The AARRR metrics framework, sometimes called the AARRR funnel or “pirate metrics,” is a framework of metric categories businesses use to track customer behavior across the customer life cycle.
AARRR’s origins can be traced back to 2007, when Dave McClure, fresh off stints leading marketing at PayPal and Simplyhired, spoke at the Ignite Seattle event in Washington state. The event’s tagline was “enlighten us, but quickly,” and McClure complied.
His talk, “Startup Metrics Metrics for Pirates: AARRR!,” clocked in at just over five minutes, but it had an outsized impact on the future of growth as a discipline, as McClure laid out five key moments in a customer life cycle that startups — particularly product-led SaaS companies — to this day use to their advantage.
What Is AARRR?
AARRR stands for acquisition, activation, retention, referral and revenue, which make up the stages of the customer life cycle. The AARRR framework says you should measure each stage to identify where, when and how often a user carries out a desired action with the product.
You can visualize AARRR as a funnel, where “acquisition” marks the beginning phase and “revenue” marks the ending phase of the customer life cycle.
How Is AARRR Used?
Businesses use the AARRR framework to grow quickly and sustainably, relying on it as a helpful set of reference points to measure conversion and ask important customer questions during each phase of the customer life cycle, which helps reveal areas for product improvement. AARRR may be used as part of a company’s growth marketing strategy, and it’s been especially popular among startups, specifically SaaS and product-led businesses.
What Does AARRR Stand For?
Here’s what every metric category of AARRR means and how each is used to drive growth.
The AARRR (Pirate) Metrics
- Acquistion: How can users discover us?
- Activation: How can casual users become customers?
- Retention: How can we keep our customers?
- Referral: How can we incentivize customer referrals?
- Revenue: How can we gain a profit from customers?
Acquisition describes the moment a user finds the company’s digital presence. In this phase, users typically arrive from a wide variety of channels, including email, social media and SEO.
Acquisition is usually measured by metrics like click-through rate, traffic per channel, visitor-to-lead conversion rate and customer acquisition cost.
In particular, McClure recommends ignoring users who click-through and “bounce,” or promptly leave the site — as they probably arrived by accident. From there, he recommends breaking down bounce-controlled click-through by channel, and evaluating each channel based on its price point, the volume of users it brings in and the quality of those users. Do users stick around? Which channels are getting the most activity?
Based on findings from these questions, resources can be allocated toward the best-performing acquisition channels.
Acquisition metrics to measure:
- Bounce rate
- Click-through rate
- Customer acquisition cost
- Lead conversion rate
Sometimes referred to as the “aha! moment,” activation is the point in the journey where the user sees the value in the product, and tips from a neutral to what McClure calls a “happy” user experience.
Ultimately, the activation metric depends on the product. At Dropbox, a measurement of activation means a new user uploads at least one file to a Dropbox folder. Or like in the early days of Facebook, activation meant a new user made seven friends within their first 10 days on the platform. McClure suggests startups use something simple as their activation metric — like a certain number of page views or 30 seconds spent on the site.
Activation metrics to measure:
- Customer conversion rate
- Drop-off rate
- Dwell time
- Time to value
Unlike the other stages so far, retention is less a particular moment than a process — the process by which a new user becomes a long-term user and continues returning.
Retention can be measured through metrics like how often a user revisits a website, whether a user is resubscribing to a service or how often a user is opening email content. McClure recommends that startups send out regular, automated emails to new users — maybe three in the first month after they first arrive on the site — to boost retention. These emails then offer up natural retention metrics: email open rates and click-through rates over time.
For Ben Winter, head of growth and marketing at Fairmarkit, retention is so key that it’s made him reevaluate what he considers growth in the first place. If a company can retain a core group of users and continually upgrade their subscriptions, he pointed out, that company can grow revenues without much acquisition or referral at all — and with net-negative churn like that, investments in customer acquisition quite literally pay off.
Retention metrics to measure:
- Churn rate
- Email open rate
- Login frequency
- Retention rate
Referral describes any instance where the user recommends the product to other people.
Referral can be measured with metrics like how often a user promotes a product on their own social media or if they have utilized product referral programs. Rewarding referrals can look different depending on the business, whether it be through in-app cash or specialized discounts. Referrals are a critical area for growth, as product recommendations between users can be seen as more trustworthy than from the brand itself.
Referral metrics to measure:
- Net promoter score
- Purchase rate of referred customers
- Referral rate
- Viral cycle time
Revenue encompasses moments where the user takes a money-making action. What that action is, exactly, can vary widely from product to product. It could mean going from hosting free events to paid events on Eventbrite; for Netflix, it could mean continuing a subscription past the free trial stage.
The revenue metric is measured in currency, unsurprisingly — though McClure also recommends comparing it with minimum viable revenue, and the revenue level at which the company would break even.
Revenue metrics to measure:
- Customer lifetime value
- Expansion revenue
- Monthly recurring revenue
- Revenue churn
The Significance of AARRR
Pirates and hackers have a similar rogue energy, and many consider AARRR a growth hacking framework, but McClure’s talk actually predated any mainstream tech discussions about growth hacking. The term wasn’t coined until 2010. McClure gave his talk the same year Facebook created the tech industry’s first internal growth team. No one knew if it would work.
Spoiler: It did. By the end of 2022, the growth team had gotten Facebook to almost 3 billion monthly active users. Many other companies have followed Facebook’s lead; today growth teams are tech industry standard. “Growth hacking,” not so much. It became a ubiquitous buzzword, then petered out of use.
For some, McClure’s “startup metric” terminology has even fallen away. “I think the term ‘startup’ is becoming a misnomer,” Winter said. He sees the pirate metrics as broadly applicable for tech companies — especially for SaaS companies striving for product-led growth.
Regardless of how it’s labeled, AARRR metrics are still widely used in the tech world — they’re just no longer strictly McClure’s. Since AARRR’s origin, other tech leaders have adapted and modernized the initial framework to continue fitting dynamic growth needs.