What is the Pirate Funnel? Everything you need to know

The Pirate Funnel is a model for dividing a business into fragments to optimize each stage, and better focus your time and effort.
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The Pirate Funnel is a must-have tool for any Growth Hacker.

This model, designed by Dave McClure, strategically structures the customer journey into six key steps, symbolized by the acronym AAARRR: Awareness, Acquisition, Activation, Retention, Referral, and Revenue.

In this guide, we'll show you how to use each phase of the Pirate Funnel to accelerate business growth. Whether you are in the field of e-commerce, a mobile application or a SaaS service, you will discover specific metrics and strategies to optimize your growth strategy.

We will also examine the distinction between traditional marketing and growth hacking, highlighting the importance of a comprehensive approach to the development of your business.

Get ready to learn how to identify and overcome barriers to growth.

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Ultimate Pirate Funnel Guide (AARRR/AAARRR)?

What is the Pirate Funnel (AAARRR)?

Definition

AAARRR has helped a ton of great businesses grow and stay successful over time.

This model is considered to be one of the best business tools which are and are an excellent starting point for developing the plan to grow your own business.

The AAARRR (also known as the A3R3 funnel) is an abbreviation for:

  • Awareness (awareness raising)
  • Acquisition (acquisition)
  • Activation (activation)
  • Retention (retention)
  • Revenue (revenue)
  • Referral (recommendation).
In 2007, Dave McClure, founder of 500 startups, introduced the Pirate Funnel for the first time. A. At that time, the model did not include Awareness (and were called AARRR). Now, this stage is considered an integral part of all AAARRR metrics.

These six funnel steps can be followed individually to determine performance of a company, as well as the stability of its growth throughout its lifespan.

Each time you improve one of the stages in your Pirate Funnel, you are improving your North Star Metric, and therefore your long-term growth.

What is the difference between Marketing and Growth Hacking on the Funnel?

Looking at the classic funnel, marketing organizations have generally focused on the first two steps:

  1. Awareness
  2. The acquisition.

This is obvious when you look at how marketing teams are structured and the goals they pursue: KPIs that correspond to the first two layers of the funnel - leads, registrations, new users, downloads, etc.

Marketing teams are optimized to achieve these goals, with the majority of their members having a background in marketing (content, paid acquisition, writing, public relations, etc.)

It all stops when marketers acquire a customer.

However, if you can't retain your customers and ensure that they get enough benefits from your product or service, you're missing out on huge growth opportunities.

This is where the Growth Hackers come into play: they are generally described as a mixture of marketing, product, and engineering.

Unlike marketers, Growth Hacking looks for growth opportunities by looking for optimizations Through the entire Pirate Funnel.

Growth Hacking = Approche du Funnel Complet
Growth Hacking = Full Funnel Approach
Growth can be influenced by acting on any Pirate Funnel layer (AAARRR/AARRR) and the aim is to understand how these layers interact with each other to grow effectively.

Thus, the objectives pursued by the Growth Hacking teams are different of those from the Marketing teams.

At any time, a Growth Hacking team can focus on improving any stage of the funnel, Because they They all influence the growth rate. Acquisition and Awareness are only subsets.

Why use the Pirate Funnel?

Like every business, you would like to get more customers, but what should you do?

  • Maybe you should do more marketing to reach more prospects?
  • Or maybe you should optimize your website?
  • Or is it possible to optimize a service or a feature in order to reach more people?

The Pirate Funnel could help you find new drivers for your growth.

If you follow the steps below and monitor all the indicators, you'll see which part of your funnel is losing the most customers.

Each time you improve any stage of your Pirate Funnel, you will improve your”North Star Metric” and therefore your long-term growth.

The 6 stages of the Pirate Funnel: AAARRR

1. Awareness: How do people get to know you?

Getting people to visit your website or to become aware of the existence of your product or service is first real stage of the product life cycle.

The objective of Awareness is (surprise!) brand awareness, but it's also much more than that.

Raising awareness in the Pirate Funnel is a tactic used to bring more users and customers into the marketing funnel.

