An intro to AARRR for Designers — The path to better products and a higher salary
One of the core things you need to know when working in Product is the customer funnel, and the metrics to measure it.
When you understand these metrics, you can understand what is working or not working with your product so you don’t guess and make the wrong assumptions.
This is often the difference between highly paid Designers, and commodity level Designers
Designing shiny things is great (who doesn’t love shiny things!), but unless we are making art we are paid to create a result. And in Product that result is being able to increase these metrics.
Currently the most popular framework, and probably the only one you need to know is AARRR.
The AARRR framework, is also known as the startup metrics for pirates. The framework got it’s name because the acronym AARRR makes you sound like a pirate (cmon, say it out loud!).
This is an introduction for Designers to AARRR.
The framework is broken up into 5 stages each flowing down into the next one. Each stage has it’s own metrics, and to start with I will provide a simple one that is commonly used.
But it’s power comes from being able to zero in on issues and opportunities, allowing you to Design solutions and measure the effects.
For the sake of this explanation, let’s use a meeting room booking app as an example.
A is for Acquisition
This is the stage where people become customers. When a lead becomes a customer, this is known as a ‘conversion’.
Typically this stage is driven by marketing who use landing pages, Google Ads, and social channels, but also referrals which we will discuss later.
For the booking app, conversion (person into a customer) is when they sign-up for the first time. So a key metric here is the conversion rate of your marketing channels.
Also important is how much $ you spend on each channel compared with the conversions. This is called the ‘Customer acquisition cost’.
This is important because if your cost to acquire customers is higher than the revenue that you get from them, it could be a huge issue.
A is for Activation
This is the customers first time experience. The crucial aspect to this stage is whether or not the customer finds value, and whether they stick around.
A product designers role in activation is about increasing the rate that new users get to the aha moment
The value of being able to get people to the aha moment is crucial. The industry standard is that 80% of users drop off in the first 3 days of using an app. This can make or break a start-up if the acquisition costs are high.
The most common tactics here are user-onboarding and free trials. Companies can also have customer success managers here as well.
The aha moment is different for every product, but it is the key moment in the journey that keeps customers coming back. Once a customer finds this, they are ‘converted’.
They key thing to measure in activation is the ratio of people that reach your aha moment.
R is for Retention
Retention is the people who keep coming back to your product month after month. The best way to measure this is the retention rate.
Creating a high retention rate indicates that everyone from the marketing, product/market fit, and even the support is aligned and creating value for your customers.
The opposite of retention is churn. If your churn is high, then you may have issues with the product, or your messaging needs work.
So, you want to make sure that your churn rate is lower than your acquisition rate. In other words, you are getting more customers than you are losing.
R is for Referrals
Unless you have tons of money to spare, having current customers bring in new customers for you is like gold. This not only brings in aligned clients, but also lowers your acquisition cost.
To have a good referral program you need to Design a systematic journey to encourage action.
In our example of the booking app, we could create and track in-app or email based referral links, or use Net Promoter Scores.
R is for Revenue
Lastly this is the reason why the product is still able to continue, it (hopefully) makes money. If the product isn’t making money, then it isn’t going to be able to continue long term.
Meaning whatever gains you are making in peoples lives, aren’t sustainable.
So what’s one of the best ways to increase revenue? By increasing your customer lifetime value and decreasing your acquisition cost.
We already spoke about the acquisition cost, but the ‘Customer lifetime value’ is the revenue you earn from the customer until they stop using your app.
I hope you enjoyed this intro article to the AARRR framework. It is a powerful tool, and one that can really improve your Design career.
I recommend to start small and focus on the ones that affect the bottom line, such as revenue, customer lifetime value, and churn.
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An intro to AARRR for Designers — The path to better products and a higher salary was originally published in UX Planet on Medium, where people are continuing the conversation by highlighting and responding to this story.