Benefit
Created in 2007, AARRR is the most popular product/growth metric framework in tech. Great for teams that want to use the metrics that are the most widely known.
What is AARRR (Pirate Metrics)
The AARRR framework, colloquially known as Pirate Metrics due to its acronym, is a fundamental model in growth hacking and product analytics. It's inception dates back to 2007, when Dave McClure, a renowned venture capitalist and founder of 500 Startups, introduced it. The framework emerged in response to the need for a more structured approach to measuring and improving key aspects of a startup's customer lifecycle and growth trajectory. Prior to AARRR, the focus was predominantly on more traditional metrics like page views or registered users, which, while indicative of certain trends, often failed to provide actionable insights into user behavior and product-market fit.
In contrast, AARRR's structured approach brought a more nuanced understanding of user engagement and retention, areas critically undervalued in earlier models. It's akin to a navigational compass for growth, guiding startups through the tumultuous seas of market entry and scaling. This framework's popularity stems from its simplicity and effectiveness, particularly in environments characterized by rapid testing, iterative development, and a relentless focus on user-centric metrics.
What Does AARRR Stand For?
AARRR stands for Acquisition, Activation, Retention, Revenue, and Referral. Each of these stages represents a critical juncture in the user's journey with a product or service, and they collectively offer a comprehensive view of the customer lifecycle.
- Acquisition: Are potential customers coming to your product? It's about getting people through the door.
- Activation: This phase is concerned with the new user experience. Are new users successfully starting to use your product?
- Retention: Are users coming back to your product?
- Revenue: Is your product making money?
- Referral: Are your users happy enough to refer others? This metric amplifies organic growth.
Examples of AARRR Metrics per Category
Each metric of AARRR is a metric category that focuses on a certain part of the product. There aren’t specific metrics set per category, but below you’ll find practical examples:
Acquisition Metrics
- Number of Visitors
- Number of New Users (often grouped by sources, e.g., social media, paid traffic, or organic)
- First visit → New User conversion rate
- Customer Acquisition Cost (CAC)
- Traffic sources and their respective conversion rates.
- Bounce rate
- Time Spent on First Session
- Page of first landing
Activation Metrics
Often involves onboarding funnel conversion rates. For example, the percentage of users who after registration.
Examples:
- Activation rate (e.g. percentage of new users who onboarded and engaged with a key feature)
- Onboarding completion rate
- Time to value
Retention Metrics
Focuses on user engagement over time. Metrics include daily active users (DAU) or churn rate, providing insights into the stickiness of the product.
Examples:
- Day 1, 7, 30 Retention Rate
- Week 1, Month1 Retention Rate
- DAU/MAU Ratio (Daily Active Users ÷ Monthly Active Users)
- Churn rate
- Session frequency
Revenue Metrics
- Daily Revenue
- Net Revenue
- Conversion rates from free to paid
- Lifetime Value (LTV)
- Average Revenue Per User (ARPU)
- Refund Rate
Referral Metrics
- Number of shares, invites, or referrals per user.
- Viral Coefficient – the number of new users generated by each existing user.
- Conversion rate of referred users compared to other acquisition channels.
Strengths and Weaknesses of AARRR
Strengths
- Mostly Holistic: User lifecycle-based approach that covers most of the important metrics for growth
- Widely used: Widely used in the product and growth space.
Weaknesses
- Lack of depth in user value analysis: Unlike HEART and LAMERS, which delves deeply into user satisfaction and task success, AARRR may overlook these qualitative aspects.
- Referral is a weak category: Many say Referral is an Acquisition strategy, rather than a metric category of its own. Furthermore, whether referrals are possible or viable as a strategy is dependent on the business; most businesses aren’t very viral. Most importantly, while referrals would be great to track, many of the most powerful forms of referrals such as word of mouth are often not digitally traceable, making it a poor quantitative metric in the first place. Additionally, we can gauge that it is a weak metric category compared to the other categories, because Referral is the only metric out of AARRR that could theoretically be zero and the business could still succeed.
- Hard to memorize: Frameworks are organized mental models that aim to make a set of information understandable and memorable. But the repetitive nature of letters in AARRR make it hard to remember what the acronym stands for, thus failing in being memorable (test it yourself - even after reading this post, are you able to recite what each letters of AARRR stand for?)