It can be difficult to measure, especially for businesses that are not in the field of digital marketing, but it's very important to take it into account right from the start of the AAARRR funnel.

Questions to be answered during the acquisition phase

  • What's keeping your customers up at night?
  • What motivates your customers to find solutions to their problems?
  • What is the desired future state for your customers?
  • What can you do to make it easier for potential customers to find you?
  • What is the cost per acquisition (CPC) for each marketing channel?
  • Can this marketing channel reach a large number of customers?
  • Is this marketing channel bringing you the right customers?

Awareness phase metrics

  • Customer acquisition cost (per channel)
  • Conversion rate
  • Traffic to the website (per channel)
  • Click-through rate
  • Cost per click
  • Time spent on the website
  • Bounce rate
  • Quality of leads

Useful frameworks for the Awareness phase

  • Personas = identify your target audience.
  • Bullseye Framework = find the marketing channels that have the most impact and the best return on investment
  • PVP index = identify the most promising market segment
  • Journey Maps = identify customer touchpoints and the customer journey

2. Acquisition: Where do your customers come from?

The second phase of The Pirate Funnel is The Acquisition.

It's about getting potential customers to engage with you and with your value proposition.

The key to acquisition is finding the right customers, not just as many customers as possible. If you do this step incorrectly, you will end up with a service that no one wants.

It takes 2 steps to find the right customers.

  • Step 1 : Determine whom Are your customers
  • Step 2 : Determine where Are your customers

Let's see these 2 steps in more detail:

Step 1: Figure out who your customers are

You need to understand your customers to offer them a compelling solution.

Start focusing on the personas of individual buyers instead of offering a service for “everyone.” This will help you save money while still allowing you to communicate effectively.

Answer these questions to find out more about your target group:

  • What's keeping your customers up at night?
  • What motivates your customers to find solutions to their problems?
  • What is the desired state or the ideal future situation of your customers?

Les personas are the basis for any successful service and will help you make informed decisions.

Therefore, you need to understand what your customers are trying to accomplish And what the For him, success means.

Step 2: Figure out where your customers are

Acquisition is difficult, and many SaaS businesses and startups fail due to a lack of new customers.

But it's necessary to identify the marketing channels that generate the most traction.

For greater clarity, the term “traction” refers to the momentum that occurs when your strategy works.

READING TIP: Traction, by Gabriel Weinberg

List of the 19 Traction channels :

  1. Viral marketing
  2. Public relations
  3. Unconventional public relations
  4. SEM
  5. Social media ads and display
  6. Offline ads
  7. SEO
  8. Content marketing
  9. Email Marketing
  10. Marketing engineering
  11. Blogs
  12. Commercial development
  13. sales
  14. Affiliate programs
  15. Existing platforms
  16. Trade shows
  17. Offline events
  18. Conferences
  19. Community building

Each of these channels are already real growth drivers for SaaS companies and startups, but Not all will consistently produce the same results according to the business model and the market segment.

However, at least one channel will help your business to gain popularity.

Answer the following questions about each pull channel:

  • How much does it cost to acquire a customer per channel?
  • What is the maximum number of customers I can reach through this channel?
  • Am I targeting the right customers on this channel?

In summary, during the acquisition phase :

Define your customers and focus on marketing channels including customer acquisition costs (CAC) is weakest And the highest return on investment.

Questions to ask yourself during the acquisition phase

  • What can you do to make it easier for potential customers to find you?
  • What is the acquisition cost for each marketing channel?
  • Can this marketing channel reach a large number of customers?
  • Is this marketing channel bringing you the right customers?

Acquisition phase metrics

  • Customer acquisition cost (per channel)
  • Conversion rate
  • Traffic to the website (per channel)
  • Click-through rate
  • Cost per click
  • Time spent on the website
  • Bounce rate
  • Quality of the tracks

Useful frameworks for the Acquisition phase

  • Personas = identify your target audience.
  • Bullseye framework = find the marketing channels that have the most impact and the best return on investment.
  • PVP index = identify the most promising market segment.
  • Journey Maps = identify customer touchpoints and the customer journey.

