AARRR Metrics Framework: What Is It and How To Use It

AARRR is an abbreviation that stands for “acquisition, activation, retention, referral, and revenue”.

AARRR, often called the pirate metrics framework (as in “arr, matey”), helps Shopify Partners perfect their funnel by providing actionable metrics for each stage of the sales and marketing strategy.

In this article, we’ll go through each part of the AARRR metrics framework, why it’s useful for growing Shopify apps, and how to improve outcomes in each part of the framework.

What is AARRR?

The AARRR framework was developed by Dave McClure, a Silicon Valley investor and the founder of 500 Startups.

With so many vanity metrics floating around out there, the AARRR metrics provide an easy-to-remember system for tracking what matters.

Let’s look at each component of AARRR metrics in more detail.

1. Acquisition

This is the first step in the framework. Acquisition starts with people finding you and ends with them being paid customers.

How people find you depends on your marketing strategy. For example, an inbound marketing strategy finds customers by producing lots of high-quality content and waiting for Google to help prospective clients find you.

Alternatively, you might be relying on banner ads, Facebook ads, or Google AdSense.

2. Activation

Activation quickly follows and overlaps with acquisition. Here is where your leads become opportunities.

While acquisition is all about getting visitors—the right visitors, specifically—to your website, activation is how you push those interested prospects to engage with your product.

This is a two-step process.

First, your leads take positive action towards trying your product. For example, if you have a free trial, they give that a go.

Second, you convert your qualified leads or free trials into paying customers.

The rate by which you convert customers is your conversion rate.

One way you can increase your conversion rate is by monitoring your trial data: which customers are trialing, how long your trials typically last, and which plans they sign up for.

Baremetrics makes monitoring trial data easy by calculating your trial data in real-time:

3. Retention

Customer retention is the most important thing you can work on as a business owner. Why? On average, acquiring a new customer can cost five times more than keeping an existing customer.

That’s why you need to identify your customers at risk of churn right away and focus on providing an exceptional customer experience.

There’s a few ways to do this:

Consistently ask customers for feedback
1. Use survey tools to gather feedback and find trends. For example, is there a particular feature that many customers feel could be improved? With this information, you can plan out the most important changes you need to make into your product roadmap and execute accordingly.
Devote resources to customer support
1. When your customers experience issues with your product, it should be very easy for them to get help. Be sure to set up a dedicated support team to respond to support requests in a timely manner, and while you’re at it, develop a customer onboarding process to help customers learn how to use your product.
Segment your customers and look for trends in their behavior
1. When it comes to retention, you’ll want to look for similarities between customers who are staying and those who are churning. You can do this with Baremetrics’ segmentation feature. By segmenting customers into segments based on common attributes, you can answer questions like “Which price tier has the most churn?”

Let’s explore that question in the Baremetrics app.

See a live demo with actual data from Baremetrics, no sign-in required!

We can see that the Pro plan (pink line) and Startup plan (yellow line) have a consistently similar user churn rate that fluctuates between 2 and 7 percent. The Enterprise plan, however, has been consistently higher than the other two plans and steadily increasing since October 2021.

Our Enterprise customers are likely experiencing similar issues that lead to their higher churn as a segment.

If you want to see more real-life examples of customer segmentation and how it can improve your customer retention strategy, check out our how-to guide.

4. Referral

As we talked about earlier, previous stages of the framework involved converting leads into paying customers. The Referral stage, then, is when you turn your existing customers into brand advocates.

From five-star ratings in the Shopify App Store to customer referrals, word-of-mouth marketing is a proven way to drive long-term success.

In particular, customer referrals are one of the most important groups of metrics to focus on. After all, having your customers refer others to your product is every business’s dream. It’s a genuine and low-cost way to acquire new customers.

To gauge the likelihood of your existing customers referring your product to other people, you can use the Net Promoter Score.

Cancellation Insights, an easy way to collect feedback on churned customers

5. Revenue

Once customers sign up as paid customers, your revenue stream begins.

Revenue is what differentiates a hobby from a business. It is the proof that your app has value and users are willing to pay for it.

There are many metrics to track for revenue. Some of the most popular include:

What questions do the AARRR metrics answer?

Metrics are meant to answer simple questions about your company. Here are some examples of questions founders might ask in each stage of the AARRR framework:

Acquisition: How are people discovering your product or company?
Activation: Are these people taking the actions you want them to?
Retention: Are your activated users continuing to engage with the product?
Referral: Do users like your product enough to tell others about it?
Revenue: Are your ideal customers willing to pay for this product?

Use Baremetrics to calculate your AARRR metrics

It can be difficult to calculate all the different business metrics needed to grow Shopify apps. That’s why Shopify Partners use Baremetrics.

With a zero-setup integration, Baremetrics pulls your Shopify data and turns it into useful dashboards, like this.

To get actionable insights about your Shopify app, start a free trial of Baremetrics.

