Using the AARRR ‘Pirate Metrics’ Method to Build Your Growth team

Today’s Community Contributor is Himanshu Periwal, Vice President of Growth for travel and bookings website ixigo.com. Himanshu has a Bachelor’s of Engineering along with an MBA, and has experience in product marketing and management consulting. He has contributed  ratings and reviews of various marketing products on TrustRadius. 

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First off, why call it Growth, and not Marketing? In a traditional sense, Marketing is how your business defines and positions your product in order to attract customers. It covers the 4Ps of business: Product, Price, Placement and Promotion. In contrast, Growth has an equal focus on these aspects of marketing along with product-tech led by experimentation. Thus, it empowers marketing to scale and optimize through product and technology capabilities.

What is the AARRR ‘Pirate Metrics’ framework? 

The AARRR, or Pirate metrics, framework was defined by entrepreneur Dave McClure. An acronym for Acquisition, Activation, Retention, Revenue, Referral, this methodology allows you to analyze and optimize every step of your customer funnel. This simple framework helps to streamline marketing and product efforts across each of these stages, ensuring your team doesn’t miss out on small yet important marketing requirements. This framework is typically used by marketing, product, engineering teams in the company to split the division of work and ownership within their teams.

How to structure your Growth Team

A typical growth marketing team will consist of these people: performance marketing, CRM/remarketing specialists, product marketing managers, designers, frontend engineers, backend engineers, content writers, analysts, etc. 

It becomes challenging and confusing if you don’t align these people with specific targets and assign them ownership of specific tasks or projects. For SaaS product-based companies, the ‘Pirate Metrics’ framework is a useful tool to help build and align your growth team. These 5 buckets/ stages provide growth teams with a model for which metrics and goals they should be focusing on throughout the buyer’s journey. The 5 stages are: Acquisition, Activation, Retention, Revenue, Referral. 

Let’s look at each of these in detail:

Acquisition

Acquisition is the methods you use to get your potential customers, or relevant users. These leads then form the top of your user funnel. The acquisition phase is about how users are able to  discover your product, across which channels and through what communication. For example, for an ecommerce app, acquisition is the process by which they get their potential customers to install their app. This growth team would need to have performance marketers, designers, and engineers – who can help run scalable, personalized acquisition campaigns through Facebook’s ad manager, Google Ads, etc. This team should have specific success metrics, such as customer acquisition cost and cost per order, to help measure their performance and assess their advertising budget.

Read reviews for other SEO tools and ad serving & retargeting software.

Activation 

Activation is when your customers encounter their first ‘aha moment’ while using your product, or they engage with the first event in your key funnel/transactional funnel. This could be a product search for an ecommerce app, or a signup/registration for a B2B website. At this part of the funnel, teams should focus on minimizing the number of potential or returning customers that drop off from acquisition → activation, and targeting maximum users from the acquisition bucket to activate. This team should consist of product marketing managers, engineers, content writers etc. Key success metrics for teams during this phase should be the percent of new users who complete the ‘activation’ event. For example, the percentage of new users who conduct a product search, or visitor to user registration ratio etc. Marketing analytics and A/B testing platform such as CleverTap, WebEngage, Optimizely, and VWO can help your team track these metrics. 

Read reviews of other marketing analytics and A/B testing software. 

Retention 

This is probably the most important of these 5 buckets/stages as it can define your product relevance for your target users. Retention is about your users coming back to your product after their last usage or purchase. For B2B companies, this typically refers to how many of their subscribers stay subscribed in the following month or year. This team should consist of CRM specialists, content writers, analysts, etc. Key success metrics to evaluate are D7 retention / D30 retention, churn rate, and repeat user order percentage. Tools that can help you team monitor these metrics include CleverTap and WebEngage for CRM campaigns, and Firebase and Fabric for analytics.

Read reviews of CRM software from marketing & advertising professionals. 

Revenue

The revenue stage of the AARRR funnel is heavily dependent on the previous 4 stages: if they have been optimized, then the groundwork for the revenue generation phase should already be laid. Revenue teams should be focused on improving the monetization per user. This includes identifying and taking advantage of more upsell and cross-sell opportunities, and optimizing pricing and discounts to earn more revenue. People in this team should consist of growth strategists and analysts. The success metrics tracked during this stage include customer lifetime value and revenue growth trend.

Referrals 

Referrals are the best way to drive growth for your product This is about how your existing users are advocating for your product, to their colleagues, friends, and family. This team should include product marketing managers, content writers, engineers, etc. Metrics to pay attention to during this phase of the customer journey are; users acquired from referral traffic, viral coefficient, and number of organic shares from the product. 

Marketing automation and mobile analytics tools like Branch can help your team set up and track referral campaigns.

Read reviews of other marketing automation products. 

What has the result been?

Since restructuring the Marketing team into a Growth team, we’ve seen a 22x increase in our sales over the past 3 years! This is much higher than the industry average, which is growing at only about 1.3x year over year. Thus, when people with growth and experimentation mindsets are empowered with the right mix of teammates and capabilities, tech based companies can achieve much better results overtime with Growth teams compared with traditional Marketing teams.