The AARRR framework (or the PIRATE funnel) is an amazing business framework.
It has been widely used by companies of all sizes throughout the years.
Companies of all sizes have widely used it throughout the years.
There is a problem with this framework, though:
It is not for everyone.
In this article, I am going to explain to you what the AARRR framework is, and why it is not suitable for every business.
Ready? Let’s dive right in.
Chapter 1: What is the AARRR Framework?
The AARRR framework—or PIRATE funnel as you may know it—is a framework invented by Dave McClure.
Dave McClure is an entrepreneur and angel investor in the San Francisco Bay Area.
Among others, he has found the business accelerator 500 Startups.
On August 8, 2007, Dave McClure shared a Slideshare that would change the startup (and business) world once and for all:
The title of the Slideshare was:
“Startup Metrics for Pirates: AARRR!!!
(Startup Metrics for Product Marketing & Product Management”
What are the AARRR metrics and how businesses can use them to grow?
According to Dave McClure’s AARRR framework—and his original 2007 Slideshare presentation—there are five (5) stages in every customer’s lifecycle:
- Acquisition: When new users come to your website for the very first time
- Activation: When users enjoy their (first) “happy” user experience (AHA moment!)
- Retention: When users come to your website again and again
- Referral: When users are happy enough to “speak out” about your product
- Revenue: When users conduct some kind of monetization behavior
Let me illustrate this with a simple example.
And, for the sake of example, let’s use our own company, Growth Sandwich.
In the 1st stage, a user visits our website for the first time:
Regardless of where the visitor came from (i.e., Facebook, LinkedIn, zest.is, referral or any other channel), they visited our website because they wanted to know what our agency is all about.
That doesn’t make that visitor a paying customer; and, let me be clear about something:
Acquisition—in this case—does NOT equal customer acquisition.
This comes later.
Now, let’s assume that the same visitor comes to our website after a couple of days—during the weekend—to watch one of our free online courses:
And, that after taking the course, they were pleased with the lessons taught.
This means that this user had a valuable—and positive at the same time—first experience with Growth Sandwich.
During that second visit, the user reached the activation stage.
After that valuable experience, the same user visits our blog section and consumes some of our content:
Moreover, the user decided to bookmark some of our blog posts, and visit our website every other day to consume more content on our blog section:
At this stage, we can say that the user is on the retention stage.
This is not customer retention—this is a different thing.
Fast forward a couple of days, the user decides to share one of our blog post on zest.is:
The stage when the user felt like sharing one of our content pieces is the referral stage.
That could happen in many possible ways, but this is just one of the many.
Let’s move on to the next stage, which is the final one.
After reading many of our articles on growth hacking (or growth marketing), the user decides to take our Growth Marketing Course:
This was the stage when the user conducted some kind of monetization behavior, which means that—according to the AARRR framework:
The user has reached the Revenue stage.
Knowing what is the ultimate journey that most users take when they interact with our website can help us leverage our marketing efforts.
Also, it can help us define all the important metrics for our agency.
Such metrics could be:
- Number of people who visit our website daily (website visitors),
- Number of people who sign up for one of our courses,
- Number of qualified leads per month,
- Number of new customers per month or
- Customer lifetime value.
Depending on the type of your business, these metrics can be entirely different.
For example, if you run a SaaS business, you may care about:
- Daily active users,
- Customer base growth,
- Free trials per month or
- Free-trial-to-paid conversion rate.
So far so good, but can you see the problem here?
The journey that we described—until someone decides to purchase one of our online courses—is one of the many journeys that someone can take.
This means that we can’t generalize it and accept it as the ONLY funnel for our agency business.
I hope it’s evident that this is the main problem with the AARRR framework.
That it doesn’t apply to all businesses; that every business is different and has a different business model and different needs.
Let’s dive deeper so that you understand the PIRATE funnel a bit better.
Chapter 2: What are the PIRATE Metrics?
If you’ve ever heard of the AARRR framework, then you’ve definitely heard of the term PIRATE metrics (or AARRR metrics).
The customer lifecycle journey is strictly correlated with these metrics.
But, what are the PIRATE metrics?
Here is how Dave McClure presented them in his original 2007 presentation:
Simply put: Startup metrics for pirates are important metrics that you should keep an eye on, and that you continuously need to improve.
Their performance is connected to your overall performance and—most of the times—they reflect the growth within your organization.
As you can see, the above slide also depicts the conversion rate between every stage of the funnel.
This is very important because this way we can identify patterns, friction points and stages that we need to optimize.
Here is how the funnel break-down will look like:
What I need you to keep is that not all the people who are going to visit your website, are going to become paying customers or promoters of your business.
In fact, only a small percentage of people entering one stage, will make it to the next one.
Thus, you should always try to optimize for increasing the number of people moving to the next stage at any given time.
