At Popcorn Metrics we use Pirate Metrics as a simple metrics and analytics foundation both for ourselves and for the clients we advise.
Originally presented as a framework for tech startups, its my belief that Pirate Metrics is fundamental to ALL online businesses, and the PPC Agencies that advertise for them, because in todays fast moving digital marketing space getting a lead is just the beginning.
Pirate Metrics: 5 Principles
Based on the assumption that every online business needs to get customers through 5 key stages, Pirate Metrics give you 5 Principles on which to base your growth:
Together they are easy to remember as A.A.R.R.R.!!! (As in the infamous cry of any swashbuckling Pirate worth his salt!)
Why this Article?
I wanted to give a full explanation of the why and how of Pirate Metrics to refer to our clients, and also write a beginners guide for entrepreneurs or marketers like you who may have never come across AARRR before, or, if you have heard about it but are unsure as to how it ￼￼￼actually translates into specific actions you can take in you day-to-day of growing your (or your client's) online business.
This article is based on a similar article written by my friend Liam Gooding when he blogged about metrics. He has closed that blog, so I'm attempting to fill that gap here.
It’s impossible to discuss AARRR without first discussing it’s creator, Dave McClure. Dave originally coined the term in a famous presentation, now immortalised on Slideshare and Dave’s blog.
As the cofounder of 500Startups and active investor, Dave came across a lot of tech startups, as well as being a successful entrepreneur himself.
He argued that for a founder/CEO to be successful, she should focus on just 5 key metrics, or KPIs (sometimes expanded to 10 to allow for multiple conversion criterial within each stage).
By focussing on only these 5 key stages, the entrepreneur or marketer can be effective in directing her team (or her own time) towards solving each distinct and actionable stage of her business/product.
Acquisition is the first contact point with a customer and your product or website. Your marketing has worked to this point and you’ve successfully pulled a visitor from what they were originally doing and now you have their attention.
They have viewed your landing page or homepage, and perhaps clicked around and maybe even read a blog post.
Acquisition is often misused as a vanity metric “We have 10,000 visitors a month!” but unless you’re in the publishing business of selling page-views to advertisers for CPM rates, saying those things just makes you sound like you don't yet know the value of your visitors or channel(s).
Your acquisition numbers should be the starting point to analyse which of your marketing channels are working.
Where are the big spikes coming from, where are the slow and steady streams. And at this point, low volume isn’t always a bad thing – we’ll follow acquisition sources throughout the whole AARRR funnel and low volume can often surprise you by being the most profitable!
Most importantly, you should be checking how engaged your Acquired visitors are, otherwise known as bounce rates.
Many people break down Acquisition into 2 general stages:
- Visitor Landed and
- Visitor Engaged.
Once a user has viewed multiple pages, or reads more than one blog post, or visits for 20+ seconds, they could be said to now be engaged.
Importantly, this might happen in multiple visits: a visitor reads one blog post after a tweet, but then bounces. However, they return a week later to read a second blog post.
You could choose to classify these users as engaged.
Until a visitor has completed your engaged criteria or Activation criteria, they’re stuck in the "landed" category.
If you run an blog based entrepreneur, you might classify subscribing to your blog (giving you their email) as an advanced stage of acquisition. If you’re an ecommerce business, you might consider this event as a user in the Activation stage. Your call.
Activation is the stage where people actually use your product.
It might sound like a trivial detail to new entrepreneurs, “Of course everyone who fills in our registration form will then use the product!” but you’d be surprised how often it happens that online businesses have <25% Activation rate. This is especially common with tech startups like SaaS, but is equally valid with a mobile app or any other business.
Poor onboarding/messaging, no beginner walkthrough, a complex UI... these can all lead to your newly acquired users from bouncing as soon as they see the inside of your app.
For many SaaS startups, Activation is usually broken into stages.
Creating their first campaign, integrating the embed code, generating their first report... It’s easy to get lost in all the different stages of the funnel.
I recommend you try and choose just 1 or 2 activation stages and then stick to these KPIs:
In the case of Popcorn Metrics, we track Activation as:
- Users have installed our tracking code and
- Users have enabled at least one Integration (Google Analytics events, Facebook Pixel, Adwords Conversions, Active Campaign, Mixpanel, etc)
- Published at least one event.
￼It’s important to focus on your Activation performance long before you invest heavily into any further acquisition, and especially before you start spending valuable developer hours on new features or rock-solid account subscription and payment integrations.
A user is unlikely to enter credit info and subscribe to your product if they haven’t activated yet. This is because they need to appreciate the full value of your product first, and need to be confident that the value is greater the cost.
Value > Cost = $ + Time + Focus
Value > Cost = $ + Time + Focus
Once users have invested their time and focus into your product, they will have gained a perception of the value of your product and will be willing to (hopefully) part with cash to continue experiencing that value.
Once you’ve acquired a bunch of users, and they’ve all used your product (Generated their first invoice, created their first project, opened the app and played 1 game) you need to focus on getting those users coming back regularly.
