What is the AARRR Funnel?
Michael Witte
Growth Scientist
“The AARRR Funnel is one of the most effective and fundamental tools used by growth hackers. It is a simple method that allows a growth hacker to accurately measure a client’s growth throughout the full user experience.“
What Does AARRR Stand For?
Each letter in “AARRR” represents a pivotal step in the chronology of the user experience for a certain product. Specifically, the “AARRR” acronym stands for “Acquisition”, “Activation”, “Retention”, “Revenue”, and “Referral”.
Acquisition:
The first step in the AARRR funnel is “Acquisition”. In terms of marketing, acquisition is how customers get to know your company / product. This step is fundamental in that it is the first step towards product purchase and revenue. Some customers might decide along the way that they are not interested in what you are selling, but every user must go through the acquisition phase. Some popular acquisition campaigns adopted by companies include online advertisements and email newsletters. Tracking key metrics such as website views will show the true effectiveness of particular acquisition campaigns.
Activation:
Following the “Acquisition” phase is “Activation”. Activation is the first direct experience a user has with a product. Examples of activation include when a user signs up for a new social media platform or creates an account for a new website. It is extremely important to grasp the interest and attention of a user during the activation phase. Thus, it is a good idea to make the activation process as seamless and simple as possible so the user can easily understand what your product is about.
Retention:
When a user regularly comes back to a company to use their product, then that company is achieving “Retention”. Maintaining retention is one of the most difficult steps along the AARRR Funnel timeline and reveals the true efficacy of a product. This can be measured by how many times a user opens an app over time or how many times a user purchases something from your company. If there is a significant drop-off in use of your product after initial activation, then it is best to alter such product in order to keep customers involved with your company.
Referral:
Referral occurs when one of your existing customers suggests or refers your product to another person. This is one of the best ways to stimulate growth, and it essentially acts as a free marketing tactic. Major companies like Dropbox and Hotmail invested heavily in their own incentivized referral methods to quickly build themselves to where they are now. Metrics such as the Net Promoter Score (NPS) and the Viral Coefficient help identify how successful a company’s referral strategies truly are.
Revenue:
The “Revenue” phase is where every company wants to get to. It is the net amount of money gained from a product. If all other steps in the funnel are optimized fully, then your product should be generating a significant revenue stream.
If utilized correctly, the AARRR can facilitate massive growth for your company. But no step should be ignored. Each phase has its own purpose and is interconnected with other steps in the funnel. If your company isn’t currently taking advantage of the AARRR funnel, try implementing it for one of your products and witness the results for yourself!