[Anti-pit reminder] Precautions for using the AARRR model

The AARRR model is actually a model of the user life cycle, but some people have also turned it into a model of the operational process: first attract new users, then promote activation, then improve retention, then obtain revenue, and finally achieve self-rebroadcasting; the author of this article shares some precautions about the AARRR model, let’s take a look together.

During the interview, when asked: How do you build your analysis ideas, many students blurt out: I use the AARRR model.

There is nothing wrong with this answer in itself, and it can fool the HR as soon as it is said. However, the subsequent explanations are often full of loopholes, and even make some principled mistakes. The hiring department is not so easily fooled.

Today, we will systematically explain what AARRR is suitable for and what it is not suitable for.

What is AARRR?

Thanks to "Growth Hacker", AARRR is an analytical thinking model that has been mentioned a lot in recent years, so much so that PRAPA, which was also popular in the early days, is rarely mentioned. So the first thing everyone needs to understand is that this thing is not authoritative, not a textbook, not a standard certified by the National Examination Committee, it is just an idea.

AARRR is an abbreviation of five words:

• Acquisition
• User Activity
• Retention
• User Revenue
• User referral Refer

The development of an application can be diagnosed from these five aspects. There are five major points to pay attention to in specific use.

01 Note 1: AARRR is a user indicator and cannot be rigidly applied to other businesses

AARRR essentially refers to user-related indicators, which are more suitable for B2C fast-moving consumer goods retail businesses. Other businesses cannot be mechanically applied, otherwise it will be a joke.

For example, in the B2C durable goods business, there was a joke that a traditional home appliance manufacturer set up a public account and let customers enjoy the air conditioning and draw prizes every day, which ended up being a waste of money.

For example, in the B2C travel business, a large number of Little Sun Families purchased the products just to go traveling during the summer vacation. However, the platform thought that they were losing users and issued coupons crazily. As a result, it was taken advantage of and made a fool of itself.

For example, various B2B2C distributors monopolize the downstream channel business. They seem to have users, but in fact they cannot reach them at all. You talk to distributors about activity and retention, but in the end all your investment is taken away by the distributors, leaving the middlemen to make a profit.

For example, in B2B business, there is only purchase activity in the three months of the year, and the orders are taken to support the business for three years. If we use the B2C retail caliber for statistics, are these users considered lost or retained?

For example, many traditional companies have also issued membership cards, but the online and offline links are not connected, stores do not require card numbers to be recorded, and the proportion of member-related orders is less than 30%. At this time, using AARRR will completely lead the company into the ditch.

So in the final analysis, AARRR itself is more suitable for mobile APP-based games, e-commerce, O2O, and social platform businesses. Before talking about AARRR, it is best to think about whether this company really fits the business scenario.

02 Note 2: AARRR is suitable for user analysis, and other analyses cannot be rigidly applied

Same as Note 1. Because AARRR is an indicator mainly for users, it cannot cover all situations.

For example, for an e-commerce website, in addition to paying attention to users, the purchase, sales and inventory of the goods themselves are also very important.

To pay attention to the purchase, sales and inventory of goods, you have to pay attention to the volume, revenue, people and goods. These analyses are carried out on the basis of goods, focusing on the life cycle of goods, turnover loss of goods, and purchase, inventory and shipment of goods.

For example, when doing B2B sales or sales of bulk durable goods, the core focus is the 7-step pre-sales follow-up and the focus is on user needs. Therefore, before talking about AARRR, it is best to first investigate the other party's department and the analytical issues that the other party is concerned about, which may provide a better hit rate.

03 Note 3: AARRR is five aspects, not five indicators

This is the number one mistake made by newcomers. AARRR refers to five aspects of thinking about a problem, not five specific indicators, nor five states of a user.

Each of these five aspects can be broken down into many secondary indicators (a brief example is shown in the figure below, and a detailed version will be provided later); combined with the classification dimensions, each aspect can become an independent classification module, and each module can have independent analysis.

Many newcomers mistakenly believe that AARRR is the five indicators of the number of new users, the number of active users, the retention rate, the conversion rate, and the forwarding rate. Some people even mistakenly believe that AARRR is the five indicators of a user, and we need to encourage all users to go from A to A to R to R to R…

Let me put it this way, think about it yourself, how many apps we download are for the purpose of taking advantage of others, and how many are thrown away after being used once. Don’t expect users to do what you can’t do yourself.

