As a product marker or product manager, you may hear of Pirate Metrics, aka AARRR framework for Saas, introduced by Dave McClure, founder of 500 Startup and venture capital investor. Pirate Metrics can be a great guideline for successful product-led growth strategy,
What are Pirate metrics?
Pirate Metrics focuses on developing customer behavior models and uses them as conversion metrics and website analytics to understand and evaluate product performance and ROI.
Pirate Metrics is called the AARRR framework because it has five customer lifecycle stages. Here is the AARRR framework:
- Acquisition: Users come to the site from multiple marketing channels
- Activation: Users enjoy their first visit (Happy user experience)
- Retention: Users visit the site multiple times
- Referral: Users like the product and refer others
- Revenue: Users conduct monetization behavior
How to Develop AARRR framework
The AARRR Framework is an easy guide for the SaaS product metrics. You should set the priorities for developing a successful framework and iterate your best practice during the entire product growth journey.
1. Define metrics for each stage
The first step for the AARRR framework is to set up the metrics for each stage. You want to identify what to measure for each stage and what are the expected user behaviors in each stage.
Acquisition
For this stage, you need to define the channels which bring the users. The most common channels are organic search, paid search, sales outreach, lead gen campaigns, and anything that triggers website/product visits.
Activation
Once they come to your website, product, or platform, you will define the prospects' actions. It includes booking a demo, signing up for free trials, or downloading e-books.
Retention
Once they actively use your product or service, you need to monitor how many users are coming back and how long they use it.
Referral
It is not easy to set up the referral metrics, but you can use an NPS survey to see how they would likely refer to others, or you can measure customer satisfaction highly related to the referral activity.
Revenue
In this stage, you will identify users who generate revenues. You can define the users who generate minimum revenue, break-even revenue, and actual revenue exceeding the acquisition cost.
2. Set up the data measurement process and type of metrics.
Once you decide what you would like to measure, you will need to choose the right data analytic tools and methods, such as Google Analytics, user behavior tracking tools, or A/B testing.
Here are some types of metrics and measurements by Dave McClure.
Qualitative measurement: Usability testing/ Session Monitoring
What do users do, and find the problem from the small number of users
Quantitative measurement: Traffic analysis/ User Engagement
What users do, track usage and conversion for entire users or empirical sample of users
Comparative measurement: A/B testing / Multivariate testing
Compare what users do in A vs. B version and see which is most effective.
Competitive measurement: Tack and monitor competitors
Track competitors' activities and compare them with yours (including keywords, demographic, user satisfaction, etc.)
3. Test each stage to verify your best strategy
Time to test your strategy. You will run tests such as A/B testing and see your best strategy for your conversion rate, or you can track different user behaviors to see user engagement or retention. This test will help you to find out where to allocate your budget.
4.Improve your product and marketing strategy
Now you have enough information for your best strategy for each step. You will decide which way to go and what should be improved. This will help you increase your conversion rate and user retention for generating revenue. Testing and iterating are essential to enhance your product and marketing performance.
Conclusion
The Pirate metrics, aka the AARRR framework, are great for product and marketing teams. It helps determine the best strategy and generate revenue. It is crucial to see how many users are turning into revenue-generating users. AARRR framework is not a one-time framework; you test and iterate to optimize your products for the entire product lifecycle.
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