3. Activation: How quickly do customers find value in your service?

The objective of the activation phase is toprovide an exceptional customer experience. Therefore, it is essential to determine the WOW moment.

The WOW moment occurs when consumers first realize the value of your service. This moment is critical and will determine whether or not your customers will stay engaged.

The WOW moment is a strong emotional experience that should happen at the beginning of the customer journey. Remember that the longer this time is, the more likely customers are to leave.

How do you find the WOW moment for your services?

To get started, start by reaching out to your most important customers and asking them what they value most about your value proposition.

However, keep in mind that each person will have their own moment of glory.

Create a list of behaviors related to customer loyalty. After reviewing customer feedback, use this list to define your activation settings.

Examine whether customers who regularly use your services:

  • Complete the integration process (= Onboarding)
  • Interact with the main function of your product
  • Get in touch with other customers.

The combination of analytical data and feedback from your customers will allow you to define the WOW moment even more precisely.

Onboarding is one of the fastest ways to quickly get consumers to experience the WOW Moment. To do this, this process needs to be as efficient as possible.

Questions to ask yourself during the Activation phase

  • What can you do to provide your customers with an unforgettable experience?
  • How quickly can consumers recognize the value of your service?
  • What do customers value most about your service?
  • What are the steps an ideal customer should follow?
  • What are the habits that are linked to consumer loyalty?
  • What does activation mean for your service?

Activation Phase Metrics

  • How many customers have used a key product feature?
  • Time to access key product functions
  • Visitors/enrollment ratio
  • Conversion rate
  • How many customers have experienced a WOW Moment?
  • Wait time + pages viewed
  • Drop-out rate

Useful frameworks for the Activation phase

  • Personas = Figure out what your target audience values the most.
  • Journey Maps = Identify the onboarding process.

4. Retention: Why would customers come back to you?

People will end up unsubscribing if you're not able to provide consistent added value.

The majority of businesses place great importance on retaining their customers. There is a simple explanation for this: Acquire new customers Is a lot more expensive What to keep existing customers.

How to combat customer disaffection during the loyalty phase?

To combat customer disaffection, it is It is important to pay attention to the warning signs.

For example, here are some early signs of customer disaffection:

  • They connect less often than the average of other customers
  • They take much longer than the average of other customers to complete tasks
  • They have shorter visit times

Also, use the Net Promoter Score to complete the information on the unsubscription rate.

This will give you a complete picture of what people think of your service and whether or not they will recommend it to others.

How do you maintain a high retention rate?

It has been shown that sending regular emails Helpful increases retention rates.

Your email campaign is a great way to build relationships with customers and help them see the value of your service.

Use these 4 tips to create better email campaigns:

  1. Get personal

Addressing customers personally is the best way to establish a link by email.

For example, in the registration form, you can ask for the customer's first name.

But avoid asking for too much detail right away. Drop-out rates increase with each additional form field that needs to be filled out.
  1. Sell benefits, not features.

People buy benefits, not features!

And yes, I know you've probably heard that thousands of times, but it's true.

  1. Send emails based on customer behavior.

By helping customers in their journey, behavior-based emails have a significant effect on retention.

  1. Provide a clear call to action in each email.

Each email should guide customers to the next phase of their journey and help them reach their goals.

How do you identify the benefits?

Customers appreciate the service for the benefits they get, and no for features.

We are going to use the Model by Kano to assess perceived benefits by functionality.

Ask your customers the following two questions:

  1. What do you think of using feature X?
  2. How would you feel if the X feature wasn't there?

Then, customers should choose one of the following answers:

  • I like it
  • I think that's normal
  • It doesn't matter to me
  • Je m'en content
  • I don't like it
modèle de kano
Kano diagram

The Kano model is a fantastic tool for determining What are the functionalities That the Target audience enjoys the most.

This framework will help you to offer more value to your customers And to maximizing your retention.

Questions to ask yourself during the Retention phase

  • How long do customers use your service?
  • What does customer retention mean for your service?
  • What is most valuable for your customers?

