AARRR Framework

AARRR is accepted as the 5 most important metrics for a startup to focus on. These metrics effectively measure your company’s growth while being both simple and actionable.

AARRR stands for the 5 phases in your customer life cycle. These are:

• Acquisition: Where are customers coming from?
• Activation: How to turn acquired customers into active customers
• Retention: How to make potential customers come back
• Referral: How to get customers to recommend your service
• Revenue: How to turn potential customers into paying customers

Who are your customers?

If you want to craft a great solution, you need to know your customers. Do not start by creating a product for everyone – instead focus on specific buyer personas.

To discover more about your target group, ask these powerful questions:
• What keeps my customers up at night?
• What motivates my customers to solve their problem?
• What’s the desired future state for my customers?

Acquisition

Activation occurs when a person becomes an active user. A user may download an app, but if they never use it again, they haven’t been activated.

Driving traffic is important, you should also conduct A/B tests with your landing page tests to determine what brings the best conversion results.

Track user behavior to determine what makes a user commit to your product.

Activation

Your users need an aha moment — the instant a user realises your product delivers meaningful value and makes them want to come back. If a significant percentage of users are not activating – create an onboarding strategy to educate and hand hold users through the initial phases of achieving their goals with your solution is one way to increase activation.

Retention

To reduce churn, you need a solid retention strategy. Beyond creating a valuable product, it’s also critical to keep in touch with your customers.

Automated emails are a simple retention strategy. Create email campaigns to automatically send at various intervals after sign-up. This helps remind your customers of your product and how to use it.

Grammarly sends weekly personalised emails to share users’ writing stats, eg their most common writing mistakes and level of accuracy

Referral

Referral is just one of the many acquisition channels. When someone likes your product enough to tell others, thats the best sign that you’ve created something of great value and people are ready to pay for it.

User recommendations is one of the most effective ways to acquire new customers. According to a Nielsen study, 83% of people trust recommendations from friends and family, and 66% of people trust consumer opinions posted online.

Revenue

One of the most important success metrics is customer lifetime value. The metric describes the total revenue generated by a customer over their lifetime.

To Calculate the customer lifetime:

Customer Lifetime Value = Average revenue per customer * (1/churn rate)
‍
If your average monthly revenue per customer is €100 and your churn rate is 5%, this means that your customer lifetime value: (100 * (1/0,05) = €2000.

Another approach to CLV…

Customer Lifetime Value = Average monthly revenue per customer X (# months) customer lifetime = ($) LTV

Customer lifetime value vs customer acquisition cost

A benchmark is a customer lifetime value to customer acquisition ratio of 3:1.

To find the channel with the lowest CAC and the highest return, apply the Bullseye Framework, which you apply during the acquisition phase.

A maturity model is a tool for evaluating how the processes, people, and systems that drive a product are performing.

A maturity model will give you tiered levels of achievement for objectively assessing the maturity in every aspect of your product and teams.

Models define effectiveness and sophistication levels and can pinpoint a person, team, project or company’s current position within the model.

Maturity models are an important strategic prioritisation tool because they provide flexible performance assessment and monitoring that can reveal valuable information about your company’s health and potential.

While a model won’t fix inefficiencies themselves, it can identify areas where you aren’t operating at standard and allow you to determine strategies that can improve your operations and processes.

3 Types Of Maturity Models

Business Process Maturity Model (BPMM)

The Business Process Maturity Model’s roots can be traced back to the Process Maturity Framework (PMF) created by Watts Humphrey at IBM in the 1980s.

The process maturity model explores the ways to introduce quality practices in software development. Humphrey and his colleagues introduced incremental stages to adopting best practices in software organisation.

The PMF served as the groundwork for the development of the Capability Maturity Model (CMM) for software in 1991. CMM then became the foremost standard for appraising the capability of software development organisations.

Initial

Inconsistent management practices or teams that react to crises rather than predict them.

Managed

Teams and businesses have a management foundation, but the individual teams within the business still work in silos with minimal collaboration or evidence of incorporating improvement strategies.

Standardised

The business is aware of its processes and is working toward consistency and uniform delivery.

Predictable

Organisations use their process infrastructure and asset capabilities to achieve reliable results by controlling the variations within their outputs.

Innovating

Your company is continuously improving and focused on innovation.

Agile ISO Maturity Model

By standardising the levels, agile ISO models set more clearly defined expectations determined by an international body.

