what the company calls liquidity network effects

Business resources:

Published by

Gennaro Cuofano

Gennaro is the creator of FourWeekMBA which target is to reach over two million business students, executives, and aspiring entrepreneurs in 2020 alone | He is also Head of Business Development for a high-tech startup, which he helped grow at double-digit rate | Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy | Visit The FourWeekMBA BizSchool | Or Get in touch with Gennaro here

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