Framework library · Marketing strategy
AARRR pirate metrics
AARRR follows customers through five steps: they arrive and sign up, have a first experience good enough to bring them back, keep using the product, and then bring others in and pay. Measured as the rate from one step to the next, the steps show where the product loses most customers, and so where the next round of effort is worth most. It replaces totals that only ever grow, such as sign-ups, with rates that can fall.
Use it when
- A digital or self-serve product has sign-ups but revenue is growing more slowly than expected, and you need to find where customers drop out.
- Several teams each want budget for their part of the funnel and need a common basis for comparing their claims.
- You are setting targets for a new product and want each to be a rate that someone can act on.
Avoid it when
- Sales are few, large and negotiated, as with enterprise contracts. Use a sales pipeline with stage conversion and deal values instead.
- Activation has not been defined. Agree the first moment of real value before measuring, or the funnel will count log-ins.
- The question is whether customers are profitable over their lifetime. Use unit economics, which brings in the cost to acquire and serve them.
How to run it
Define each step as an event you can count
Acquisition: a visitor creates an account. Activation: the first moment of real value, such as a first device online. Retention: still active after a set period. Revenue: pays. Referral: brings someone else in.
Follow one cohort
Use the customers who signed up in the same month and follow them through, so the rates are not blended with older customers.
Enter measured rates
Use rates from your analytics, not targets. Where a rate is an estimate, say so wherever the results are shared.
Find the step that loses most
Compare each rate with your own trend and with what similar products achieve. The weakest step against its potential is where to start.
Change one step at a time and measure again
Test a change on the weakest step, such as simpler set-up, and read its effect on the next month's cohort before moving on.
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Mistakes to avoid
- Spending on acquisition while activation is weak, which pays to bring in customers who leave in their first week.
- Defining activation as a log-in. It should be the first moment the customer gets what they came for.
- Mixing cohorts, so that a good month of sign-ups hides falling retention.
- Counting referrals without checking whether referred customers activate as well as the rest.
Where it comes from
Dave McClure, "Startup Metrics for Pirates: AARRR!", a talk he gave in 2007 and posted with its slides on his blog, 500 Hats, in September 2007. The five steps are acquisition, activation, retention, referral and revenue. Source.
Use it with
Further reading
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