Agile Maturity Model helps organisations understand their current practices and work toward improving them with the goal of increasing ability to respond to changing business conditions and better harnessing innovation.

Level 1: Documented Processes

Your processes are documented -in any form from a Word doc, to an Excel spreadsheet. Knowing what your processes are for different areas of your business is the first step to taking a process-led approach.

Level 2: Followed Processes

There’s little point in having documented processes if they’re not put into action. Processes have to be followed and used regularly by your team. This means that work gets done in the best way every time, and also means that the teams who follow them will be able to point out obvious flaws and inefficiencies.

Level 3: Managed Processes

Processes should shape and inform the way in which you conduct your operations. You need to structure things to allow processes to play a big role. This could include getting dedicated process management software, setting up a specialist process team, harvesting and analysing the data from the processes.

Level 4: Optimised Processes

By now you have the infrastructure in place to yield rich accurate data. This lets you begin to understand your organisation in a transparent manner– identifying every event as and when it occurs. This is an accurate model of your business and lets you know not just what happened this week, but what will happen next.

Level 5: Integrated Processes

The core business has been systemised in line with business needs, you can begin to develop and devise new processes to link different stakeholders. These could be processes between leadership and staff, they could be internal peer audit systems, or they could be processes which bring customers or business partners into the heart of the organisation.

Once the organisation has been systemised, the processes can be leveraged to improve the nature, culture, and awareness of the organisation. eg you could reduce your carbon footprint or make your supply chain more sustainable.

Capability Maturity Model (CMM)

The capability maturity model assesses the maturity of your organisation, or software development systems, by comparing it to best industry practices.

By measuring results and assigning maturity levels, companies and development teams can use their models to evaluate their awareness of business processes, effective management techniques and areas for improvement.

Continuous Delivery Maturity Model Example

Continuous delivery is all about reducing risk and making sure business get their return on investment as soon as possible. It is about removing focus from repetitive and risky tasks to devoting all you effort into delivering business value.

Continuous delivery has become increasingly popular. Implementing it is often considered to be difficult and risky

The road to continuous delivery is paved with many small goals, each of which deliver value by themselves. A maturity model will serve as a guide on this road.

A job is the progress a customer seeks in a particular context

Knowing more and more about customers is taking us in the wrong direction. What we need to focus on is the progress that the customer is trying to make in a given circumstance — what the customer hopes to accomplish. This is the job to be done.

When we buy a product, we “hire” it to help us do a job. If it does the job well, the next time we’re confronted with the same job, we hire that product again. If it does a poor job this time, we “fire” it and look for an alternative.

The 2 Assumptions

When you decide to adopt a Jobs to be Done approach, you work with simple assumptions that drive decision-making.

Customers buy a product to perform a specific task

A passenger doesn’t want a ride in a taxi, he wants to reach a place.

A construction worker doesn’t want to push a wheelbarrow, he wants to move material from here to there.

An accountant doesn’t want a computer program, she wants an easy method to calculate tax.

Tasks become the job to be done.

Tasks are the heart of strategies and innovations

Our products evolve over time, but the jobs to be done remain.

If the customer’s needs are always initially conceived as the JTBD, they remain stable and valid for longer periods. Companies can remain focused on outcome-driven innovation.

Jobs To Be Done Example

Imagine you have just taken a photograph, there are numerous potential jobs now

1) Capture this moment privately between two people, so we can look back on it fondly in years to come.

2) Embarrass a friend in front of another friend.

3) Get this photo backed up online, so I can point others to it.

4) Get a copy of this photo to my grandmother who doesn’t use computers.

5) Make this look cool and interesting. Like me. And then share it.

6) Get this edited and into my portfolio so people consider hiring me for future engagements.

In this case the products you could hire are Facebook, iPhoto, Instagram, Flickr. When you think about how many of these apps you use, you realise the job is the distinction here, not you.

Focusing on the job rather than the persona helps highlight how features like red-eye reduction, multiple photo sizes, or filter effects are only useful for certain jobs

Desired Outcome Statement

Direction Of Improvements	Metric	Object Of Control
Minimise	Time it takes	Songs
Contextual Clarifier Listening to music

Example “Hiring” an iPod

The user experience is tailored to do the job of helping you feel motivated when you go running. The iPod is smaller than a CD player, easier to use, and it allows you to have more than one CDs worth of songs on your playlist. You don’t have to listen to the same music over and over again or change a CD.

