Most businesses are familiar with the idea of growth hacking—or testing and scaling strategies to improve the customer journey. However, before the term "growth hacking" was even coined, Dave McClure gave a talk to introduce his AARRR framework for product-led growth. The framework helped kick off the growth hacking revolution and remains relevant today.
Let's take a look at how the AARRR framework can help your business grow faster.AARRR may be the original growth hacking framework, but it's still relevant for today's businesses. Here's how to get started! Click To Tweet
What is the AARRR Framework?
Dave McClure, the founder of 500 Startups, developed the AARRR framework in 2007 as part of a talk at Supernova, titled "Product Marketing Metrics for Pirates: AARRR!". The simple framework defines five user behavior metrics that product-led growth businesses should track and optimize to improve marketing and development.
The five "pirate metrics" are:
While measuring these metrics wasn't easy in 2007, modern marketing and analytics tools have made it easier than ever to measure and optimize these growth hacking metrics. In particular, Google Analytics is a free solution that enables you to measure all five AARRR framework components, and Google Optimize even helps you run A/B tests.
How are customers finding your product or service? For example, they may arrive from email marketing, content marketing, social media, or paid search. The most common way to measure acquisition is by comparing click-through rates to the cost of each channel. However, you may also want to look at the quality of each user (e.g., their conversion rate).
What actions are your customers taking to engage with your business? For example, Facebook's original activation metric was a new user making seven friends within their first ten days on the platform. The best starting point is a simple metric, like time on site, unless you already have a specific goal in mind that's more relevant to your success.
How many of your customers drop off over time? For example, you may have a high number of customers drop off during the first 30 days before reaching a plateau of long-term customers. Drip marketing campaigns are a popular way to boost retention rates over time by keeping customers engaged and encouraging them to use your product regularly.
How can you encourage existing customers to refer their friends and colleagues? For example, you may offer customers referral bonuses, such as free service or discounts, in exchange for onboarding their contacts. Referrals are an excellent source of revenue since there's a lot of built-in trust that comes with a colleague's recommendation.
How is your business bringing in money? You might have many happy users, but you don't have a successful business unless they're paying you sufficiently. A good starting point is identifying how much revenue you need to break even and then work toward reaching that level. Later, you can look at how to provide more value and increase revenue per user.
How to Use the AARRR Framework
The AARRR framework doesn't provide step-by-step instructions for optimizing specific metrics. Instead, the framework helps you identify the types of metrics that you should measure. In other words, it enables you to avoid so-called "vanity metrics" and focus on data points that move the needle in terms of growth and profitability.
That said, a typical process looks something like this:
- Identify the AARRR metrics that you want to track.
- Use analytics tools to measure these metrics over time.
- Tweak and A/B test changes to optimize the results.
- Use AARRR metrics to show growth or regressions.
For example, suppose that you want to improve retention on your mailing list. If you use MailChimp, you can calculate the average number of unsubscribes per email. You might decide to try segmenting your email list by source (e.g., customers vs. prospects) and send different types of emails to each source to try and reduce the unsubscribe rate.
Again, the specific metrics and goals depend on your business. For example, some companies may want to optimize the number of leads going into a marketing funnel, while others may focus on increasing average revenue per user (ARPU). It's essential to take the time to sit down and define the right metrics for your business.
Evolution of Growth Hacking
Growth hacking has come a long way since the AARRR framework came out in 2007. In fact, many companies have dedicated growth teams that focus on continuously optimizing these metrics. There are thousands of different growth hacking strategies and techniques that have come out designed to help businesses scale more quickly and cost-effectively.
Most experts recommend starting with processes rather than tactics. In other words, don't automatically try out the latest YouTube Ad tactic that you see on Hacker News or IndieHackers. Instead, create a repeatable process that you can use to develop and execute tests, learn from the results, and ultimately scale success stories.
There are many different tools that you can use to help with the process. For instance, GrowthHackers provides a software suite that you can use to define goals, manage experiments, and track results. If you want something cheap and straightforward, most tracking can be done with Google Analytics and a couple of spreadsheets.
There are also many online communities that have sprung up to share growth hacking knowledge. IndieHackers is an online community of solo founders and small businesses that frequently use growth hacking to launch new products whereas GrowthHackers provides an online community for growth hacking teams.
Of course, growth hacking also goes hand-in-hand with the Agile methodology. Without the ability to quickly pivot based on customer feedback, growth hacking would be a lot less effective. Agile development teams can quickly implement new features in two-week cycles and modify them quickly based on feedback.
The Bottom Line
The AARRR framework kicked off the growth hacking revolution in 2007. While the framework's metrics remain relevant today, you may also want to dive deeper into more modern processes and tactics to supercharge your growth rates. Fortunately, there's no shortage of tools and communities out there to help you along the way.
If you want to discuss your project, contact us today to schedule a free consultation and learn how we can help you quickly iterate based on customer feedback.