The most common questions I hear from startups are…
- “How do I get more users?”
- “How do I keep current users engaged?”
- “How do I get existing users to refer new users?”
Today, I’m going to introduce you to a framework that will you help answer these questions.
It’s called, The Lean Marketing Framework (or Funnel) and you can start using it today to grow your business.
The framework is broken up into five separate stages that we use to track the lifecycle of a user. Dave McClure famously coined these five stages, “Startup Metrics for Pirates,” or “AARRR” for short. It’s a clever little acronym to help you remember what each stage is and what order a user flows through them.
The 5 Stages of The Lean Marketing Funnel
It goes like this: Acquisition, Activation, Retention, Referral, and Revenue.
It’s best think of these like a funnel with acquisition at the top and revenue at the bottom.
Acquisition is getting someone to come to your site, from any number of marketing channels including: SEO, paid advertising, word-of-mouth, social media, etc. That “someone” has just become a visitor.
The next step is turning the visitor into a user or activating them. Think of this as starting a relationship with the visitor. Your goal here is to get some level of commitment from the user. You want them to take a specific action like signing up for a free trial, requesting a demo, or submitting an email address for your newsletter. This opens up the lines of communication and allows you to start building rapport.
Ok, so the user signed up for a free trial. They’ve been activated. Now you have to get them to come back and use your product multiple times. This is called retention and it’s where a user transitions to an active user. They’re actively using and engaging with your product on numerous occassions.
Now that you have active users, you want them to refer your product to other potential users. There are a few different ways to generate referrals. Incentivizing your users to share your product can be a very powerful way to accelerate growth. The type of incentive you offer depends on the type of product you have. The obvious play here is a monetary incentive like a commission on each referred sale. But what if you can’t afford to pay users a commission? Or what if you don’t charge for your product? Offer a non-monetary incentive like Dropbox did! Much of their explosive growth happened by offering users an additional 250MB of storage for each person they referred.
Last, and certainly not least, is revenue. In this step, your goal is getting the user to take some action that generates revenue for your startup. Upgrading from a free trial to a paid subscription, purchasing a course, and clicks on advertisements all fall into this category. The three major business models here are ecommerce, SaaS, and paid advertising.
Identify Leaks in Your Funnel
Your job is to efficiently and effectively move people down through the funnel from one step to the next. Why a funnel? Because people are flowing in from the top and down through the bottom.
Along the way you’re going to lose people at each step. One of the major advantages of The Lean Marketing Funnel is being able to identify where people falling off. We call this a leak. Next, you need to figure out why people are falling off at a certain point and plug the leak.