Life Inside Dave McClure’s Pirate Metrics Funnel

Dave McClure’s “Pirate Metrics” funnel has been lauded by many, and adopted as something of a default model for SaaS customer metrics.

Its name comes from combining the first letter of each of its stages (Acquisition, Activation, Retention, Referral, Revenue), which spells out “AARRR”. You know, like what a pirate says.

Businesses find it useful for tracking how well they’re converting strangers into full-fledged, money-spending evangelists. But when viewed from the perspective of someone going through the process of becoming a customer, the experience is quite different.

A View from the Inside

While names like “Activation” and “Revenue” are easy ways for a company to describe the current status of any of its customers, those words are meaningless when applied the other way around: no part of becoming a customer “feels” like any of the stages as they’re named.

For example, this would never happen:

Person 1: “Hey, how are things going with building up your newsletter list?”
Person 2: “Pretty good! I’m in the Retention stage of my relationship with MailChimp right now.”

Put simply, the terms the AARRR funnel uses are completely out of alignment with the experience of becoming and remaining a customer.

This may not sound like a big deal, but the issue is as foundational as it is subtle: when the way you view your relationship is out of alignment with the way the other party views it, that relationship is in severe jeopardy.

A Funnel on Their Terms

Think back to a recent time you became a customer of a SaaS company – what was the process it took to get there? How would you describe it from your own perspective, rather than the company’s?

I’d be willing to wager it would be pretty different in at least two ways:

  1. The process would be centered around your relationship with a recognized need, not with a particular company
  2. Your relationship with the need would go back long before the company came on the scene, and continue long after you started paying them

In other words, MailChimp’s customers don’t view themselves as part of the MailChimp customer base, but the reverse – they view MailChimp as just a part of fulfilling their greater need.

To me, the latter is a much healthier perspective for a company to take. Rather than limit the scope of “relationship progress” to what customers can do for a company, why not invert it and chart out all the ways a company can help further the customer’s relationship with their greater need?

This keeps you laser-focused on the central reason people become your customers to begin with, and also diversifies your ability to bring value to them.

For just one example, consider what people are struggling with before they search for a solution to purchase. How can you help them in that earlier phase and frontload your relationship with value? How much of an advantage would that give you once they’re ready to buy?

Of course, this is not to say that all company-centric metrics should be completely banished. They have their place and their utility, when kept within their proper context.

Just keep in mind that your customers aren’t living in your funnel, they’re living in the real world. Fortunately, you can live there too.

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