04 Note 4: AARRR is a holistic design, not a one-size-fits-all approach

This is the second mistake newcomers make. AARRR is used to diagnose the status of the business. It is not about looking at each indicator separately and blindly pursuing a certain value; but putting them together to find the balance point that best suits your business.

Because each business faces different core customer groups and user demands, and has different means of business development, different development models (or routines) are created. Under the guidance of these development models, different combinations of the five aspects of AARRR will be produced.

For example, when making games, there are two routes: big R and big DAU.

If you want to be a big spender, you have to create a sense of satisfaction for the rich, reflect the difference in payment levels, and accept a considerable amount of user loss. We often see Hong Kong stars wearing weird clothes, carrying plastic swords, and "Here is a new version of the ship that you have never experienced". These legendary ads are like this, and they even deliberately create ugly scenes to reversely screen users.

If you want to increase DAU, such as Candy Crush Saga, Parkour, and Landlord, you have to put revenue on the back burner and focus on acquiring new users and referrals while maintaining activity. Although both are games, the two models determine the two combinations of AARRR.

When the business type is a platform business and a platform contains a mixture of multiple business forms, tactics must be designed in layers.

For example, on a business travel platform, business travel users (high frequency and high consumption), holiday users (high frequency and low consumption), wedding users (low frequency and high consumption), and individual travelers all have different needs.

For example, in e-commerce operations, different product categories, such as durable goods, fast-moving consumer goods, clothing, and food, have different consumption rhythms, and the demands of different core customer groups will also be different.

For example, the customer groups for online education, K12, junior high to high school, on-the-job training, and studying English abroad also vary greatly.

Failure to differentiate customer needs, failure to identify core customer groups, and generalization of AARRR will instead erase the huge differences between different types of users. The sophisticated operations guided by data will turn into whack-a-mole operations that are fooled by data.

05 Note 5: AARRR has priorities, not whack-a-mole

This is the third problem faced by new offenders, and it is actually an extension of the previous problem.

Because each business has its own core customer base and its own stage of development, the five aspects of AARRR are not treated equally in different periods, but require trade-offs. We must first understand the core issues of the year, then see which aspect of AARRR is the most important, and then analyze the problems and design tactics to ensure core indicators.

Newcomers often lack an overall concept and like to play whack-a-mole. When they see low activity, they try to increase the activity rate; when they see low conversion, they try to do promotions; when they see fewer new users, they think about investing money to buy traffic and create fission. Anyway, the bigger the number, the better, and they only look at one indicator and ignore the rest. This is a typical approach of treating the symptoms without addressing the root cause.

In fact, if we look at each dimension separately, there are some immediate ways to increase the data value:

• User acquisition A: spend money to buy traffic and advertise
• User activity A: Big wheel, big lucky draw, big giveaway, single product 9.9 yuan limited time sale
• User retention R: Various coupons will be distributed after 30 days, 60 days, and 90 days...
• User benefits R: special sales, discounts, add 1 yuan to purchase...
• User referral R: group buy to get discount, forward to get coupons, friends help bargain...

However, without an overall design and only focusing on the details, it is easy to distribute coupons endlessly, which will not only burn money, but also attract a large number of users who take advantage of the situation, and ultimately harm the sustainable development of the business.

To be frank, many Internet companies are 50 years behind traditional enterprises in cost control. They are still stuck in the era of the Great Steel Production in the 1960s, when people were bold and produced as much as they could, and they worked hard, grabbed land, and gave out various discounts.

On the contrary, after 20 years of fighting, the physical enterprises that can still survive in this era all have a set of cost control methods. By the way, don't be superstitious about Internet thinking. Without burning money, most Internet companies are nothing. The capital winter is full of wailing.

06 Summary

When talking about the AARRR model, the best way to start is to first explain the current business development stage (expansion, stability, contraction) and the primary business goals (maintaining growth, promoting conversion, maintaining revenue, and controlling costs). Focusing on these two, list several core issues to be resolved in AARRR, and then look in depth at how these issues can be analyzed and solved using second- and third-level indicators. This will be much more stable.

Due to limited space, we will find examples in each aspect to demonstrate one by one in the future.

Author: Down-to-earth Mr. Chen, WeChat public account: Down-to-earth Academy. Senior consultant with rich data-related experience in 15 industries including Internet, finance, fast-moving consumer goods, retail, durable goods, and beauty.