2019-11-01 06:32:48

RARRA: Focus on retention metrics to exponentially grow your business

This article explains RARRA and how to drive business growth with a focus on retention.

The AARRR Funnel, so-called "Pirate Metrics", has been the go-to framework for business growth since Dave McClure created it in 2007. However, 10 years after its creation, a new framework for growth has appeared, RARRA. Both AARRR and RARRA cover the same activities, but there is an important distinction. Whereas AARRR is focused on a chronological short-term user acquisition funnel, RARRA focuses on the activities that increase medium-to-long-term ROI

By reordering the steps, you allow your growth / marketing / business development team to focus their time, effort, and money. It’s the difference between spending $10,000 on Google Search advertisement this month (acquisition focused) and spending $10,000 on UX/UI improvement (retention focused). 

AARRR: a focus on acquisition first

In 2007 Dave McClure created theAARRR Growth Metrics Framework. It aims to optimize product marketing and product management, especially for startups. 

AAARR

  • A. Acquisition: Users come to the site from various channels
  • A. Activation: Users enjoy 1st visit: “happy” user experience
  • R. Retention: Users come back, visit site multiple times
  • R. Referral: Users like the product enough to refer others
  • R. Revenue: Users conduct some monetization behavior

Growth hackers and marketers everywhere used the AARRR method to effectively tracks their product marketing efforts. It was great for startups who wanted to grow their businesses in the early stages. AARRR focuses on the customer's journey and conversion funnel but misses the point of a growth model. Now in 2019, this method has become outdated.

"To get the most out of the model, you need to re-prioritize the funnel."

Gabor Papp

RARRA: A focus on retention first

In 2017, Thomas Petit and Gabor Papp reorganized the steps of AARRR to RARRA to shift focus towards areas with the highest medium-to-long-term benefits for ROI. Whereas AARRR is chronological (hence the term ‘funnel’), RARRA is ROI-based.

RARRA

  • R. Retention: Users come back, visit the site multiple times
  • A. Activation: Users enjoy 1st visit: “happy” user experience
  • R. Referral: Users like the product enough to refer others
  • R. Revenue: Users conduct some monetization behavior
  • A. Acquisition: Users come to the site from various channels

This reorganization is important because optimizing retention:

  1. Is generally more cost-effective than optimizing acquisition (the cost of acquiring a new customer is much greater than maintaining and growing an existing account)
  2. Optimizing retention leads to optimization of referral, revenue, and acquisition organically.

Therefore, optimizing retention is your most important goal in 2019. If you can't retain your customers, you are filling a leaking bucket. You're burning cash for less return on investment. 

RARRA Growth Drivers and Metrics:

These growth drivers and metrics will vary depending on your product/service, but they should give you some ideas to get started :)

Growth Drivers Metrics
RetentionUI / UX improvements
Contents creation and sharing
Proactive communication
Loyalty campaigns
Push notifications
Re-engagement Ads
Re-engagement Emails
Webinars
Landing pages for product features
Social media to educate your customers
Videos that show users your product features
Defining the ideal user journey and encourage users to follow it
Customer Churn
Revenue Churn Rate
Existing Customer Revenue Growth Rate
Repeat Purchase Ratio
Product Return Rate
Days Sales Outstanding
Days Sales Outstanding
Net Promoter Score (NPS)
Time Between Purchases
Loyal Customer Rate
Activation Customer on-boarding
One-step registration with email
Registrations
Session Length
Screens per Session
One-Day Retention
Referral Rating prompts
One-click sharing
Social/Contact List Integration
Incentivized Sharing
Referrals
Ratings & Reviews
Social Buzz
Revenue Sales & Promotions
Downloadable content
Personalization
Frequent Updates
Monthly Recurring Revenue
Return on Advertising Spending (ROAS)
Customer Acquisition Cost (CAC)
Return on Investment (ROI)
Average Revenue per user
Customer Lifetime Value
Subscriptions
App purchases
In-App transactions
Ad revenue
Acquisition Ratings & Reviews
Paid Advertising 
Digital Marketing
Traditional Marketing
Downloads
Installs
Product page visits
Site visits

The 1st step to driving business growth: Optimize retention

Example: AARRR vs RARRA

AARRR (focusing on activation first)RARRA (focusing on retention first, activation last)
If you invest $1000 to acquire 100 new users, and 95% leave by the end of the month, then you have spent $1000 for 5 users. Your Customer Acquisition Cost (CAC) is $200. If you invest $1000 to acquire 100 new users, and 70% leave by the end of the month, then you have spent $1000 for 30 users. Your Customer Acquisition Cost (CAC) is $33.

Let's look at a proper retention strategy

  1. Situational awareness: Understand your current situation.
    • Retention rate and drop off points.
      • How many users stay around after one day? One week? One month?
    • For users who use it regularly, how do they use it?
    • What do the longest, heaviest users do with your app?
    • What do loyal users love about your product?
  2. Increase your app/service’s value and encourage habits around its usage.
    • Growth Drivers: Decide on areas of improvement for retention
      • UI / UX improvements
      • Contents creation and sharing
      • Proactive communication
      • Loyalty campaigns
      • Push notifications
      • Re-engagement Ads
      • Re-engagement Emails
      • Webinars
      • Landing pages for product features
      • Social media to educate your customers
      • Videos that show users your product features
      • Defining the ideal user journey and encourage users to follow it
  3. Retention metrics: Test your ideas and measure the results
    1. Customer Churn
    2. Revenue Churn Rate
    3. Existing Customer Revenue Growth Rate
    4. Repeat Purchase Ratio
    5. Product Return Rate
    6. Days Sales Outstanding
    7. Days Sales Outstanding
    8. Net Promoter Score (NPS)
    9. Time Between Purchases
    10. Loyal Customer Rate
  4. Rinse and repeat

Optimizing retention is an iterative process, and the more you test the better you will become. Remember, all tests should focus on retention and activation so you can show progress and optimize based on data.

R + ARRA

We tried to keep this article short and sweet to show the difference between AARRR and RARRA frameworks and help get you to start optimizing your retention rates. Of course, Activation, Referral, Revenue, and ultimately Acquisition Growth Drivers / Metrics are also important for sustainable SaaS product marketing. However, we’d encourage you to focus on retention first. In this way, you can get the added benefits of trickling down your efforts to the other areas of the RARRA model.