When you first heard about the AARRR metrics, you probably thought it was a typo or some joke someone said to make fun of eCommerce managers that are easily distracted by vanity metrics. Well, the AARRR framework is as real as it can be, is adopted by eCommerce businesses and has been developed by one of the most popular angel investors worldwide.
When you say “AARRR metrics” out loud, you sound like a pirate, indeed. That’s why these metrics are also known as pirate metrics. As you’ll see, only the name of the framework has something to do with pirates because the rest is serious business.
Let’s walk you through the AARRR Pirate Metrics Framework and how you can apply it for your ecommerce store.
What is the AARRR Pirate Metrics Framework?
The AARRR metrics framework was developed by Dave McClure, entrepreneur, Silicon Valley investor, and founder of business accelerator 500 Startups, to help startups focus on the metrics that matter most for the company’s long-term growth.
AARRR is the abbreviation for the five essential metrics companies should track to measure and improve business performance:
Acquisition > Activation > Retention > Referral > Revenue
Each of these five metrics helps a business answer five essential questions for its continuous growth:
Acquisition – “How many people find our company and what we offer?”
Activation – “How many people take their first important step in their relationship with our brand?”
Retention – “How many people engage with our company’s solution?”
Referral – “How many people talk about their experience with our company?”
Revenue – “How many people become customers?”
AARRR pirate metrics help maintain focus on the KPIs that matter most in each customer stage and identify why your company isn’t as performant as it could be.
How do we apply AARRR Metrics for Ecommerce?
The original AARRR metrics framework or the “Pirate Metrics” framework simplifies the five stages SaaS customers go through. As you see, retention comes before revenue, reflecting the fact that the user has to go through a free trial period (retention) before becoming a paying customer (revenue).
But the framework was adopted by the eCommerce startups, too, by re-arranging the AARRR metrics to reflect the journey of an online shopper accurately:
Acquisition > Activation > Revenue > Retention > Referral
As part of an eCommerce growth team, the AARRR metrics framework helps you answer these five burning questions:
Acquisition – “How many people do we attract to our company and what we offer?”
Activation – “How many people take their first important step and engage with our brand?”
Revenue – “How many people become customers?”
Retention – “How many become repeat customers?”
Referral – “How many people recommend our company to their friends and family?”
Let’s see how the AARRR metrics are applied in eCommerce.
The first step in the AARRR funnel is acquisition. At this stage, visitors and potential customers discover your brand, content, products, or services.
Of course, you want to attract quality traffic and identify which channels allow you to do that. To nail this stage, you need to identify who your best customers are and which are your best-performing channels.
Your acquisition efforts should focus on attracting more new customers like your existing best customers. Your best customers are the ones that place multiple high-value orders frequently, are loyal to your brand, and are happy with their customer experience. You want to use the top customer list to generate lookalike audiences for your acquisition campaigns.
Then, you want to find where your best customers spend time online. Are they on Facebook or TikTok? Do they read blogs or watch videos? Do they trust influencers or do extra work with their own research? You need to find the channel they prefer and those that bring the best results for your business.
In the second stage of the AARRR funnel, your visitors become more engaged with your brand and take the first important step towards a potential purchase.
There are several actions that a visitor can take during this stage: subscribing to a newsletter, creating an account, adding products to the cart, or starting the checkout process.
What moves the visitor from acquisition to activation is what marketers call the “AHA moment.” It’s when they realize that your brand offers a valuable solution to one of their struggles and helps them improve their lives.
To lead your visitors to this second stage, you need to understand the jobs to be done for your brand and map the customer journey based on qualitative interviews with some of your top customers. After you have identified the JTBD and defined the customer journey, you need to make sure your website clearly communicates the value you add to their lives once they start using your products and services.
When your apply AARRR metrics for your eCommerce, revenue comes before retention. To transform visitors into first-time buyers, you need to improve activation to revenue conversion rate with a seamless online shopping experience that builds trust and eliminates objections, remorse, and friction on all devices.
In this stage, you should focus on simplifying the checkout process and making sure every detail regarding their order is clearly and transparently communicated. If you don’t know where to start, ask your existing customers what would make their ordering process easier.
The way things go on their first order contributes to their first impression as a customer, so you need to ensure it’s a good one. The way newly acquired customers feel during their first shopping session and experiencing their first order sets the tone for the future of your relationship.
You invested so much in attracting these new people, so if you want to retain them long-term, you can’t afford to lose them, especially high-potential or highly-fit customers.
Retention comes forth in the AARRR metrics framework applied to eCommerce and represents the source of sustainable growth. Ecommerce stores thrive on repeat customers.
You made all these efforts to convince people to buy from you. Now’s the time to convince them to order again and stick with your brand despite the aggressive discount campaigns of your competitors.
If you want to improve retention rates, you have to talk to your loyal customers and ask them why they choose to stick with you, what they appreciate most and what are the key elements of an excellent customer experience.
