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Pirate metrics are a set of five user-behavior metrics that start-ups (especially SaaS companies) can use to measure product-led growth.
The funny acronym for the metrics (AARRR!) makes it easy to remember the metrics individually. As silly as the name is, pirate metrics are worth remembering because they can help grow your business by measuring the right things.
The key to unlocking value in pirate metrics is to know what they are, how they are linked, and how they work. This article will cover everything you need to know so you can go ahead and use pirate metrics to grow your company.
AARRR (acquisition, activation, retention, referral, and revenue) is a metric framework for start-ups created by Dave McClure in 2007.
The framework includes the most important metrics in a sales funnel and is used to understand the customer journey and measure a company’s growth.
Since pirate metrics answer product growth and user behavior questions, they can also help optimise your sales funnel.
The five pirate metrics are critical but straightforward user-behavior metrics that provide deep insight into your sales funnel and customer journey.
It’s important to note that you may not need to measure all five metrics -- you can pick and choose the metrics relevant to your product.
However, you should be obtaining various metrics from across your sales funnel to help you understand your strengths and weaknesses.
Here’s a breakdown of the main questions the metrics answer:
Pirate metrics are explained individually
The acquisition is concerned with the beginning of your funnel. It measures how people find you. Do they come from Google? Social media? TV ads? These can be measured with web analytics, cookies, and unique URLs.
The acquisition is also concerned with how many people become customers. To measure acquisition rate:
Divide the number of customers acquired over a time period by the length of the same period. E.g. 3,400 (customers) ÷ 6 = 566. 566 is the rate of new customer acquisitions per month. You can use it to compare different periods.
Acquisition starts when the visitor first signs up to use your product. By understanding where visitors come from and the visitor-user ratio, you can establish what activities are driving the best results for your business.
Activation is concerned with the next stage in your sales funnel - users trying your product for the first time after signing up.
Activation measures a customer’s first experience and their journey to get there, so it is useful for measuring when users see the value of your product. This could be immediately or several days after signing up.
By understanding activation, you can see how efficient your sales funnel is. It could be that you need to speed up your sales funnel with things like special offers, rewards, discounts, and extended free trials to drive greater product growth.
Retention is concerned with how many users stick around after trying your product. In this sense, it is a measurement of product success.
To measure retention rate:
Having a high retention rate is a sign your product is solving problems and delivering value; a low retention rate is a sign your product isn’t useful. It’s easier to upsell than it is to sell, so it makes sense to measure retention accurately.
Referral is concerned with customer satisfaction. How likely is it users will recommend you? How often do users recommend you to others?
A high referral rate means high acceptance in your industry. A good metric is the Net Promoter Score® (NPS), which is used in customer experience programmes, or you can use the Customer satisfaction score (CSAT).
CSAT is our favorite metric. Here’s how to do it:
Number of customers who are happy ÷ total number of responses collected x 100
Revenue is concerned with how many users pay to use your product. It is the most crucial metric because it determines the viability of your business.
We recommend that you track your revenue with the cumulative value of sales over a period of time. Here are three metrics to do just that:
Pirate metrics might sound funny (AARRR!), but they are crucial metrics for every successful business. By following this simple framework, you can leverage deep insights to make better decisions and grow your business with accurate data.