No, you party animal, this is not the pirate funnel we’re talking about today:
If you want to know what the pirate funnel is in terms of MARKETING, you’ve come to the right place. In this article, you will find out what the pirate funnel is and why you should use it. There is also an in depth explanation of the 6 fundamental pirate funnel stages (awareness, acquisition, activation, retention, referral, revenue). An hypothetical scenario/example is included, with a template made just for you.
Don’t want to read the whole article? Watch this quick 2 minute summary video:
Let’s get started.
What aaarrr the Pirate Funnel?
The AARRR Pirate Funnel, also known as the Pirate Metrics, is a framework that helps businesses understand and optimize their marketing and sales efforts throughout the customer journey.
It consists of five key stages: Awareness, Acquisition, Activation, Retention, and Referral, with an additional focus on Revenue. Each stage represents a specific point in the customer’s journey, from first becoming aware of a product or service to becoming a loyal customer and advocating for the brand.
The funnel provides a structured approach for businesses to track and measure their performance at each stage, enabling them to identify strengths, weaknesses, and areas for improvement.
By leveraging the AARRR Pirate Funnel, companies can gain valuable insights into their marketing strategies, optimize customer experiences, and ultimately drive business growth.
Why should you use the AAARRR Pirate Funnel?
- The AARRR Pirate Funnel provides a clear framework for understanding and evaluating the customer journey.
- It helps identify bottlenecks and areas of improvement by breaking down the process into distinct stages.
- It promotes a data-driven approach, allowing informed decision-making and effective resource allocation.
- The AARRR Pirate Funnel emphasizes a customer-centric mindset, prioritizing value delivery and exceptional experiences.
- Lastly, it has a cool name.
In depth explanation of the AAARRR Pirate Funnel stages
Awareness is the initial point of contact between your brand or product and potential customers. It focuses on creating visibility and generating interest among your target audience.
Make sure you understand the following bullet points, to truly understand awareness.
- Reach: This refers to the total number of individuals or potential customers who have been exposed to your brand or message. Reach can be measured through metrics such as website traffic, social media impressions, or the number of views on a promotional campaign.
- Impressions: Impressions represent the number of times your marketing material or message has been displayed or viewed by individuals. For instance, it can include the number of times an ad is shown on a website or the number of times a social media post appears on users’ feeds.
- Social Media Engagement: Analyzing social media metrics such as likes, comments, shares, and retweets provides insights into the level of engagement and interaction your content is generating among your target audience.
- Search Engine Rankings: Monitoring your brand’s visibility on search engine results pages (SERPs) through search engine optimization (SEO) metrics helps assess the level of organic visibility and exposure your brand receives. Companies like SEMRush and Google Analytics can help you here.
Acquisition focuses on converting potential customers into actual paying customers or users. It measures the effectiveness of your marketing efforts in attracting and capturing the interest of individuals who have become aware of your brand or product during the awareness stage.
Consider these factors when understanding acquisition:
- Leads and Prospects: Leads represent individuals who have shown interest in your product or service by providing their contact information or engaging with your marketing material. This can be through newsletter sign-ups, email subscriptions, or downloading gated content.
- Conversion Rate: The conversion rate measures the percentage of leads or visitors who take a desired action, such as making a purchase, signing up for a trial, or subscribing to a service. Conversion rate = Number of conversions / Number of leads
- Cost per Acquisition (CPA): CPA quantifies the average cost incurred to acquire a new customer. It helps assess the efficiency and profitability of your acquisition campaigns and channels. By tracking CPA, businesses can optimize their marketing spend and prioritize channels that yield higher return on investment (ROI).
- Customer Segmentation: Analyzing the characteristics, behaviors, and preferences of acquired customers can provide insights for targeted acquisition strategies. Segmenting customers based on demographics, psychographics, or purchase behavior helps tailor marketing messages and campaigns to specific customer groups, improving acquisition outcomes.
Activation is the level of engagement and interaction customers have with your product or service after the acquisition stage. It measures the extent to which customers start using and experiencing the value your offering provides.
- Onboarding Process: A smooth and effective onboarding process is crucial for activating customers. It involves guiding new users through the initial steps of using your product or service, introducing key features, and providing the necessary education and support to ensure a positive user experience.
- User Activation Rate: The user activation rate measures the percentage of acquired customers who have successfully engaged with your product or service. This can include actions like setting up a profile, making transactions, or reaching specific milestones that indicate they are actively using and benefiting from your offering. The specific criteria for activation may vary based on the nature of your product or service.
