What is the Pirate Funnel (AAARRR) + How to apply it in 5 quick steps

What is the Pirate Funnel?

The Pirate Funnel is a framework to cut a company in pieces and shows you where to focus your attention. The funnel is developed by Dave McClure and called the Pirate Funnel because the first letters spell out AAARRR for Awareness, Acquisition, Activation, Retention, Referral, Revenue.

The pirate metrics are the perfect starting point if you don’t know where to get started. If you fill in all the AARRR steps in a Pirate Funnel Canvas, you’ll see where you lose the most people.

The 6 metrics of the Pirate Funnel: AAARRR

• Awareness – How many people do you reach?
• Acquisition – How many people visit your website?
• Activation – How many people take the first important step? (E.g. Sign-up, install an app or post their first comment)
• Retention – How many people come back for a second/third/tenth time?
• Revenue – How many people start paying? And how much do they pay?
• Referral – How many people refer friends to your business?

But there are other options… different experts and companies interpret the Pirate Funnel differently. For example, depending on your business model you might want to swap Retention and Revenue because it is more important for you to get a repeat-customer. Acquisition and Activation are also open for interpretation and therefore some people see Acquisition as a new customer instead of a site-visit, and Activation is sometimes compared to the AHA-/WOW-moment instead of simply signing up.

And in the original Pirate Funnel from Dave McClure the Awareness-step wasn’t part of the funnel (it was still just the AARRR framework) and it was later added in 2016 by Growth Tribe.

Why use the AAARRR framework?

The Pirate Funnel is used by growth hackers to find the weakest point of a business which you should focus on.

The AAARRR framework (also referred to as the A3R3-funnel) cuts a company in six steps (Awareness, Acquisition, Activation, Retention, Referral, Revenue). Customers have to flow through each of these steps and, by filling in this framework, you’ll find the gaps in your business.

For example, you might already see that you don’t have enough customers, but what should you do to get more customers/users? Maybe you should do more marketing to reach more people? Or maybe you should optimize your website? Or is it that one feature that you should develop to be more interesting for people?

Well, the Pirate Funnel could help you find this bottleneck. If you follow the steps below and fill in all the numbers, you’ll see what part of your funnel is hurting your customers the most. Therefore you know that this is the part where you get “the biggest bang for your buck”. Every time you improve any step of your Pirate Funnel it will help to improve your ‘North Star Metric‘ and therefore your long-term growth.

Ready to get started with Growth Hacking? Then the Pirate Funnel is your perfect starting point! Let’s get started…

Get started on Growth Hacking with the Pirate Funnel

How to get started with Growth Hacking? Well as a growth hacker you focus your time and efforts on the bottleneck of your business. The Pirate Funnel will show you the bottleneck if you fill in the numbers.

Let’s start!

1. Define the steps

The steps are open for interpretation and will be different for every business model. Therefore we’ll have to start at this step.

How should you define your Pirate Funnel-steps? Start by looking at your business and write down the most important steps people take, like signing-up, add an item to the basket or adding a new task to their dashboard.

Now we want to define these AARRR steps as equally measurable steps. I always use the unique number of people/users who accomplish a certain step. For example, the number of people visiting your website, the number of people who logged in per week or the number of people who referred a friend to us.

(It normally doesn’t matter what time period you use and therefore I always take the longest time period as possible up to one year. Unless there have been major changes in the business, like a redesigned website, a new user onboarding or a change in the product.)

Now check if you have defined at least every step of the AAARRR Funnel with a number. Having more steps in between is often better, but I would advise you not to use more than ten steps, because you want to keep focus and not get too detailed immediately. This comes later. 😉

2. Fill in the AAARRR-steps

Take your time to find the right number for each step of the Pirate Funnel. Most of the numbers can be found within Google Analytics and your advertisement-platforms, like AdWords or Facebook Ads.

If you get stuck because you can’t find or don’t have the exact number, I would advise taking a ballpark-estimate if you feel like you do have a feeling of how many people it would be. As always with growth hacking, remember: “Progress over perfection!”

Filled in all the steps? Let’s get to the analysis!

3. Find your bottleneck

This next step is easier than you think. Data Analytics was named one of the most important growth hacker skills, but it doesn’t need to be hard.

You can have a look at the percentage that survives the gap to the next AARRR step. If you’re not a math-magician, you can easily divide the number of step 2 with the number of step 1, and then divide step 3 by step 2, etc.