Don’t be tempted to start throwing payment forms or in-app purchases (IAP) in front of these users just because they’ve tried it out. It’s too early still. Regardless of your chiseled jaw line, perfect veneers and olympian abs, it’s still going to be easier to get a woman into bed if you take her on more than one date. (Note, insert alternative anecdote here for sexual equality)
Measuring retention might be as simple as signing back into your dashboard 2x within 30 days. Or opening your app a second time and playing at least 1 level. Depending on your SaaS app (or mobile app) the concept of retention is relative. Some products require daily use, others weekly or monthly.
A consulting team, who raise 5 invoices a year at $75,000 each, may log into their accounting app those 5 times, plus once at the end of each month to update expense receipts, and again once each quarter to print reports for their partners meeting. Just because they don’t log in every day or even every week, doesn’t mean they aren’t retained successfully.
Choose a metric or two that seems appropriate for your app. At Popcorn Metrics we monitor retention as:
￼1. Users who returned to view their dashboard on a weekly basis.
Word of mouth marketing is the best performing ROI you will ever have. Referrals, particularly between 2 people who know each other, are the highest conversion rates you will get in your app and have the potential to grow your userbase exponentially.
Getting users into the referral stages means they not only like your product, but they think that their contacts and friends could also benefit from that value.
They want to be the person responsible for them discovering that value. When their contact, colleague or friend is raving about how good your product is in 6 months, they’ll finish the story with “Yeah, and it’s all thanks to Sandra, she told me about it”.
There are other drivers for referral’s too – they can be more transactional. Dropbox are a great example of this: refer a friend and we’ll give you more storage space on your account for free. Direct transactional rewards work great in consumer products.
Once you start looking at the referral stages, it’s important to ensure you have some viral mechanisms in place. Share buttons, promo codes, affiliate links, “powered by”, invite a colleague... etc. Once you have a few of these, you can start A/B testing and monitor the performance of your referrals.
You can break your referral metric into 2 stages:
- How many eyeballs did they bring to our product
- How many customers did they bring to our product
If they post on twitter and 200 people click their link and view your landing page, thats great.
But if only 1 person creates an account, that’s not so great.
Compare that to if they invite a client to collaborate on a project within your app, and then that client is so impressed that they create their own account for their own company to use. That’s a lot more valuable, particularly if they convert to paid.
Generally, lots of eyeballs is great for exposure, brand and PR, but be sure to
￼track how those referrals actually end up as paying customers.
Another great tip is to add “referred_by” properties to users on registration, and then breakdown all your metrics by this property later if you really want to identify your key influencers and evangelists.
Monitoring revenue is the crucial part of avoiding vanity metrics in your startup.
It’s also important that you place the other 4 stages before revenue, as without them you’re just wasting your time throwing prices in front of people.
Once you’re tracking transactions, it allows you to follow certain events such as subscribing to the blog, or opening a particular email, or clicking on a particular tweet, and seeing how those actions translate to the bottom line.
It’s also crazy valuable to be able to dissect the results of an A/B test that doubled the price of your product. Yes, conversion rate was down, the number of transactions was down, but MRR (Monthly Recurring Revenue) and LTV (Life Time Value) have both increased.
It can be really dangerous if you get tempted by revenue to early. Not only can integrating revenue functionality be expensive (relative to your total MVP effort cost) but also can distract you from properly achieving product market fit (PMF).
If you manage to land an early customer, who happens to be much bigger than your intended customer, and they pay you £1,000 a month (when your regular product is only £29 /mo) then suddenly you’re at the risk of letting that one customer dictate your product.
“They paid us £1,000 a month, of course the product must be amazing. Lets launch a £10,000 pay per click campaign!”
Things like this can cripple and early startup. Skipping stages out in AARRR just doesn’t work. You need to be confident you’ve solved your value proposition, got users enjoying it and repeatedly using it, and got them so passionate about it that they want to tell all of their colleagues. Then, and only then, do you focus on revenue growth.
Why Should Startups Use AARRR As A Framework?
AARRR is quite possibly the simplest growth model you will ever come across.
There are far more complex models with much, much more academic and clever methods.
Huge complex customer funnels, flow charts to fill a whiteboard, business dashboards with 30 KPI’s that can predict next quarters revenue.
But the chances are, you will use those models when it really, really
Usually when something has gone wrong.
And even worse, you might need to employ a consultant, or a full time data-analyst in your team who just runs those daily and weekly reports for you.
But the power of AARRR comes from it’s simplicity.
The more simple a model, or a dashboard, or a procedure – the more likely you are to use it.
And use it daily.
It’s no use having a wonderful set of reports 8 pages long, produced every week, if no one is taking action on them.
AARRR is for Entrepreneurs who want to take action on their metrics.
AARRR is also incredibly easy to understand.
Out of the 00's of entrepreneurs I have explained AARRR to during 1-to-1 consulting, I’ve never had a single entrepreneur not understand it.
We chose AARRR as the model for Popcorn Metrics because we wanted a way for entrepreneurs to grow their online businesses.
We needed a model that any entrepreneur can understand, and that every entrepreneur could use to take action, without spending hours every week obsessing over reports.
Whatever your Analytics platform, go and setup an AARRR funnel and then get out of your data and into your business!
Need help getting started, or got a question about Pirate Metrics? You can ask me in the comments below.