Ahoy there, matey!
We’ve got a special post for you today on growth hacking (*ahem* commandeering) the mobile customer purchase funnel to secure a captain’s share of the highly lucrative app market.
Rest assured we’ll send the pirate lingo to walk the plank, but first, we have just one thing to say: Aarrr!
AARRR: Dave McClure’s Startup Metrics for Pirates
We talk a lot about the marketing funnel at Alchemer Mobile (formerly Apptentive). From acquiring downloads to inspiring loyalty, app marketing is one big game of getting as many customers as possible into and through your funnel. We’ve published numerous guides around individual activities within the funnel, but we thought it would be useful to bring everything together for a high-level visualization of the marketing funnel… And for that, we’ve looted a page from the pirate’s book.
Pioneered by entrepreneur and angel investor Dave McClure, the Startup Metrics for Pirates form the foundation of how tech companies visualize the marketing funnel. Taking the first letter of each metric, AARRR, gives the iconic metric its namesake and serves as a powerful mnemonic for recalling the five metrics involved: Acquisition, Activation, Retention, Referral, and Revenue.
Together, these five metrics make up our understanding of the marketing funnel, sometimes referred to as the mobile consumer purchase funnel. Aptly named for the diminishing number of customers in each metric tier, this funnel illustrates your marketing’s ability to convert customers and reveals any bottlenecks in the customer journey where conversion is disproportionately low.
In the remainder of this post, we explore each of the five tiers to the consumer purchase funnel and provide resources for measuring and growing conversion at each stage.
68% of app discoveries are driven by App Store Optimization. (click to tweet)
The first ‘A’ in AARRR is Acquisition. In the world of mobile app marketing, this metric is often divided into Awareness (the set of activities that drive people to discover your app) and Acquisition (the set of activities that motivate people to download your app).
App acquisition metrics
Traditionally when we think acquisition, we think immediately of downloads, literally representing the number of people who have acquired your app, and installs, representing the number of people who have not only downloaded but installed your app. While the two metrics are often used interchangeably, the latter requires a double conversion and often sits at a mere 30-60% of the total download volume to account for customers who download your app but forget, or decide not, to download it.
While the awareness side of the picture can be challenging to measure, there are a few meaningful metrics to consider:
- App store product page visits, which can be tracked with Google Analytics (Google Play) or a third-party tool.
- Site visits, for your app’s website or landing page.
- Top-of-mind or aided awareness, which can be measured in a brand recall survey.
App acquisition drivers
When it comes to driving downloads and brand awareness, app publishers have four primary tools:
- App Store Optimization (ASO), the process of increasing the visibility of your app store product page by boosting your app’s rank and search relevancy through the strategic use of keywords and product page details. Responsible for driving 68% of all app downloads, ASO is an essential part of any organic acquisition campaign and comes down to a 10-step process.
- App Store Ratings & Reviews, an assurance of quality left by current or former customers on your app store product page. Positive ratings and reviews serve as social proof for your app, such that product page conversion rates can be directly tied to star ratings, with 96% of customers reporting a willingness to consider a 4-star app but only 50% willing to consider a 3-star app.
- Paid advertising, the process of acquiring customers through app install ads. Check out this great post for a high-level breakdown of common mobile ad formats.
- Digital/Traditional marketing, the process of driving customers from the web or physical world to your app. This broad metric includes social media, public relations, and content marketing, each of which we’ve covered in our Guide to App Marketing Channels in 2016.
Customers typically decide whether or not they will continue to use an app within the first 30 seconds. (click to tweet)
Once a customer has downloaded your app, the next step is to win their usage. The Activation tier introduces a new conversion hurdle: Getting customers to try your app.
App activation metrics
The most common way to measure activation is through registrations. If your app requires customers to register before they can use your app, tracking the sheer amount of registrations as a proportion to downloads is an indicator of how well your app motivates activation.
If your app does not require registration, other common metrics include:
- Session length, how much time customers spend in your app, where a longer session means greater activation.
- Screens per session, how many different pages (screens) of your app a customer launches in a single session. Again, a greater screens per session indicates greater activation.
