Understanding User Behaviour Metrics
Lets discuss some actionable metric goals for product-led growth businesses.
Dave McClure, A Venture Capitalist, Angel Investor and Founder of startup accelerator 500 startups developed a framework known as AARRR. In today’s article, I will be discussing about this framework in detail which will help us understand the various phases of a user’s journey.
AARRR stands for Acquisition, Activation, Retention, Referral, Revenue. The AARRR framework refers to a set of user behaviour metrics that businesses can track within customer lifecycle. Let’s have a look into each one of them:
1. Acquisition : Acquisition refers to all of the channels you use to introduce people to your product. It can be social media, word of mouth, SEO etc. This metric tells which channel drives the most traffic, which channel has lowest customer acquisition cost etc.
2. Activation : Activation tells about how good is the first impression of users for your product. This can be measured time spent on your app/website, signing up for free trial etc. It is that phase where the user realizes the real value of your product. This makes them come back to your product again.
3. Retention : After the user gets activated, we measure how many times they return over a given timeframe, percentage of emails they read targeted to them etc. Retention basically means people regularly come back to use your product.
4. Referral : This is the best way to drive growth. This means the users of your product introduce your product to their friends and co-workers and spreading good word of mouth. One of the tools for the same can be emails with referral promotions.
5. Revenue : Finally, you’ll need to identify actual revenue targets for your users. It will help you understand whether or not your costs for acquisition, activation, and other efforts result in profitable growth. So what’s the best way to increase revenue? By increasing your Customer Lifetime Value (CLV) and decreasing your Customer Acquisition Cost (CAC).
To summarize, the AARRR framework is the simplest and most effective way to look at optimizing your business and measuring growth.