Monday, July 16, 2012

Lean Startup Metrics: AARRR!!!

I wrote a bit about Lean Startup Metrics last year after attending a Lean Coffee TO session.

One particularly useful framework is "Startup Metrics for Pirates" from Dave McClure.

His popular "AARRR" model suggests segmenting your metrics into:
  • Acquisition
  • Activation
  • Retention
  • Referral
  • Revenue

I decided to crunch about 13 months of data from my project management software startup PMRobot.

Here's what I found:

My Analysis
  1. An 13% signup conversion rate seems awesome! -- until you look at activations.
  2. The first column shows very clearly how many people you need to put into the funnel at the top to get revenue out at the bottom. It's often more than you think!
  3. Breaking down the step to step rates is critical -- it lets you see at a glance where you're losing people.
  4. We still have a lot of work to do helping users activate. We've been simplifying the interface and adding inline help. What else would you suggest?
  5. Our retention is not as good as I would hope. Would you recommend exit interviews to find out why the left?

What do you think? What else can we learn from this data?

A few side notes about the chart:
  • Conversions from step to step read diagonally -- ie. Activation -> Retention is 12.82%.
  • The first column is the absolute conversion rate from all new visitors.
  • The numbers are a bit misleading since signups are per user and activation/retention/revenue is per organization (which could include many users)
  • This includes data only for customers acquired through the website.
  • Therefore, it excludes my two largest revenue-generating customers, since they were converted by face-to-face meetings.
  • "Activation" is an in-app metric corresponding roughly to "actually using the product for something real" -- as opposed to just putting in test data.
  • "Retention" indicates long-term frequent users -- the ones that are "hooked" :)
  • "Revenue" are customers that are currently on monthly credit card billing.

About the author: Jason Hanley is a software developer, project manager, world traveler, and a private pilot. He spends his time trying to make project management for software consulting companies easier, and just plain better.

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