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AAARRR Funnel: what is it, and how does it work?

30 Sep

Learn more about all six steps that make up the funnel, and how can one use it.

AAARRR is a sales funnel (also known as Pirate Metrics) that is divided into six steps and correlates with relevant metrics to measure the growth and success of a product or a brand. These metrics can help you track the performance of your project from the first point of contact to making a purchase. In other words, they demonstrate how efficient it is in terms of attracting new customers.

AAARRR stands for Awareness, Acquisition, Activation, Revenue, Retention, Referral.

1. AWARENESS

The first step is simple. Make your audience aware that your brand or product exists. Your goal here is to build up your brand or product and introduce it to the market. Think about what advertising channels can lead you to your target audience? What media platforms do your potential customers engage the most?

 

Metrics to track: Impressions & Social Impressions, CTR, Site Visits, etc.

 

2. ACQUISITION

The next step is about first user interaction with your brand. That can be any interaction with your website, app download, perhaps a user joined a newsletter, or some email promotion. Once the user is acquired, you should gather information like demographic details. It can help you craft ideal customer personas.

 

Metrics to track: New Leads, Visit-to-lead Conversion Rate, Social Engagement Rate, Email CTR, Bounce Rate, etc.

3. ACTIVATION

This stage is about real user interaction with your product or service, where you offer a solution to their problem or need. It determines whether they stay engaged or leave. At this point, help your users to get the most from your product or service.

 

Metrics to track: CR, CPA, Engagement Rate, Bounce Rate, etc.

4. REVENUE

That is the moment when users decide to pay and become your customers. Measure how many free customers become paying ones over a certain time? 

At this point, you can understand how much it costs to acquire a customer, and how much you earn.

 

Metrics to track: CLTV, CAC, Repeated Purchases, Revenue Churn, etc.

5. RETENTION

At this stage, take a look at how many activated customers have returned and continue to use your product or service. Customer loyalty is crucial to any business. 

Keep an eye on your Retention Rate. If it is low, then you better rethink your offers and who you market to.

 

Metrics to track: Retention Rate, CLTV, Churn Rate, etc.

6. REFERRAL

And last but not the least, at this stage your customers refer your brand, product, or service to at least one friend. Keep in mind that any customer can be your potential brand ambassador. Word-of-mouth is vital as most customers take action because of personal recommendations. 

 

Metrics to track: Customer Satisfaction, Social Shares, Referrals, NPS, etc.

Even though the AAARRR Funnel was designed for startups at first, it is useful for all companies that are mastering something new: the market, the audience, the product. Understanding how users move through the AAARRR Funnel gives you better insight into what areas of your business need the most attention.