Retention Phase Metrics

  • Loyalty rate and unsubscription rate
  • Email open rate
  • Email click rates
  • Loss of customers
  • Month to recover the CAC
  • Average customer retention time (time people remain active customers)
  • Net Promoter Score
  • Connection frequency

Useful frameworks for the Retention phase

  • Kano model

5. Referral: Why should customers recommend your service?

People who value your service highly enough will usually recommend it author of them

When existing customers use word-of-mouth, your cost of acquiring “recommended” customers is zero. This strategy has been proven and can generate explosive growth!

So how do you optimize the number of recommendations? By optimizing viral loops.

How viral loops are helping your business grow exponentially

The viral coefficient is the quantity of new customers you get for each existing customer, and can be used to assess the effectiveness of your Referral phase.

Viral loops consist of three stages :

  1. A customer discovers the service and decides to use it.
  2. A customer recommends the service to a friend.
  3. The friend also becomes a customer of your company.

Les viral loops work particularly well for services that increase in value as more people use them.

They are already integrated into communication and social media platforms such as Facebook, Instagram, etc...

The Viral Coefficient

This is how the viral coefficient is calculated:

Viral coefficient = number of invitations sent per customer* conversion percentage

For example:

If your customers send 5 invitations and only 3 people respond, the calculation is as follows:

Viral coefficient = 5* (3/5) = 3

One exponential growth is indicated by a viral coefficient greater than 1.

Les share buttons Social networks and bonuses that reward you for each friend you invite are two best practices for optimize the Referral.

Consider the different ways people might want to share your service before adding generic social sharing buttons.

The Length of the Viral Cycle

The duration of the viral cycle, in addition to the viral coefficient, is an important component of virality loops - or even more important.

The duration of the viral cycle indicates how long it takes for a customer to recommend your product to another customer. The shorter the viral cycle, the better.

READ MORE: Understanding everything about Factor K and viral loops

How likely are customers to recommend your service?

The Net Promoter Score is a great way to determine how likely customers are to recommend your service.  

The NPS measures the customer loyalty And the probability of unsubscribing.

Start by asking your customers:

“On a scale of 0 to 10, how likely are you to recommend us to a friend?” to assess your NPS.

Then, divide the respondents into three categories.

  • Promoters 9-10
  • Passive 7-8
  • Detractors 0-6
Calculate the net promoter score like this: NPS =% of promoters -% of detractors

Then ask open-ended questions about the “why” to get more comprehensive information like:

  • What is the reason for your score?
  • What could have changed your score?

This will give you valuable insights on how to maximize the likelihood of recommendations.

Provide value, make it easier to invite friends, and reduce the length of the viral cycle.

In summary, the recommendation phase provides value, makes it easier to invite friends by customers and shortens the time needed to customers to invite their friends.

Questions to ask yourself during the Referral phase

  • What would be the best ways to encourage consumers to invite their friends?
  • What aspects of my service do customers value the most?
  • When are customers most likely to invite friends?

Referral phase metrics

  • Percentage of customers who recommend your product to friends
  • Referred customers
  • Percentage of total purchases made by referred customers
  • Lifetime value of referred customers
  • Positive reviews
  • Social media sharing
  • Invitations sent and successful invitations
  • Viral coefficient and duration of the viral cycle
  • Net Promoter Score

Useful frameworks for the Referral phase

  • Kano model = determine the characteristics that are most valuable to customers.
  • Journey Maps = identify at what point in their journey customers are most likely to invite friends.

6. Revenue: Why should customers pay for your service?

The last metric of Pirate Funnel (AARRR/AAARRR) is income.

La customer lifecycle value (CLTV) is one of the most important metrics of the income phase. 

This measure describes a customer's total income over the course of their life.

CLTV = Average revenue per customer* (1/cancellation rate)

Comparing the acquisition cost (CAC) from a customer to the CLTV, you will have a good idea of the success or failure of your business (A 3:1 ratio is a good ratio).

Apply the Bullseye Framework, which you already know from the acquisition phase, to Find the channel with the lowest CAC and the highest efficiency.

