The AARRR funnel is the sales funnel used in the discipline of growth hacking. This is applied to growth marketing and differs from the funnel used in classic digital marketing, known as AIDA, differing mainly in their approach.
While the AIDA funnel is designed in a linear way and thought from the moment it captures the user's attention until they decide to buy and monetize, the AARRR funnel is designed for growth. For this, the AARRR funnel focuses not only on the process that takes all the way up till the purchase, but also in the retention, loyalty and brand evangelism, or recommendation state.
In addition, it is designed in such a way that the customer is encouraged to return, thus reaching a process that feeds itself and whose maximum optimization is pursued. Think growth loops, and so on, that we also covered here.
In order to explain how AARRR differs from AIDA, and what key advantages it has as a non-linear model, let's first understand AIDA well.
The acronym AIDA refers to:
- Awareness (Product or service discovery).
- Desire (Willingness to buy)
- Action (The act of purchase itself)
This funnel is designed in a linear and sequential way so that the potential client knows the product or service, becomes interested in it, wants it and finally buys it. So we can see that the funnel AIDA is designed from a mindset whose primary belief is that a customer is not won for a lifetime, rather goes through a process that finishes in a purchase in a natural way.
This belief is rational and understandable; however, we can see that the AARRR funnel differs circumstantially from this.
The most remarkable difference that we will find between both funnels is that, while the funne AIDA is linear, the AARRR funnel is not. On the contrary, the different stages and acronyms that form AARRR do not refer to sequential phases, but to business metrics themselves.
The acronyms AARRR are the following:
- Revenue (Income).
- Referral (Reference).
Acquisition refers to the moment in which a person knows the product, service or the brand. For this stage we must focus on how we manage to generate traffic and make ourselves known for our buyer personas and general audiences. It can be through ads on google, through publications in RRSS, through influencers, media campaigns, through a content strategy ... For this stage it will be important to work on SEO, SEM, PPC, email marketing, influencer campaigns and Linkbuilding.
Activation is the process in which the person who has discovered the business becomes the user (sometimes daily active user). This phase will be more or less long depending on the business model and the marketing strategy in place. For some businesses it will be easy for the user to make a purchase directly, for others, on the contrary, it will be a more complex phase whose first step will be simply get the user data. This is the most crucial step and is usually accomplished through an exchange in which the brand offers something of value whose price is the data of the person.
At this stage we work with processes such as conversion optimization, A / B testing, screen recordings and heat maps. The idea is that the user gets to the AHA moment, realises what the product is for and starts using (ideally falling in love with) the product.
Retention refers to whether users return; That is, if they interact with the business, if they follow social networks, if they continue to buy, if they open your emails to keep up to date with the news, go back to the platform, interact with your consultants and so one.
In this phase we can already see a key difference with respect to the AIDA funnel and that is that the AARRR attaches great importance to retaining users who have already bought a first time and its objective is to avoid by all means that they lose interest and unsubscribe. If you think about it, this is actually the key: increasing the Lifetime Value of the user.
This stage is usually worked at different lengths of time, thus working in the short, medium and long term.
In this phase, profits are being a direct focus and it is worked from two perspectives. On the one hand, you are trying to increase current income; For this you do not have to focus only on acquiring new users, but also try to increase the average ticket and the number of purchases. On the other hand, the development and scalability of the business is also worked from a perspective of the company's business model. Are there any new revenue streams? Anything else you can do to increase your incomes?
Finally, the referral phase focuses on making the user fall in love with the brand and the product or service to the point that they decide to recommend it to other people who become interested. It is, in short, free advertising and also a conversion by referral is much faster and more agile than one that tries to be achieved through traditional methods.
Thus, we can see that the AARRR funnel is a Growth Hacking and Growth Marketing technique that raises the marketing strategy in a very different way from the traditional one. It works on five important phases (acquisition, activation, retention, income and referrals) and is not planned in a linear and sequential way, but rather as metrics. This should not lead one to think that each phase works disconnected from the others; On the contrary, a good AARRR funnel strategy consists of observing the complete funnel, seeing how all of them feed into each other and trying to optimize it as much as possible.