Their perception of your brand matter most and can inform your future initiatives, from retention strategy to marketing automation setup and remarketing campaigns. In this stage, your goal is to keep them happy and increase customer lifetime value.
The last stage in the eCommerce AARRR funnel is the referral. Happy customers that share their good experiences with your brand generate new business for your online store. They create so-called viral loops online and offline.
Word-of-mouth remains the most powerful driver of new sales because people trust more recommendations from other people – friends, family, colleagues, or acquaintances.
Keeping your new and recurring customers happy should be among your top priorities. You need a proactive attitude, meaning you have to constantly monitor and analyze customer satisfaction, acting in real-time according to customers’ feedback and importance to your business.
How do you encourage happy customers to recommend your brand if they haven’t done it already? Start a referral program (it can be part of your loyalty program) and set an irresistible reward for each time a customer recommends you to someone new. Give them extra benefits each time they leave a review on your website. Make referral benefits easy to access and keep this virtuous circle rolling.
The AARRR Pirate Metrics for each stage of the funnel
The AARRR funnel is a simplified model that helps your company understand what metrics to look at during each customer journey stage: from the moment a potential customer discovers your brand to the moment that determines loyal customers to recommend your brand to friends and family.
One of the perks of having an online business is getting access to multiple data types. The downside is that, sometimes, handling all this data becomes overwhelming. Each department has different KPIs, each manager has a different perspective of what you must track, and each collaborator seems to emphasize the results that make them look good when it’s reporting time.
Many eCommerce stores adopt the AARRR pirate metrics to keep the entire company focused on the data that helps them improve processes and generate sustainable growth.
Let’s take a quick ride through the main AARRR pirate metrics you should track, analyze and improve for each stage:
KPIs for the Acquisition stage
During acquisition, visitors and potential customers discover your brand, content, and offer. You need to attract quality traffic and invest in those channels that help you achieve this goal. The KPIs you want to focus on are:
- Visitors per channel
- Customer acquisition cost
- Click-through rate
- Cost per click
- Conversion rate
KPIs for the Activation stage
During activation, visitors start to engage with your brand and make clear steps towards a future purchase. You need to get them to the “AHA moment” and show them the value you bring to their lives. The metrics you want to focus on are:
- New subscribers
- New user accounts
- Average time on page
- Pages/ session
- Visitors to sign up rate
- Conversion rate
KPIs for the Revenue stage
The revenue stage marks the beginning of your relationship with newly acquired customers. You need to make a good impression and set a positive tone to increase the chances of a second purchase. Keep your eyes on metrics like:
- Revenue by channel
- Revenue by customer type
- Conversion rate by channel
- Revenue per customer
- Average order value
- Revenue by new vs. repeat customers
KPIs for the Retention stage
During the retention stage, you have to convince existing customers to become repeat and loyal customers. Customer loyalty programs and VIP treatment help you keep high-value customers close. The KPIs you need to focus on are:
- Retention rate
- Churn rate
- Customer lifetime value
- Net Promoter Score
- Conversion rate
- Loyalty program conversion rate
- Average days between transactions
- Recency, Frequency, Monetary value
KPIs for the Referral stage
The referral stage allows you to use the power of your loyal & happy customers to attract more new customers like them. Your goal is to motivate satisfied customers to become active promoters by joining the referral program. The pirate metrics you want to look at are:
- Net Promoter Score
- Referred customers
- Referral rate
- Referral conversion rate
- Positive reviews
- Social media tags
When creating a reporting system based on AARRR metrics, you’re more likely to observe what works and what doesn’t, allowing you to prioritize your actions and prioritize the most burning tactics.
Now that we covered the AARRR metrics for eCommerce, how optimistic are you about your business growth?
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Frequently asked questions about AARRR metrics
AARRR metrics are also called pirate metrics because they sound like the sound a pirate makes. “AARRR” stands for Acquisition, Activation, Retention, Referral, and Revenue. The AARRR metrics are used by companies that want to focus on the right KPIs on their way to achieving eCommerce growth.
The activation stage of the AARRR funnel aims to turn visitors into users. If we’re talking about a SaaS company, the goal is to convince the visitor to create an account and start using the solution. If we’re talking about an eCommerce store, the company wants to convert visitors into users by creating an account on the website on in their app.
Visitors start to engage with a company in the activation stage of the pirate funnel. Their engagement indicates a clear interest in their brand, products, and services. The company’s focus during the activation stage is to generate that “AHA moment” that helps the new audience understand the value added by the brand to their lives.
“RARRA” is Thomas Petit and Gabor Papp’s reinterpretation of Dave McClure’s AARRR framework. According to Petit and Papp, retention should come first in the funnel because it’s the most important stage. The order they are suggesting is Retention, Activation, Referral, Revenue, and Acquisition.