An iPod

Feature: 5 GB Storage
Benefit: 1,000 songs your pocket
Context: When you go running
Job to be done: You want to motivate yourself with music

System of Progress

All customers journey through the same System of Progress

According to JTBD theory, the journey for progress includes four touch-points:

The customer imagines a better life solution — a “new me”
The customer searches for and chooses a solution
The customer uses the solution in order to start making progress
The customer realises the “new me”

Forces of Progress

Anxiety force reduces progress. There are 2 types of anxieties for customer jobs:

• Anxiety in Choice (I will choose the wrong product)
• Anxiety in Use (the product won’t work the way I expect)

Inertia force reduces progress – a tendency to do nothing or remain unchanged.

There are two types of inertia’s for customer jobs:

• Habits in Choice (I will choose products that I always have)
• Habits in Use (I will use products that I always have)

Push force improves progress

It is signified by a need to change. There are both internal (e.g. motivation for progress) and external (e.g. life forcing someone to change) pushes.

Pull force improves progress and it is signified by an aspiration or ideal that someone is in pursuit of (e.g. a better life).

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to 100 other good ideas. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying NO to 1,000 things.” ― Steve Jobs

Market Fit Pyramid. All the layers of the pyramid are hierarchical and are built on top of each other, that proposes a structured guideline to achieving product-market fit

The bottom layers of the pyramid is the market. As a product manager, you don’t control the market. If you change your customer, then your whole pyramid falls down and you have to start all over again.

You can pick which market you want to go after but everything builds on top of your target customer and their needs.

• Whose life are we trying to make better?
• Who we are trying to create value for?
• Within our customer needs, which ones are undeserved?

In our Product-Market Fit pyramid, the Product layer is divided into 3 key elements:

Value proposition

A value proposition is a promise by a company to a customer or market segment.

Feature set

The functionality we need to build to deliver the benefits that fit customer needs. Validating at this stage plays a crucial role in defining direction for our product.

UX Design

Good design is something that causes delight, a positive functional surprise; resulting in an emotional uplift in our users.

Determine Your Target Customer

These are the people whose desires, values and needs most closely align with what your business can offer them. They’re already looking for what you have. Understanding your target market requires research over assumption.

It’s about trying to grasp on a much deeper level who those people are, what motivations they’re driven by and how you can reach them.

Identify Underserved Customer Needs

Divide your hypothesis into the “problem space” vs the “solution space.”

A problem space as a customer problem, need or benefit that the product should address.

The solution space there is a specific implementation to address the customer need or requirement.

An underserved market is a large group of people who have been ignored by businesses in a certain industry. This group can represent a certain gender or race. An underserved group can also be people who live in a certain location (such as a neighborhood or city), or a group of people who share certain beliefs or experiences.

Examples of product-market fit

Some companies have done such an outstanding job creating a product to fit the market that their successes can serve as models for your product development efforts.

Netflix

Netflix first gained traction in the early 2000s. Movie watchers were tired of paying late fees from brick-and-mortar DVD rental shops. Netflix sent them DVDs by mail as part of a subscription service, letting people keep a disc as long as they wanted.

If Netflix had remained a DVD-by-mail company, it would have disappeared when DVD players did. Instead, Netflix positioned itself as the easier, cheaper alternative to whatever currently dominates the entertainment market: brick-and-mortar rentals, DVDs, or traditional TV. Netflix has altered its product every time the market need changes, maintaining its fit.

Netflix’s success is a great reminder to stay flexible in changing markets.

Google

Google competed with lots of other search engines for market share when it started. As the other players in its market, they made money by offering ad spots next to search results. In 2003, they jumped ahead of the competition when they introduced a new concept, AdSense.

Google realised that businesses would pay to display their ads other than their search page. AdSense was developed to meet that demand. AdSense scanned webpages and automatically display relevant ads.

Within a few years Google Adsense was generating $95 billion a year. Google identified a need no other search engine was meeting, and then met it.

Take the time to find things that your competitors aren’t doing and adapt to fill unmet needs.

Slack

Slack the instant messaging platform used for workplace communication, started out as a completely different business. The founders were developing a role-playing video game – Slack was something they had quickly hacked together as an internal communication tool for their team.

The team realised the market had plenty of role-playing games, but there was nothing out there quite like Slack. They pivoted away from game creation. Today Slack has over 10 Million users.

Slack’s success proves that changing your focus towards a better product-market fit can be worth your time. Don’t be afraid to radically change your original idea when you see a better opportunity.