- One-day retention, measuring how many customers continue to use your app 24 hours after installation. This metric lies between the Activation and Retention tiers and calculates the percentage of customers who enjoyed their first session of your app enough to use it again.
App activation drivers
You can grow the above metrics, and Activation by proxy, by removing the barriers to registration with:
- Mobile app onboarding, your ability to introduce customers to your app and its mechanics. Effective onboarding makes customers feel welcome and reduces the learning curve associated with navigating your app, thereby improving the customer experience and hooking the customer from their first session.
- One-step registration, the simplification of the registration process to remove any barriers to entry in the minds of your customers. One-step registration does away with complication sign-up forms and asks, instead, for only the bare essentials—often an email address or Facebook log-in.
People who are interacted with in-app are four times more likely to continue using the app three months later. (click to tweet)
The third tier of the mobile customer purchase funnel, Retention refers to your ability to keep customers coming back and to inspire their loyalty.
App retention metrics
Retention is typically measured one of three ways:
- n-Day retention, measuring the percentage of customers who continue to use your app n days after installation. Retention is usually monitored on a monthly basis, with a 40% industry average for 30-day retention.
- Monthly Active Users (MAUs), calculating the number of customers who actively use your app. When tracked over time, MAUs speak to your ability to convert and inspire loyalty, such that an increased ratio of MAUs to Total Downloads means greater retention.
- Session frequency, the number of times the average active customer launches your app in a given timeframe (typically one week). A greater session frequency means greater engagement and conversion.
App retention drivers
Retention marketers have four primary tools:
- Proactive communication, the process of messaging and engaging customers before the customer has any need to seek customer service. Proactive communication allows publishers to spark a conversation with their customers and discover potential issues that typically go unvocalized. As a result, those who are proactively interacted with in-app are four times likelier to continue to use your app three months later.
- Loyalty campaigns, gamified or rewards-based systems that incentive retention by rewarding customers (with in-app achievements, virtual currency, premium features, or discounts) for regularly using your app.
- Push notifications, short messages that can be sent to anyone who has your app installed. Once delivered, push notifications wake up the recipient’s device and display regardless of whether or not they are currently in your app, making them a great way to keep your app top-of-mind with customers (that is, if they are well-timed and intelligently targeted).
- Re-engagement ads (retargeting), paid advertisements targeted only to those who both have installed your app and not recently opened it. Just like a smart push notification, re-engagement ads can draw customers back to your app to boost retention.
An intelligently prompted review is 3x more likely to be positive than an unprompted one. (click to tweet)
In the previous two tiers of the mobile customer purchase funnel, consumers like your app enough to give it their continued use. To make it to this next tier, Referral, customers have to not only like your app, but love it—enough to rave about it to their friends and family.
App referral metrics
Measuring referrals is traditionally a little more challenging than our other metrics, but there are a few good tools and alternatives:
- Referrals, recommendations to download your app made by customers. Beyond the two one-to-many referral types below, referral metrics can be challenging to track. However, third-party attribution tools like Branch Metrics and Alau exist to make the work a little easier.
- App store ratings and reviews, an assessment of customer satisfaction posted directly to your app store product page. As we saw in the first tier, positive ratings and reviews serve as referrals and social proof to anyone considering downloading your app to the extent that an increase of just one star in your average rating, from 3 to 4, can almost double your visits-to-downloads conversion rate.
- Social buzz, measuring how often your app is mentioned online or over a social network, which can be tracked with a social listening tool.
App referral drivers
Driving referrals comes down to collaboration between marketing and product to build shareability into the app itself. Four such builds are:
- Rating prompts, in-app messages encouraging customers to leave an app store rating or review. Well-timed and intelligently targeted prompts increase both review quantity and sentiment.
- One-click sharing, built-in share buttons or email referral links that make sharing quick and effortless.
- Social/contact list integration, another way to remove the barriers to sharing by asking permission to connect your app with customers’ contact list or social network contacts. Once integrated, customers can go through their contact lists within your app and mass-share your content.
