Use the AARRR Funnel Analysis to achieve more ecommerce sales

As you go from Acquisition to Revenue during the process, less and less clients remain on the different levels. As a consequence, the diagram of the process forms a funnel; that’s where the name funnel analysis comes from.

A little funnel analysis history

Elias St. Elmo Lewis created the AIDA model (Attention, Interest, Desire, Action) in 1893, based on his own sales experience. This model concentrates on grabbing attention, then interest, creating desire and ultimately, and encouraging taking action.

The model is built on advertising psychology and its main purpose is the analysis of offline marketing tools. Right until around 2000, the use of the model was extremely popular among marketing professionals, however, due to the spread of online communication and websites, a new model appeared which was created in 2007 by Dave McClure. This was the AARRR model, also known as AARRR funnel analysis.

Of course all this doesn’t mean that the AIDA model is no longer in use (on the contrary!), it’s just that it approaches the process from another aspect. Due to the rapid changes of the online world and because of the experiences gained based on these changes, newer and newer models and ideas are born.

The AARRR model focuses mainly on online marketing and data-driven marketing, and it’s also ideal for the monitoring and optimization of conversion (mainly transactional) processes.

The AARRR model analyses the users through 5 measurable dimensions:

Different indicators measurable by measuring tools can be defined in each dimension of the AARRR funnel analysis. After the definition of the indicators, you will be able to measure and then to optimize these quantified and scaled values, thus increasing your efficiency.

According to McClure, these measurable data may be the following:

Diagram of the AARRR model

The model can be illustrated in several ways.

I

Log into Google Analytics and then to Reporting Suite. Here you’ll find the illustration options of the model defined by you under the menu Conversions/Targets/Channel illustration (it’s necessary to create properly set targets and access routes for the channel illustration).

Example for Google Analytics channel illustration

II

Another kind of illustration is the bar chart illustration. The majority of the analysis software applications give preference to this.

Example for bar chart channel illustration

You can use various free of charge (Google Analytics) and paid (Kissmetrics) pieces of software in order to increase the efficiency of your website (generating more registrations or higher revenue). After choosing the most appropriate analytical tools, you will by all means have to integrate the code of the measuring tools into the ecommerce store. This step is essential because this way you will be able to measure all the indicators and levels of the funnel model.

Now let’s see the dimensions of the AARRR funnel analysis in more detail

Acquisition

The first dimension of the AARRR funnel analysis collects the data in terms of the acquisition of visitors. You will certainly have to determine the channels for the acquisition of visitors. Such channels may be for example social media, organic searches, email campaigns, display campaigns and the channels of the different advertisements.

After having determined the channels, continuous auditing of the obtained results is indispensable. The number of acquired visitors and the cost of the visitor acquisition determined on the basis of the channel, may be appropriate indicators. The purpose of this stage is to have as many relevant visitors on your website as possible, and to achieve that with the lowest possible marketing costs.

Activation

After the users have found your online shop, the second dimension of the model, activation, comes in, the purpose of which is the increase and the measurement of their activities. You can measure the activities of your visitors (and later your users) with various analytical measurement tools. Such tools are Google Analytics available to everyone, and the different heat mapping analytical tools (e.g.  Mouseflow).

Key indicators of the activation stage may be: number of page views, time spent on the given page by the customers, or the number and cost of conversions targeted by the company.

Conversion indicators may be, but not limited to, for example the following (depending on the company and the profile):

Retention

Even if the 80/20 principle, elaborated by Vilfredo Pareto, (according to which 80% of the effects come from 20% of the causes) will not necessarily be valid for your company, still, the visitors and the users of your ecommerce store who showed some sort of a commitment and loyalty (in the scope of the already mentioned conversion indicators) and returned to your online shop play a vital role.

Fact: Reaching the already acquired visitors involves a much lower cost than reaching those who have not yet visited your website.

You can measure for example the following key indicators in the third stage of the AARRR funnel analysis: ROI (Return on Investment) indicator of remarketing and email campaigns, churn rate, and the rate of returning visitors compared to the total number of visitors of your website.

Revenue

The most important indicators from the point of view of all companies may be revenue, and the amount of the realized profit.

In this dimension of the model the measuring tools help you determine the scaled values of the customers. Such values may be:

Referral

The fifth and last dimension of the funnel model is based on the viral spread, the meaning of which is that your visitors or clients share their views and the pieces of content and/or products offered by your ecommerce store, in the form of Facebook posts and/or YouTube videos for example.

Then later these pieces of content reach the other users without involving additional costs (that’s what’s called viral spread). Important key indicators of this stage may be:

The number of shares on Facebook and the numeric value (from 1 to 5 stars) of the ratings,indicators of customer satisfaction,viral indicator (how many new customers arrive thanks to the referral of your already existing customers), viral cycle (how long it takes until the person to whom the online shop was recommended becomes a customer thanks to the referral.)

The referral stage does not necessarily have to be the last one, since the visitors can share their opinions on the ecommerce store or on one of its products even during the first visit.