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Powerful framework used by some of the most successful startups

Published March 15, 2017 by PLATFORM

The AARRR framework is a great tool for entrepreneurs, CEOs, marketers and even designers who want to achieve quick growth and expand their customer base. The most popular startups and tech companies like Facebook, Twitter, LinkedIn, Pinterest, Apple, Spotify, Dropbox, Tumblr and many others are using this extremely powerful framework to grow their business. The implementation is very simple and it doesn't require any technical knowledge. The AARRR startup metrics model developed by Dave McClure describes all of the behaviors of your customers. Furthermore, the AARRR framework is divided into 5 steps. The aim is to make people move from one step to another. People will ideally move from signing-up to your product (Acquisition), to giving you their money (Revenue).


001

The 5 steps of the AARRR model


It is important to understand the AARRR process, because only when one understands all the metrics can you diagnose what is wrong with a startup, instead of guessing and making wrong assumptions.


Acquisition - Get traffic and media attention


Acquisition is the first contact point with a customer and your product or website. In this step, you want people to sign-up for something. In a SaaS product, you generally want people to register for a Free Trial. The best you can do in this step is to work on Traffic Acquisition to ensure that you can bring a lot of qualified leads to your website or mobile application. There are many online and offline tools that can help you attract your customers, depending on your offering, some work better than others. Once you attract a potential customer, the most important aspect comes right after they appear on your web or mobile landing page. Now you have them and you need to capitalize on this attention and move to the next step!


002

Various online and offline acquisition channels


Understanding the right acquisition channels for your offering are key to attracting potential users to your mobile app or website. Often times less is more, select a few channels and do it well, rather than spreading your energy across many channels and not fully understanding what you are trying to achieve. You can always add another channel later.


Activation - Turn visitors into engaged users


Activation is the stage where people actually use your product or at least leave their details (social media sign-up, email newsletter) with a potential to become users at some point in the future. A user is unlikely to enter credit card info and subscribe to your product if they haven’t activated yet. This is because they need to appreciate the full value of your product first, and need to be confident that the value is greater than the cost. So asking them to fill out a complex sign-up form can lead your newly acquired users to bouncing as soon as they open the app.

Don't lose a customer just to get their credit card information. Gain the customer first and then worry about the details.

One way to increase the number of activated users is allowing them to easily explore the most popular content and core features through guest access. Show them beautiful images, attractive content, valuable features and interesting UX design so they can fall in love with your app. You can always ask for personal info later. The way in which Apple Music and Uber use design principles to activate their mobile app users are provided below.


02_apple_music

Apple Music engages its users early on by asking them to select artists they like, love or dislike in a playful way.


This interactive on-boarding process helps Apple collect important data about the artists and music styles a user likes in order to later use them in their algorithms to recommend what the user might like to listen to next. This is a seamless way for Apple Music to show you the benefit of discovering new artists.


01_uber

When a new user downloads the Uber application, Uber quickly shares with them the value of the application by showing the user that within a few minutes they could have someone pick them up to give them a ride.


Retention - Turn your users into active users


Once you’ve acquired a bunch of users, and they've all used your product (E.g.: generated their first invoice, created their first project, opened the app and played a game) you need to focus on getting those users to come back regularly. Measuring retention might be as simple as signing back into your dashboard 2x within 30 days. Or opening your app a second time and playing at least one level of the game. Social networking applications such as Twitter have an excellent built in feature that will encourage people to interact with the app more by providing them with notifications of others’ activity. Getting the user to set up the notification as a push notification may also be a very effective way to get users to come back to your app. The idea in this step is to get the user to come back and use the application again. The more an application is used, the more benefits users see in the product.


05_twitter

Twitter provides you with in app notifications (can be set up as push notification) to entice you to come back to Twitter as new activity is added that you may be interested in.


04_tumblr

Tumblr's push notification example.


Most of the social media applications allow a user to set up push notifications. An example of Tumblr push notification is provided above. Mobile applications use notifications as a tool to retain their users and turn them into fans, which helps them transition into the next step of the framework.


Referral - Turn your users into evangelists


Word of mouth marketing is the best performing ROI you will ever have. Referrals, particularly between 2 people who know each other, lead to the highest conversion rates you will get in your app and have the potential to grow your user base exponentially. Once you start looking at the referral stages, it is important to ensure you have some viral mechanisms in place. Share buttons, promo codes, affiliate links, “powered by”, invite a colleague... are just some of the possibilities. Once you have a few of these, you can start A/B testing and monitor the performance of your referrals.


If all of the steps described above were well executed, the users will themselves have a desire to share the application with others. Thus it is important to design such sharing process as simple and intuitive as possible. However, it is important to purposefully decide when this sharing will happen. The user should be at their emotional peak, when they are the happiest about using the app. At this point, when the user has decided to share our app, we need to make it simple for him/her to do so.


06_share

Zane David created an iO7 Air Drop sharing concept.


Dropbox is another great example of a company that not only made it easy to share their product, but built in an incentive to do so. Dropbox made it their priority to share the product before looking at the revenue potential, which from a long term perspective paid off tremendously. Dropbox gave its users the ability to increase storage space by inviting others to join, by providing a testimonial, by sharing the application through social networks, etc.. The free space was an excellent trade-off for the exponential growth in their user base and low marketing costs. They used this technique to not only lower their acquisition costs but also to spread the word about their brand.


07_Dropbox

Some of the ways in which Dropbox users can benefit from sharing Dropbox


Revenue - Scaling your business


Once you establish your startup, monitoring revenue is a crucial part of avoiding decisions based on vanity metrics in your startup. However, note that it is important that you place the other 4 stages before revenue, as without them you’re just wasting your time throwing prices in front of people. Once you’re tracking transactions, it allows you to follow certain events such as subscribing to a blog, or opening a particular email, or clicking on a particular tweet, and seeing how those actions translate to the bottom line.


There are dozens of different revenue models out there, including paid apps, in-app purchases, freemium models, virtual goods, SaaS (software as a service, where you pay-as-you-go, or tiered pricing), ad-based revenue, data selling, transactional, affiliate to name just a few. You need to find a model that best fits your offering. LinkedIn is a good example of a tiered SaaS revenue model, where different users may have different needs and there are different packages provided to meet these needs.


08_Premium_business

LinkedIn's Premium account offers several benefits beyond those provided by their free version.


09_Game

Many games use a virtual goods revenue model, where the game itself may be free, however he user has an option to purchase some goods that would improve their experience interacting with the game.


10_Tinder

Tinder is an excellent example of a freemium revenue model, where most of the functionality is provided to the users, however some exclusive functionality is only available to paid customers.


Important: Focus on activation and retention first


We understand that all entrepreneurs want to make money, however we would like to caution you to focus on activation and retention before you get ahead of yourselves. It is important to ensure that your product solves a real need and that it delivers the UVP, otherwise there is no need in getting a lot of users to experience the product. In fact, getting too many users too early could be costly if their interaction with your website or application is negative, they could not only bounce, they could give you bad reviews, which could prove much more costly. Therefore, only once you validate your MVP, should you focus on growth hacking. 


We hope that you found these tips helpful as you think of your business. If you enjoyed reading these business tips, you might enjoy reading some of our other blog posts about how to succeed as an entrepreneur, 6 tips for a winning startup and much more.

Anna McNab is a product strategist at PLATFORM and an associate professor at Niagara University

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