What is the AARRR model and how can you use it to scale your business?
The AARRR funnel is an analytical framework developed by Dave McClure, founder of the American Startup Accelerator 500 STARTUPS. The AARRR model is useful for identifying the current status of services, and it's particularly useful for startups that don't have enough manpower or time.
The AARRR funnel consists of five stages: acquisition, activation, retention, revenue, and referral.
Acquisition: This stage is about attracting new customers to your service. For example, when you advertise on social media or through billboards.
How do you attract new customers?
How are the new customers accessing your products/services for the first time?
Multiple channels exist such as on/offline advertisement, publicity, viral, e-mail, social media, and so forth.
Metrics: CPA, CAC, number of new visitors, and route of new visitors inflow.
Activation: In this stage, the customer becomes active in using your service. For example, when a user signs up for a trial version of your product or service and makes their first purchase within three days of registration.
How do customers first actively use our products/services?
Is the customer’s first experience of using the product/service positive?
Each business has different standards for defining ‘active’ (eg, actively using the services, frequently viewing detailed pages of products on sale, reading the content of platform services, etc.)
Metrics: website traffic, in-web time spent, PV, sign-up rate, event participation rate (number of event page views), etc.
Retention: This stage indicates how long an active customer continues to use your service. For example, when a user remains in a 30-day trial period without canceling their subscription before the end date arrives.
What is the repurchase rate?
In which part do customers find value and decide to repurchase?
Metrics: bounce rate, bounce pages
Revenue: This stage shows how much money your company makes from each user (the amount of money spent per transaction divided by the number of transactions).
Do customers pay for our products/services?
Under what circumstances do customers contribute significantly to sales?
Metrics: purchase conversion rate, sales, a unit price per order
Referral: It is when a user tells others about your product or service through word-of-mouth marketing (e.g., social media posts).
Are users voluntarily sharing their testimonials?
Metrics: number of shares, number of comments
We all know that marketing is an important part of any business. But when we think of ‘marketing’, we tend to focus on raising awareness and acquiring customers. As mentioned in the AARRR model, the focus is on the top level of the funnel. However, growth marketing focuses on every stage of the funnel. This is because business can grow once the customers actively engage with our products/services and eventually generate sales.
Therefore, if you are a marketer who wants to do growth marketing to grow your business, you must improve the overall marketing funnel.
If you would like to know more about the AARRR model and how you can apply it to scale your business reach out to us at BS Consult.
BTW, we will start with some stupid questions!