The AARRR Funnel Framework
OK, now I'm going to take you through the basic funnel structure we'll be setting up and using as our framework throughout the rest of the course.
We'll be using what's called the "AARRR" funnel, which is just a visitor funnel divided into levels for Acquisition, Activation, Retention, Revenue, and Referrals. Some people call it the "pirate funnel" — AAAARRRRR - get it? Well, anyway, I'll explain what each of these levels are and how they work in more detail here.
You can split the funnel up into three broad areas—top, middle, and bottom—each has it's own characteristics and subtleties that we'll cover here. The top part of your funnel is concerned with acquisition, or getting people to your site or app or whatever. The middle part involves getting users activated or engaged and well as getting them to come back (that is, retention). If you've successfully moved your visitors and potential customers through to the bottom of your funnel, you'll be working on converting them to paying customers in the revenue level here and then hopefully turning them into your very own free marketing team through referrals. We'll talk about each of these in more detail and then do some brainstorming for each level as well.
So the first level of the funnel is, again, acquisition. These are the channels and tactics we use to get visitors to our sites, right? We might use social media, search, paid advertising, referrals from backlinks, and on and on. I’m sure you’ve read a thousand blog posts or books or whatever about how to get more traffic to your site, which is great. Just know that “more traffic” isn’t necessarily always the best goal to have, and hopefully you’ll see why that is soon.
Now, after you gotten people to your site, what is it that they do when they get there? Are they consuming content that you create? Do they sign up for a free trial or opt-in to your email list? Do they download something you’ve created? And most importantly, how are any/all of these things helping your business? Do they lead directly to sales? Brand awareness? Goodwill for the future? I’m a getting a little ahead of myself here, but already, you should start to see how a funnel isn’t made up discreet little categories of potential customers, but rather a dynamic system that’s very fluid and interconnected...but let’s slow down a bit before I get too excited and ruin all the cool stuff for you.
Once you have people hooked and engaged through your activation efforts, we want to be able to bring them back to your site, if they don’t straight into buying that is. What kinds of channels and processes do you have set up to bring repeat visitors back to your site? How do you target them with email campaigns? Social media campaigns? Retargeting ads? Anyone who knows even a little bit about business knows that converting someone who already knows about you into a paying customer is much easier than converting new, cold traffic. And yet, it’s crazy, I see a lot people overlooking this and, like I said, focusing too much on “more traffic, more traffic, more traffic.” Again, that’s not always necessarily your best course of action.
So all levels of your funnel tie in with one another, but the big one we like to focus on is obviously revenue. How do you make money? What’s your bottom line? If you have multiple products or services, which ones perform best and why are they your top performers? Which channels (from acquisition, remember?) have the best conversion rates? Which tactics can you use to best convert leads? How can we analyze and optimize buy intent? How much does it cost me to acquire a new paying customer? How much does it cost me to sell to an existing customer? Lurking within your data are the answers to these types of questions. And not only that, your data can be used to predict where your efforts in marketing/relationship building will have the biggest impact. And that is the bread and butter, and really, the beauty of this approach.
And last, a very powerful way to create a virtuous loop out of your funnel is to develop the ability to turn your customers into raving fans or, at the very least, your own free marketing team. So for instance, if you have one, how do you measure your referral onboarding campaigns? Do people share your product/content on social media? Do you get quality traffic from backlinks? Can you measure how much word-of-mouth traffic you get?
We’ll go into more depth with each of these levels of your funnel and create really a cohesive plan to help you optimize your entire funnel and make sure it’s working like a well-oiled machine instead of drunken tuk-tuk driver with no sense of direction.
I hope you’ve already begun to see, however, that this is not a static approach to optimizing your funnel. Everything works together, and—this is very important—when you’re developing strategies for each level of your funnel, you always want to be thinking of ways to keep people moving through your funnel and to never lose sight of the big picture of how each level works together to form a cohesive system.
To put this another way, your funnel isn’t just a one-way street. So, for example, people might come to your site and engage with your content or product or whatever, and then you might have to take some time to retain them as a “warm lead”, build a relationship with them and even activate them a few times before they commit to buy from you. And then, over here, if you’re really good, you might have a “golden loop” in your funnel, where returning visitors become paying customers and then keep coming back and keep buying from you. Subscription services that do this well are highly profitable, and it shows in metrics like your return visitor conversion rate and churn rate.
And as I mentioned before, a powerful, virtuous loop you can work towards is using referrals from your paying customers to generate new leads that work through your funnel. If you can achieve this, this sort of system amplifies multiple levels of your funnel. It's simultaneously an acquisition channel and an activation channel, or even a revenue channel if you've got a product that people will often buy after a single interaction with your site.
So as we go through the next few videos, just keep in mind that your funnel is a very fluid, dynamic system and, if you’ve done your due diligence, you should be able to practically hold your visitors’ hands as they march along through it.