This week’s episode features the General Manager of Startups at BlueChilli, Catherine Eibner about the importance of understanding customer funnel metrics. Catherine explains and expands on these metrics and gives us real life examples that can be related to the product building and testing processes.
What is a customer funnel?
When we think about acquiring customers, it’s a funnel, and quite a traditional sales funnel, but we use some specific metrics when we think about startups. These are often referred to as the ‘pirate metrics’ because they’re the acronym A A R R R so when you say it out loud it’s ‘AARRR’.
Taking a subscription service like Airloom (featured in this week’s episode) for example. It’s essential to track back to the sales funnel. Going back to the AARRR metrics in this case is very useful.
The AARRR acronym spells out:
A: Acquisition – How do I acquire users, and how do people find out about my product?
A: Activation – How many of those customers have a great product experience?”
R: Retention – How many of those customers actually become users and visit the product or use the service again?
R: Revenue – How many of the customers become revenue generating
- What percent of those people who signed up for account start paying for products and thus start generating revenue.
R: Referral – The last one is literally referral
- Which is how many times people tell others about how much they loved using your product/service and encourage them to try it.
In our example of Airloom, the most important part is the referral, the word of mouth component for people who use the product and then share it with their friends and family.
Catherine Eibner, General Manager of Startups at BlueChilli
How do you experiment on the AARRR?
The experiments are different for each stage, and every startup is so different
If we are looking at acquisition for example, a lot of it is running measurable advertising campaigns. This could mean that we set a budget for a Facebook or Google ad campaign. We run different versions of the ad and see which one converts more people.We would look into metrics like click through rates and cost per click, and track those. We would also add analytics into the site so that we can figure out how many people visit then convert and / or become users. There’s a whole manner of content and tactics around ways to acquire customers, and tracking them.
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