If you do this for all steps, you’ll see which percentage is the lowest. Congratulations, this is your bottleneck!

Do look at them relatively. If some steps are small steps, it might not be fair to compare them, but I trust on your instinct to feel that yourself.

4. Dive deeper from problem to cause

You have now found the problem where you’re losing customers and now we have to find out why!

This is where you turn from hard data to soft data. The numbers from step 2-3 won’t help you understand why. This is where you’ll need tools like Hotjar to see what people are doing, maybe you need to send out a survey or get out of the building to talk to your customers and interview them how they are experiencing this part of the customer journey.

5. Pick your focus and OMTM

If you’ve found the root cause of why you’re losing customers, you can start with the G.R.O.W.S.-process;

• Gather ideas on how you could solve the problem
• Rank those ideas by the ease and potential impact
• Outline a growth experiment
• Work work work
• Study outcome (and celebrate your fails and successes!)

But that growth hacking process is a topic for a different blog. At least you have your One Metric That Matters (OMTM) and you can keep that in mind for your GROWS process.

If you are ready to get to the next step and start improving your faulty step of the pirate funnel, you can read my step-by-step explanation of the G.R.O.W.S.-process on this website.

For now, you can be sure that you’ve found a point of focus thanks to the Pirate Metrics and you know what you need to solve to hack your growth!

If you want to take it a step further…

So this is for the slightly advanced growth hackers and data-driven marketers among us because you can get even more focus! There are two options:

Make your steps even smaller

There are steps between your steps. (Sorry if this gets a bit meta…)

For example, you might know that your websites conversion rate is the bottleneck of your business, but I’m sure that you can get more specific within that one step of the AAARRR framework. Between what pages between landing on your site and signing up do you lose the most customers?

Or if your biggest bottleneck is your referral-step then you could zoom in on how many people even know about your referral-option, how many of them do even send an invite to a friend and then how many of those friends to even visit our website?

These questions can get your more specific problem to find the cause for.

Segment your numbers per channel, persona or behaviour

I often see that different people act very differently. Therefore it might be interesting to fill in separate Pirate Funnels for different channels, which is a lot easier than it sounds. For example, in Google Analytics you can use a specific user segment for people from search or email.

You can also segment people based on their behaviour. The device they use often has a big impact on their conversion rate (because your website looks different per device or because the user’s mindset is different; mobile-users are often on-the-go and less patient, while desktop-users are more patiently or have a work-related mindset) or other behaviours like frequency of use (this could be found in tools like Mixpanel) or NPS-score.

Lastly, you could look at the different customer-personas like the country of residence, job title or tech-savviness.

Creating different AARRR funnels for different types of people, might show you a more detailed look on where you need to focus your attention.

Bonus: Funnels versus ‘Loops’

The Pirate Funnel is great and especially for startup-stage growth, but in the end you will hit a ceiling in terms of how much traffic you can push through the funnel, because your budget and resources are limited.

So in many fast growing scale-ups they move from just funnel-thinking to Growth Loops: a slightly different approach where you create a self-reinforcing approach where your product’s output (like active customers or new content) automatically bring in new users. Growth loops can be seen in acquisition, retention, or referral, to create a cycle where each new user naturally brings in more users or keeps others engaged.

But:

• First, you should focus on getting in customers at all, so the AAA’s of the Pirate Metrics,
• Then, you work on making money and retaining happy users, so the RRR’s.
• And only then, should you consider adding on Growth Loops to grow faster!

FAQ on the Pirate Funnel / AARRR

TLDR; Here are some quick answers to your burning questions on the AARRR framework.

The Pirate Funnel is a framework to cut a company in pieces and shows you where to focus your attention. The funnel is developed by Dave McClure and called the Pirate Funnel because the first letters spell out AAARRR for Awareness, Acquisition, Activation, Retention, Referral, Revenue.

A Pirate Funnel shows you where to focus your time and effort because you’ll see your biggest bottlenecks. Therefore it is a great starting point for most growth hackers.

These are the first letter of every step of the Pirate Funnel: Awareness, Acquisition, Activation, Retention, Referral, Revenue.

Ready to go?

If anything is unclear about the Pirate Funnel or the AARRR framework, if you need my help or if you want to add something to this blog, feel free to send an email to ward@growwithward.com.