AARRR (Pirate) Metrics (post #15)
AARRR metrics was developed and popularized by Dave McClure of 500 Startups. AARRR is an ancronym standing for acquisition, activation, retention, referral and revenue. These are the metrics that Dave, and many others, think are the most important. What you want to stay away from are what are referred to as “vanity metrics.” Vanity metrics are things like registered users, downloads, and raw pageviews. They are easily manipulated, and do not necessarily correlate to the numbers that really matter: active users, engagement, the cost of getting new customers, and ultimately revenues and profits. Below are each of the terms and what we needed to be considering:
Acquisition: metrics for acquiring your user. We had given significant consideration to the cost of acquisition, but we also needed metrics that were telling us where our customers were coming from. If you don’t have this, then it’s hard to know what is working and what isn’t, and therefore it is hard to know which marketing activities to poor more capital into and which ones to stop doing. It ended up that our YouTube strategy worked the best, as 72% of our ASVAB customers have come directly from those videos.
Activation: metrics that show that the customer is now activated. They signed up and engaged with the app. This usually means that your user creates a username and password. Pretty simple. However, our MVP did not have usernames or passwords, and so at that point we just said that an activated user was one who had completed a round (ten questions).
Retention: customers come back to use your app. For us, this metric was going to be daily active users. Many consumer products are going to be looking at monthly active users. But, we had a short window as many students would use the product a lot while they were preparing for the exam, and once the exam was over they would be done with it. So, daily active users was and is a very important metric for us.
Referral: are users happy enough with your app that they refer it to others? It can be harder to measure because sometimes people do actually talk off line. However, if you include the question “were you referred by someone” as part of the signup process, then you should have your referral metric. This brings up two interesting points. The first is referral marketing. That was our distribution strategy (again, YouTube). So referrals were huge to us in that way.
Second, what we really did care about was the viral coefficient. Viral Coefficient is the number of new users an existing user generates. This metric calculates the exponential referral cycle - sometimes called virality - that accelerates company growth. Virality is the inherent incentive for customers to refer friends or colleagues to your company. The viral coefficient is a number like .7 or 1.2. If your viral coefficient is 1.2, that means that on average 1.2 people get a friend or acquaintance to sign up for your product. A product wants to be over 1.0. Otherwise, you will have to keep spending money to acquire customers.
Revenue: metrics that show that you are making revenue from your users. This one is pretty simple. Apple provides a dashboard though itunes that keeps track of various metrics including downloads and purchases. You can see the percent change on a daily, weekly, monthly, or yearly basis.
We used Google Analytics to track our metrics. We liked it mostly because it gave us the information that we needed and it was free. However, there are many sophisticated metrics tools out there. They include CrazyEgg, KISSmetrics, Mixpanel, Optimizely and Segment.