The metrics that you are going to use may differ based on:
- Your type of business – A SaaS should monitor different metrics than an eCommerce business
- Your startup’s stage of growth – A startup that hasn’t found a product-market fit yet, is interested in different metrics than a startup that has found a PMF
- Your marketing funnel – The structure of your funnel and the customer journey you’ve chosen, affects the metrics that you need to monitor
Assuming that you run a SaaS, some of the metrics that you could use are:
- Retention rate
- Number of qualified leads
- Number of people signing up for your free trial
- Churn rate
- Customer acquisition cost (CAC)
- Paying customers
- New customers
- Number of paying customers per month
- Number of new customers per month
Once again: every business picks up different metrics, based on what is important and based on the structure of its funnel.
If you want to dive deeper into the world of analytics, I recommend you read the Lean Analytics book (from the Lean Series):
This book will help you understand what is essential to monitor and why.
An additional resource that I would suggest is our “Growth Marketing Course,” which you can find in our “Online Courses” section:
It will help you get a better understanding of the metrics that you need to monitor, based on your type of business.
Let’s move on to the next (and most important) chapter.
Chapter 3: Why the AARRR (or the AAARRR) framework is not for everyone?
As I mentioned earlier, the AARRR Framework was published in 2007.
In 2015, Growth Tribe (a growth hacking academy based in Europe) added one step to the Pirate funnel—and, broke down “Acquisition” into two stages:
- Awareness: Getting people to visit your website, product or service.
- Acquisition: Customer doesn’t abandon your website, product or service. (Which is closer to customer acquisition.)
Even though the AAARRR framework describes the customer lifecycle stage for many businesses and business models, there are still many businesses that don’t fit in this model.
Simply put, an eCommerce business may have a different funnel than a SaaS or consulting business.
Even businesses that fall into the same vertical may have completely different funnels.
Let me explain that with a simple example.
And, for the sake of the example, let’s assume that you are looking for an affordable way to track the flow of your sales funnel.
And, ideally, you want someone that integrates with Google Sheets and Gmail.
After researching online, you end up on Airtable home page (which also works as a landing page):
This is the Awareness stage since it’s the first time you visit the company’s website.
The tool seems to offer exactly what you are looking for, and thus you decide to sign up for a free trial:
Plus, it integrates with most of the tools already in your marketing stack, through Zapier:
At this point, we can say that you’ve reached the Acquisition stage.
Soon enough, you find out that Airtable offers ready-to-use templates for various use-cases:
And, that it has an exact template of what you were looking for:
Thus, excited as you are, you start to edit the template, trying to adjust it to your needs.
In this stage, you are in the Activation stage (the AHA moment!); as you’ve used the product right away.
We can say that, in this case, Acquisition and Activation happened almost simultaneously.
So far, so good.
Next—and while on the 14-day free trial—you decide to share this tool with your colleagues and friends, through Airtable’s referral program page:
This is the Referral stage, which—in this case—came before the Retention stage.
Most of your friends and colleagues respond the next day, and you have more than $130 in account credits.
Thus, you decide to use your account credits to purchase the PLUS plan of Airtable’s pricing plans:
This is the Revenue stage, as you’ve conducted some kind of monetization behavior, smartly using your account credits.
Now that you have a PLUS plan, you visit the tool every day, you connect it to your Gmail and Google Sheets, and create effective workflows.
Note: Base is the name Airtable is using to describe your spreadsheet/database.
This is the Retention stage, as you (the user) return to the product every day, and get actual value out of it.
The funnel in our example was the following:
- Acquisition and Activation
Which is quite different both from the AARRR and the AAARRR framework.
The bottom line?
When it comes to mapping out your funnel, there isn’t a one-size-fits-all solution.
Thus, I recommend that you use frameworks, but also try to adjust them so that it fits your business needs.
You should know that a business can have multiple funnels:
- A social media marketing funnel
- A content marketing funnel
- A sales funnel
All these funnels consist of different stages and micro-conversions that help you reach your macro goals.
It’s not about the acquisition channels or marketing channels you are using; it’s about how you glue everything together, to create a consistent stream of new customers that love your product and stick with it.
Regardless of the funnels a business is using, it all ends up to provide users with an amazing user experience.
A meaningful first experience is going to help you turn first-time visitors into customers and promoters of your business via word-of-mouth.
By now, you should have a better understanding of what the PIRATE Funnel and the PIRATE metrics are.
In our website, we offer free marketing funnel templates:
You can find them all here.
Let’s move on to the last chapter.
Chapter 4: Last Thoughts
The business world should thank Dave McClure for the exceptional framework he invented.
The AARRR framework has helped many businesses understand the lifecycle journey that someone takes until they become a paying customer and promoter of their business.
Also, AARRR metrics are very useful when you want to understand what is more important and what is not.
However, as I explained in this article, AARRR is NOT for everyone.
Spending time creating funnels or complex systems that tell you nothing about your customers won’t get you anywhere.
My advice is this:
The foundation of your marketing efforts should be the value you add to your customers and not the funnel you are using.
Map everything out, stay organized, but above all try to add value.
If you do, you’ll get value in return.