FAQ

What are AARRR pirate metrics?

AARRR pirate metrics are a five-stage framework for measuring the health of a subscription or SaaS business across acquisition, activation, retention, referral, and revenue. The name comes from the acronym itself, which sounds like a pirate's exclamation, and the framework was created by Dave McClure of 500 Startups to cut through vanity metrics and focus founders on the numbers that actually drive growth. For B2B subscription companies, each stage maps to a concrete question: how are new customers finding you, are they converting from trial to paid, are they staying, are they referring others, and is the revenue growing. Tracking all five stages together gives a more complete picture of funnel health than monitoring any single metric in isolation.
How does the AARRR framework differ from tracking MRR and churn alone?

The AARRR framework captures the full customer journey from first discovery through to revenue generation, whereas tracking MRR and churn only measures what happens after a customer is already paying you. MRR and churn rate are critical subscription metrics, but they tell you nothing about where new customers are coming from, how efficiently your trial-to-paid conversion is working, or how likely your existing base is to refer others. Using the pirate funnel alongside revenue metrics like MRR, LTV, and ARPU gives SaaS founders and finance leads a complete operating picture rather than a narrow view of billing outcomes. The AARRR framework is best understood as the strategic layer that sits above your subscription analytics dashboard, connecting acquisition and activation decisions to their downstream revenue impact.
How do I use the AARRR framework to reduce churn in a B2B SaaS business?

Reducing churn inside the AARRR framework starts by isolating which customer segments are cancelling most often and identifying what those cohorts have in common before you build any retention response. Within the retention stage of the pirate funnel, you compare behavioral and billing attributes across churning versus retained customers, looking for patterns like pricing tier, billing interval, or low product engagement in the early weeks after activation. Once you know which segments share the same churn triggers, you can build targeted interventions such as proactive outreach for at-risk enterprise customers or onboarding improvements for low-engagement trial users. Baremetrics lets you apply this kind of segmentation directly to your billing data, so you are acting on actual revenue signals rather than assumptions about why customers are leaving.
What metrics should SaaS founders track in the revenue stage of the AARRR pirate funnel?

In the revenue stage of the AARRR pirate funnel, the metrics that matter most for subscription businesses are monthly recurring revenue, annual recurring revenue, customer lifetime value, customer acquisition cost, and average revenue per user. Together these figures tell you whether the unit economics of your business are sound, meaning whether the revenue generated over a customer's lifetime justifiably exceeds the cost of acquiring them. Founders should also track MRR broken down by new MRR, expansion MRR, contraction MRR, and churned MRR, since that decomposition reveals whether revenue growth is coming from new customers, upsells, or is being eroded by downgrades and cancellations. Baremetrics calculates all of these subscription metrics in real time from your existing payment processor data, with no manual setup required.
How can I benchmark my AARRR metrics against other SaaS companies?

Benchmarking your AARRR metrics against comparable SaaS businesses requires access to aggregated, anonymised data from companies at a similar stage and revenue scale, which is difficult to find in a reliable form. For the retention and revenue stages specifically, churn rate and MRR growth benchmarks are the most commonly sought comparisons, since a churn rate that looks acceptable in isolation may be well above the median for your MRR range or pricing tier. Baremetrics publishes open benchmark data drawn from hundreds of subscription companies, which lets you compare your churn rate, LTV, and ARPU against peers without needing to commission custom research. Knowing where you stand relative to the benchmark turns the pirate metrics framework from a directional guide into a competitive diagnostic.
What is the difference between activation and acquisition in the AARRR funnel?

Acquisition is the stage where potential customers first discover your product through channels like content marketing, paid ads, or organic search, while activation is the stage where those visitors take a meaningful action that moves them closer to becoming paying customers. In a subscription or SaaS context, acquisition ends when someone lands on your product and activation begins when they sign up for a free trial, complete onboarding, or reach the moment where they first experience the product's core value. The distinction matters because a high acquisition rate paired with a low activation rate signals a conversion problem, not a traffic problem, and the two require entirely different fixes. Tracking trial engagement data alongside acquisition channel data is the clearest way to diagnose where the handoff between these two stages is breaking down.
How do I track AARRR metrics without building a custom analytics stack?

Tracking AARRR metrics without a custom analytics build means connecting your existing payment processor data to a subscription analytics platform that surfaces the revenue, retention, and activation metrics automatically, rather than stitching together data from multiple tools manually. For the revenue and retention stages of the aarrr framework, a platform like Baremetrics connects directly to Stripe, Braintree, or Recurly and instantly calculates MRR, churn rate, LTV, and trial conversion metrics with no engineering work required. From there, you can layer in product analytics for the acquisition and activation stages using tools that integrate with your existing stack. The goal is to give SaaS founders and growth teams a single place to monitor funnel health across all five pirate metrics stages without needing a dedicated data team to maintain it.

AARRR Metrics Framework: What Is It and How To Use It

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