In our previous post on Growth Engineering Basics, we introduced the concept of the Growth Funnel — how it helps growth engineers structure the user journey from discovery to loyalty while improving tracking and optimization. It simplifies identifying and optimizing drop-offs.
Now, let’s take a deeper dive into the AAARRR framework, also known as the Pirate Metrics.
Convention
- We will refer our customers or prospective customers as users.
- We will call our offering/solution/product/service as product only.
What is the AAARRR Funnel?
AAARRR Funnel is a 6 stage categorisation of a user’s journey based on their intent and level of interaction with our product.
A user who just discovered the product will not refer it to their friends, at this stage user is looking to discover more about the product. Users at this stage are interested in knowing if the product can solve their problem, and if they can trust the claims of the product. Showing a referral program will not make sense even a CTA to download the product might not make sense in some cases.
The Six Stages of the Growth Funnel
The six stages start with awareness when a user becomes aware of the product. And goes down the funnel when they take an action like downloading the product to the acquisition stage. Similarly, they go deeper into the funnel as they take the desired action of each stage till they reach the bottom of the funnel.
We aim to make a system that guides the user down the funnel without any human intervention or minimal intervention to ensure scalability.
Let’s explore each stage in further detail.
A – Awareness: Getting Discovered
The awareness stage addresses 2 main areas — awareness about the problem we are solving & awareness about our product that is solving the problem they are facing.
Problem Awareness
- Users recognize they have a problem but may not know the solution.
- Content like blogs, social media, SEO and influencer marketing helps educate them.
Solution Awareness
- Users start exploring possible solutions, including your product.
- Comparison pages, case studies, and targeted ads help position your solution effectively.
How do we create awareness?
- Content marketing (blogs, SEO, videos)
- Social media and online communities
- Paid advertising (Google Ads, Meta Ads)
- Word-of-mouth and influencer marketing
Key Metrics: You can define a key success metric for different channels like Website traffic, impressions, brand mentions, and social shares.
A – Acquisition: First Interaction Matters
Once users are aware, the next goal is to make them interact with your product—this could be signing up for a newsletter, downloading an app, or requesting a demo.
Users at this stage are evaluating different solutions, including competitors. Ensuring a frictionless experience at this stage is crucial.
How do we improve acquisition?
- Optimized landing pages
- Clear CTAs and compelling offers
- Free trials and lead magnets
Key Metrics: Conversion rate, sign-up rate, cost per acquisition (CPA).
A – Activation: The First ‘Aha’ Moment
Earlier marketing teams used to consider the work done once the user reached the acquisition step. But a user is still figuring out and trying out your product along with competitor’s products. Activation happens when they experience the core value of the product, the Aha moment.
For example, for Slack, activation happens when a user creates a team and starts sending messages. For Dropbox, it’s when a user uploads their first file.
How to drive activation?
- A seamless onboarding experience
- In-app guidance and interactive tutorials
- Personalized recommendations
- An easy-to-use UI/UX of the app.
Key Metrics: Time to activation, activation rate, feature adoption rate.
R – Retention: Keeping Users Engaged
As growth engineers, we don’t stop at activation; a business succeeds when users keep coming back to the product. A high retention rate indicates that users are finding consistent value in your product.
For example, Netflix retains users by offering personalized recommendations, ensuring they always find something interesting to watch.
How to improve retention?
- Continuous product improvements
- Push notifications and email engagement
- Gamification and loyalty programs
Key Metrics: Retention rate, churn rate, DAU/MAU ratio.
R – Revenue: Turning Users into Paying Customers
At this stage, the focus shifts to converting active users into paying customers. Businesses experiment with different pricing models, upsells, and customer segments to optimize revenue.
How to drive revenue?
- Freemium to paid conversion strategies
- Tiered pricing and upselling
- Experimenting with pricing plans
Key Metrics: Monthly Recurring Revenue (MRR), Annual Recurring Revenue (ARR), Customer Lifetime Value (LTV).
R – Referral: Leveraging Network Effects
The final stage of Growth Funnel is where your users become your biggest marketing channel. If your product delivers exceptional value, users will naturally refer it to their network. However, a structured referral program can accelerate this process.
Dropbox’s legendary 3900% growth was powered by its referral program, which rewarded both referrer and referee with additional storage.
Slack became the fastest-growing business app of all time by relying on word-of-mouth. (Source: https://foundationinc.co/lab/slack-viral-growth-formula/)
How to drive referrals?
- Incentivized referral programs
- Social sharing integrations
- Building a strong brand reputation
Key Metrics: Referral conversion rate, virality coefficient.
How the Growth Funnel Stages Interact and Overlap
The Growth Funnel isn’t a rigid, step-by-step process where users move in a straight line. It’s a dynamic journey where stages often overlap, interact, and even loop back based on user behaviour. Optimizing one stage often improves others.
Awareness ↔ Acquisition
- A user who becomes solution-aware may move directly to trying your product (Acquisition).
- However, if they are still exploring options, they may return to the Awareness stage to compare competitors before deciding.
- Retargeting ads, social proof, and educational content help bridge this gap.
Acquisition ↔ Activation
- A user might sign up but not immediately engage with the product, requiring further nudges (onboarding emails, product tours).
- Some users activate quickly, while others need multiple touchpoints before experiencing the product’s core value.
Activation ↔ Retention
- Activation is about delivering the first value, while retention is about delivering continuous value.
- A great onboarding experience can accelerate retention, while a poor activation experience might lead to churn before retention even begins.
- Features like in-app guidance, personalized recommendations, and habit-forming experiences strengthen this connection.
Retention ↔ Revenue
- Engaged users are more likely to convert into paying customers.
- Some users may upgrade early (before strong retention is established), while others need repeated engagement before purchasing.
- Free trials, feature restrictions, or premium add-ons often create a bridge between these two stages.
Retention ↔ Referral
- Highly retained users become the best advocates, recommending the product through word-of-mouth.
- A well-retained user base naturally feeds into referrals, but structured incentive programs (referral rewards, community engagement) can amplify this process.
- Some users may refer even before they fully activate or pay (e.g., Dropbox’s referral program rewarded sign-ups before activation).
In the next post, we’ll explore growth mindset — how adopting the right mindset can drive continuous learning, innovation, and long-term success. Stay tuned!