- Feature Adoption: Monitoring the adoption rates of key features or functionalities within your product or service helps assess how well customers are utilizing the value-added features. Identifying which features are popular or underutilized can help you identify where the strengths and weaknesses lie.
Retention refers to the capacity to maintain and keep customers engaged with your product or service over time. It measures the percentage of customers who continue to use your product or service, indicating their loyalty and satisfaction.
Make sure to understand the following terms and concepts:
- Customer Lifetime Value (CLV): CLV represents the total value a customer generates for your business throughout their relationship with your brand. It helps estimate the revenue potential of a customer over time.
- Customer Feedback and Surveys: Collecting feedback from customers through surveys, interviews, or Net Promoter Score (NPS) assessments provides valuable insights into satisfaction levels, pain points, and areas for improvement.
- Customer Loyalty Programs: Implementing customer loyalty programs can incentivize repeat purchases, reward customer loyalty, and foster stronger relationships.
- Churn Rate: Churn rate is a term often used in the retention phase of the Pirate Funnel. It measures the percentage of customers who stop using your product or service within a given period.
Referral is the fifth stage of the AARRR Pirate Funnel and focuses on the willingness of satisfied customers to refer your brand or product to others. It measures the effectiveness of your customer advocacy and word-of-mouth marketing efforts.
- Referral Rate: The referral rate measures the percentage of customers who actively refer your brand or product to their friends, family, or colleagues.
- Net Promoter Score (NPS): NPS measures the likelihood of customers recommending your brand or product on a scale from 0 to 10.
- Customer Reviews and Testimonials: Positive customer reviews, testimonials, or online ratings are extremely important. Monitoring and encouraging customers to provide feedback and share their positive experiences can generate organic referrals. It also helps build trust and credibility among potential customers.
- Viral Coefficient: The viral coefficient measures the average number of new customers acquired through referrals from existing customers. A viral coefficient greater than 1 signifies that each customer, on average, is bringing in more than one new customer.
Revenue is the final stage of the AARRR Pirate Funnel. It focuses on the financial performance and profitability of your business. It measures the total income generated from customer transactions and interactions with your product or service.
Ensure you grasp the following key terms and concepts related to revenue:
- Total Revenue: Total revenue represents the overall income generated from sales, subscriptions, or fees associated with your product or service. It reflects the financial health of your business.
- Average Revenue per Customer (ARPC): ARPC measures the average amount of revenue generated per customer over a specific period. It helps evaluate the average value each customer brings to your business and can vary based on pricing models, customer segments, or subscription tiers. Increasing ARPC can be achieved by upselling, cross-selling, or implementing pricing strategies that encourage higher spending.
See examples of every stage of the Pirate Funnel:
How to calculate the percentages in your own pirate funnel
We will work with a hypothetical scenario. Let’s say we reach 1000 people in the initial stage, awareness.
Acquisition: % of people who click on your website or discover your business.
- Acquisition Rate = (Number of users acquired / Number of users reached) * 100 = (200/1000) * 100 = 20%
Activation: % of acquired users who take a specific action or engage with your product/service.
- Activation Rate = (Number of activated users / Number of acquired users) * 100 = (100/200) * 100 = 50%
Retention: % of activated users who continue to use or interact with your product/service over a specific time period.
- Retention Rate = (Number of retained users / Number of activated users) * 100 = (70/100) * 100 = 70%
Referral: % of retained users who refer or invite others to use your product/service.
- Referral Rate = (Number of referred users / Number of retained users) * 100 = (14/70) * 100 = 20%
Revenue: the number of retained users + number of referred users
- Total Revenue = The referred customers, along with the retained users, contribute to generating revenue. Let’s say each customer has an average lifetime value of $100, resulting in a total revenue of $8,400 (84 customers x $100).
- Revenue Rate = (Revenue generated from referred users / Total revenue generated) * 100 = (1400/8400) * 100 = 16.67%
AAARRR Pirate Funnel Template
Try this using your own business. Download this template and fill in the blank spaces using the equations above.
In conclusion, the AARRR Pirate Funnel offers a strategic approach to drive growth by focusing on awareness, acquisition, activation, retention, referral, and revenue. By understanding and optimizing each stage, businesses can effectively guide customers through the marketing journey and achieve long-term success. Implementing the right strategies and analyzing the funnel metrics are key to unlocking the full potential of this framework.