READ MORE: What is Customer Lifetime Value (CLTV) and how can it be optimised?

Define revenue quality and find out what the best customer segment is for your business.

Not all customers are the same, and not all revenue is generated the same way. It's important to determine which customers are most valuable to you.

The PVP index, is a Great model for identifying your best customer segment.

It helps you identify customer segments that bring you personal development, value your work and generate income:

  • THEpersonal development : Do you like working with this type of client?
  • Value : What is the value of your work in this market segment?
  • Profitability : How profitable is this segment of work?

When you identify your ideal customers, you are able to make better use of your marketing budget and increase the quality of your revenue.

Questions to ask yourself during the Income phase

  • What percentage of customers convert to paying customers?
  • What is the average order value per customer?
  • How many repeat customers do I have, and how often do they shop?

Parameters to be measured in the revenue phase:

  • Customer lifetime value
  • Customer acquisition cost
  • Recurring monthly income
  • How many free customers become paying customers?
  • Average order value per customer
  • Repeated purchases
  • Loss of income
  • Expansion income

Useful frameworks for the revenue phase

  • Kano model
  • PVP index
READ MORE: Ultimate Guide to Key Performance Indicators to Measure

How do you find your Pirate Funnel's bottleneck?

Use “Hard Data”

This step is easier than you think.

Data analysis was shown as One of the skills The most important Growth Hackers, that doesn't mean it doesn't need to be complicated.

You can look at the percentage that succeeds in taking the next step of AAARRR.

If you're not a mathematician, you can easily:

  • Divide the number from step 2 by the number from step 1,
  • then divide step 3 by step 2,
  • etc...

If you do this for all of the steps, you'll see what percentage is the lowest and where to focus for the next iterations.

Congratulations, you've just found your bottleneck.

pirate funnel et recherche des goulots d'etranglements
Detecting barriers to growth through the Pirate Funnel

Use “Soft Data”

Now you've found the stage where you're losing customers and now we need to know wherefore !

In order to better understand the problem, tools like Hotjar to track user behavior will be of great help to you.

You may need to send satisfaction surveys or go talk directly to your customers to ask them about how they experience your products or services.

Choose your focus and your OMTM

If you've found the root cause of why you're losing customers, you can start with the GROWS method. ;

  • Gather ideas on how to solve the problem
  • Categorize these ideas
  • Describe growth experiences
  • Execute
  • Study the results of the experiments (and celebrate your failures and successes!)
If you are ready to take the next step and start improving your deficient stage The Pirate Funnel, you can read the article explaining the Growth Hacking method step by step: The GROWS process.

Well done! You have just found an area of improvement where you can focus your efforts thanks to Pirate Metrics.

You know what you need to solve to hack your growth, let's see together some examples of Pirate Funnel by type of business model.

3 Pirate Funnel Examples

Here are a few examples below to help you see more clearly:

Pirate Funnel: Mobile App

pirate funnel pour application mobile
Mobile app

Pirate Funnel: E-Commerce

pirate funnel pour modele ecommerce
E-Commerce

Pirate Funnel: SaaS app

pirate funnel pour entreprise saas
Business SaaS

Conclusion

The frame AAARRR (or AARRR) is the easiest and most effective way to optimize your business and measure growth.

If we break down the life cycle of a typical business customer, we have 6 key phases which are as follows:

  • Acquisition phase: A potential customer reads your blog and discovers that your application has value. Then, the potential user goes to the app store and searches for your app.
  • Activation phase: The potential customer installs the application and follows the onboarding process.
  • Retention phase: In the first month, a potential customer opens and uses your application more than ten times.
  • Recommendation phase: At least one friend is referred to your application by a potential customer.
  • Income phase: The potential customer becomes a paying customer. Each measure has deeper layers and I encourage you to go deeper into optimizing each of them.

At each iteration, you must improve one of these steps: your OMTM will then be targeted at the biggest obstacle to the growth of your business; this should be your objectives during your experiments.

With each improvement of your OMTM, you improve your North Star Metric, and therefore also the growth of your business.

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Stephen MESNILDREY
CEO & Founder

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