Creating a successful business is a challenging task that requires careful planning and execution. One of the most significant pain points for businesses is the inability to drive growth and convert leads into paying customers.
The customer journey from awareness to conversion can be complex and can easily get lost in the noise of the market. This is where the importance of a funnel comes into play. A funnel helps businesses to understand the customer journey and track their progress toward conversion.
However, a traditional funnel alone is not enough. A growth funnel is a powerful tool that combines traditional marketing techniques with a data-driven approach to optimize the customer journey and drive growth. By leveraging the latest technology and innovative strategies, a growth funnel helps businesses to identify the bottlenecks in the customer journey and find new and creative ways to convert leads into paying customers.
In this article, we will explore the AAARRR (A3R3) Framework and show you how to create a growth hacking funnel. We will cover the key elements of the framework and provide practical tips and insights to help you optimize your customer journey and drive growth.
What is a Growth Funnel (a.k.a. Pirate Funnel)?
A growth funnel is a customer-centric approach to marketing that uses data and technology to optimize the customer journey and generate more leads. It is commonly referred to as the "pirate funnel" or "AAARRR framework" because of how the latter sounds when pronounced as a single word.
The AAARRR (A3R3) framework was developed by Dave McClure in 2007 to provide a comprehensive model for understanding and optimizing the customer journey.
It consists of six stages:
An important aspect to keep in mind about the funnel is that the order of the stages is not fixed and can vary based on your unique requirements and business goals.
The growth funnel also helps us make a clear distinction between marketers, salespersons, and growth hackers.
A marketer primarily focuses on awareness and acquisition.
A salesperson's job is to take the leads generated by the marketer through the rest of the funnel and turn them into paying customers.
A growth hacker, on the other hand, takes care of the entire funnel from top to bottom - this is known as a "full-funnel approach."
Steps In A Growth Funnel
The first stage of the customer journey is Awareness.
This stage involves creating awareness about your product or service and introducing it to your target audience.
To do this, you need to use effective marketing techniques such as content marketing, SEO, social media campaigns, and paid advertising. Through these channels, you can increase brand visibility and attract potential customers to your website.
At the Acquisition stage, you need to convert potential customers into leads.
To do this, you can use landing pages, lead magnets, and opt-in forms to collect contact information from your visitors. You can also use referral programs and discounts as incentives for people to sign up with your business.
When Dropbox launched its referral program and offered free storage, its users grew by 3,900%!
At the Activation stage, you need to nurture your leads and get them to take action.
This involves engaging with potential customers via email marketing, social media campaigns, webinars, and other forms of communication. You can also use personalized content and targeted offers to drive conversions.
The Retention stage is all about keeping your customers engaged and interested in doing business with you.
You can do this by providing exceptional customer service, offering incentives for loyal customers, and delivering high-quality content. You can also use loyalty programs and rewards to encourage repeat purchases.
At the Revenue stage, you need to turn your customers into paying customers.
You can do this by offering a clear pricing structure, discounts, and loyalty programs to encourage people to purchase your product or service. You should also use upsells and cross-sells to increase the average order value.
The last stage of the customer journey is Referral. Network effects play a very important role here.
At this stage, you need to use referral programs and word-of-mouth marketing to get your existing customers to refer their friends and family. You should also offer incentives such as discounts or rewards for successful referrals.
Examples of Pirate Funnels
Pirate Funnel for E-commerce
A pirate funnel for an e-commerce store might look something like this:
- Awareness: The person first comes across an ad by the website on social media or other platforms
- Acquisition: They go to the website and sign up for a newsletter or begin exploring the products and turn into leads
- Activation: The leads then add one or more products to their online shopping cart
- Revenue: They then make a purchase and become paying customers
- Referral: They refer other people to the website through word-of-mouth or referral links to get discounts.
- Retention: They love the product and service. So, they come back for another purchase.
Pirate Funnel for SaaS
The A3R3 funnel for SaaS businesses varies quite a bit from the e-commerce funnel. Here's an example:
- Awareness: The person comes across a lead magnet, like an ebook or a webinar, related to a pain point or challenge they are facing
- Acquisition: They sign up for the lead magnet by providing their email address and other information and become leads
- Activation: on the website Acquisition: They sign up for a free trial or request a demo
- Revenue: After trying out the software, they decide to buy a subscription plan
- Retention: The customers are kept satisfied with the service and support they receive and continue to subscribe to the product monthly or annually
- Referral: The customers refer their friends to the SaaS business out of goodwill or for incentives like discounts.
Pirate Funnel for Mobile Apps
The A3R3 funnel for mobile apps looks something like this:
- Awareness: The person comes across the app either through an online ad or app store
- Acquisition: The person downloads the app and becomes a user
- Activation: They open the app and start exploring the features and functionalities of the app
- Referral: The users are intrigued by the app's features and share it within their network
- Retention: The users engage with the app regularly and become active users
- Revenue: The users buy in-app purchases or premium subscriptions to unlock extra features or remove ads
Find Your True North - The North Star Metric (NSM)
The North Star Metric is the key indicator that helps you measure your customer journey. It should be a metric that captures the overall success of your business.
For example, if you are an e-commerce website, then your NSM might be 'the percentage of customers who complete their purchase.' If you are a SaaS business, then your NSM might be 'the number of active users.'
Your North Star Metric should be used to measure the success of each stage of the customer journey.
Most successful business owners, CEOs, and other top-level executives function with this metric in mind.
Let's look at a few examples of NSMs.
Examples of North Star Metrics of Startups
NSM Does Not Talk About Revenue
Of course, the first thought that comes to mind for most when asked about NSM is "profits" or "revenue." But they are not the NSM, rather just a by-product of it.
The purpose of NSM is to measure where your customers are in their journey and overall satisfaction with your product/service. It helps you optimize the customer journey, identify areas of improvement and narrow down on what needs more attention.
One Metric That Matters (OMTM)
One Metric That Matters can be defined as the metric that is the NSM for a team or division of the company, which ultimately contributes to the business's ultimate NSM.
Let's take the popular food delivery app, Swiggy, for example.
Swiggy's North Star Metric is 'daily/weekly orders.'
The NSM for teams that work within Swiggy is, however, not the same. Each team has "one metric that matters" to them. Let's take a look.
The A3R3 (AAARRR) framework provides a structured approach for growth hacking by breaking down the customer journey into key stages and allowing growth hackers to focus on optimizing each stage.
By utilizing this framework, businesses can drive growth and achieve their desired results in a more efficient and effective manner. It is a valuable tool for businesses looking to boost their growth and achieve success in the competitive digital landscape.
With a clear understanding of the A3R3 framework, businesses can create a growth-hacking funnel that takes their customers on a journey toward conversion and loyalty.