Growth Hack Strategies- Pirate Metrics- Stage 5

Aug 30, 2021

Summary: The following would be a part 5 of 6 part series- where we will dive into the various growth hacking strategies defined specifically for each stage. But wait, stages of what? Read more to find out !

Before we delve into the next stage, a quick recap on the "Pirate Metrics (AAARRR)” for growth hacking strategies- divided into 6 stages, which are: Awareness, Acquisition, Activation, Retention, Revenue and Referral.

If you missed out on what entailed in the previous series of blogs, read about Stage-1~ Awareness, Stage 2- Acquisition , Stage 3- Activation, and Stage 4- Retention , to get a quick recap..!

 So after we have created enough “awareness” of the product and brand within the target audience, and moved onto “acquiring” customers . Have the customers download the app to use the product/service once, it's time to “activate” the customer into a regular customer. We also got the customer to stay. Time to generate revenue. 

 Stage 5: Revenue

“How can you increase revenue?”

 If you’ve optimized according to the four AARR metrics before, revenue should already

be flowing in nicely. And no matter what anyone tells you, revenue and figuring out a monetization plan is important for any startup..!

At this stage, it is essential to focus on how to make the potential customer or the users that are already engaging with your app, service, or site to become a paying customer. After the CAC (Customer Acquisition Costs) spent, the remaining cash is termed as the revenue generated. 

The CAC is defined as the money you’ve spent on advertising, sales, and any other relevant costs used to get your customer’s attention (awareness and acquisition). This includes the cost for marketing, sales, meetings, fancy dinners or whatever it takes to get your customer to convert..!

The CAC is compared to the business’s lifetime value (LTV or CLV) to determine what needs to change in order to build revenue and grow the business. LTV is the amount of revenue one customer generates on an average over their buying timeframe. 

Together, CAC : LTV ratio offers insight into:

  • How much funds are needed to invest into customer acquisition
  • How profitable the customer will be
  • How to pertain the customer base

Ideally, the ratio of CAC to LTV should be around 1:3, meaning the value of a customer should be three times more than the cost of acquiring them. 

Growth Hack Strategy for Revenue: How do you ensure the cost of acquiring a customer is lower than the revenue it generates? 

  • It's essential to increase a brand’s LTV and lessen the CAC. 
  • Understanding how customers are moving through the AAARRR funnel and detailing each step for improvements is a good start. Looking at the product pricing and how it aligns with the target customer base is another way to improve that ratio. 
  • You optimize your sales funnel by finding the right users for your product (awareness + acquisition) 
  • Feedback is crucial for an enhanced user experience. It helps you understand your customers’ preferences and optimize the facets of your business that drive customer satisfaction and revenue growth. 
  • Omni-channel presence- by being present on more channels, you reach out to more customers and add to your revenue streams. 

Conclusion: A paying customer reaffirms the confidence of a company in its product offerings. The idea is to ensure that the customer base continues to organically grow in size, to improve the CAC: LTV ratio. 

But how to increase the customer base while keeping the CAC costs low? That's where the last stage comes in..! 

Tune in for the part 6 of this series coming next!!

Author(s) :
Swadha Agarwal