- Incentivized sharing, a system designed to reward customers for referring friends. Often associated with gamification, incentivized sharing may offer customers in-app currency or premium features in exchange for a share.
Half of all mobile game revenue is generated by 0.15% of players. (click to tweet)
The final frontier of the purchase funnel and the end goal of many app marketing campaigns, growing profitable customers requires perfecting each of the above tiers—growing engagement, building loyalty, and earning Customer Love. True to its position in the funnel, Revenue is our narrowest tier, with only 2.2% of people likely to convert to paying customers if given a freemium option.
App revenue can take many forms, depending on the chosen business model. In paid apps or apps with a subscription or freemium model, revenue takes the form of a direct transaction. In free apps with an ad-based model, there is no transaction between you and the customer, and growing revenue becomes a matter of growing ad impressions through growing app usages and loyalty.
App revenue metrics
Beyond the straightforward Total Revenue, there are several meaningful ways to categorize and analyze your app’s profitability:
- Average Revenue Per User (ARPU), a measure of total app revenue over a designated time period averaged over monthly active users (MAUs) for that time period.
- Customer Lifetime Value (LTV), a predictive measure of the revenue a customer will generate over their entire relationship with your app. Download our free guide for tips on growing and measuring this often-enigmatic metric.
- App purchases, app revenue generated from purchases of a paid app.
- Subscriptions, app revenue generated from monthly fees for subscription-based apps.
- In-app transactions, app revenue generated from transactions (of either physical or virtual goods) made within the app.
- Ad revenue, app revenue generated by advertisements shown in your app.
App revenue drivers
We’ve found the most success driving revenue with these four strategies:
- Sales and promotions, the set of activities that drive awareness for a particular product, service, or feature.
- Downloadable content (DLC), purchasable premium features and virtual goods that enhance, or add to, the app experience.
- Personalization, the use of consumer insights to personalize a customer’s experience and promote only those products or services relevant to the customer’s wants or needs.
- Frequent updates, the process of continuous improvement on your app to regularly roll out new, rich content updates. Fresh content keeps customers coming back, driving both sales and ad revenue.
X Marks the Spot
Next time you approach marketing and monetizing a mobile app, just remember a pirate’s favorite letter: AARRR (Acquisition, Activation, Retention, Referral, and Revenue). Together, these five growth metrics provide us with a map to app success:
Visualizing your marketing activities in such a way as this purchase funnel allows you to keep an eye on your most important conversions, map marketing activities to objectives, and identify any bottlenecks where conversion is abnormally low from one tier to the next. And, if you do come across any such bottlenecks, we’ve curated a list of tier-specific resources to help widen the funnel at each stage:
- The Digital Marketer’s Guide to App Store Optimization [Alchemer Mobile (formerly Apptentive)]
- 25 Creative Ways to Promote Your App For Free [Entrepreneur]
- Building a Successful App with Paid User Acquisition [Tapdaq]
- 3 Mobile Onboarding Tactics to Make the Best First Impression [Alchemer Mobile (formerly Apptentive)]
- User Onboarding Best Practices [Jackrabbit Mobile]
- The Guide to the Mobile Customer Decision Process [Alchemer Mobile (formerly Apptentive)]
- 16 Mobile Mistakes that Plummet User Retention Rates [Apptimize]
- How to Grow Your Mobile App Retention [Apptamin]
- The Guide to Customer Retention for Mobile Apps [Alchemer Mobile (formerly Apptentive)]
- What is the best ‘invite a friend’ flow for mobile? [Quora]
- 3 Ways to Integrate Social Media to Fuel Growth of Your App [Blue Label Labs]
- Mobile Customer Loyalty Demystified [Alchemer Mobile (formerly Apptentive)]
- 10 Ways to Monetize Your Mobile App [The Next Web]
- The Math of the App Business [Alchemer Mobile (formerly Apptentive)]
- 4 App Monetization Strategies for Free Apps [VentureBeat]
We hope this guide, and the above resources, help you find success and optimize your app marketing. As always, we’re only a tweet away if you encounter any questions on your app marketing journey!