[Mobile Marketing] The Conversion Funnel: The AARRR Framework Applied to Mobile Applications

11 Jul 2018
[Mobile Marketing] The Conversion Funnel: The AARRR Framework Applied to Mobile Applications

The technical development of a mobile application is only the first step of a long road.

Even though many people believe that the main difficulty lies in the development stage, the reality is quite different. The success of a mobile application is determined mainly by the way marketing related challenges are handled; both upstream (the problem the app aims to solve or the need it aims to satisfy, targeting the right audience, etc.) and downstream (conversion funnel performance) of the app launch.

These challenges were formalized in 2010 by Dave Mcclure * through a well-known theory in the tech world: the AARRR Framework, which applies to both software and mobile applications. The AARRR Framework shows a conversion funnel in 5 successive phases (Acquisition, Activation, Retention, Referral and Revenue).

 

Source : Qwamplify

 

Each of these stages involve:

  • a key goal to achieve (= the key event that will take the user to the next stage of the conversion funnel)

  • one or more marketing tactics/actions

  • one or more performance indicators (= the KPIs that enable measuring the impact of the taken marketing actions)

... with obviously a risk of churn = that is the momentary (= inactivity) or permanent (= uninstallation) loss of app users **, who cannot be taken to the next stage of the funnel.

 

Let's take a closer look at these 5 steps: 

 

I.ACQUISITION 

 

 

a) Key objective of the Acquisition stage

The marketing objective of the acquisition phase: get as many people as possible to download and install your mobile app on their smartphones.

This comes down to asking the following question: how to generate the maximum of app downloads / installs by my target users on their smartphones? 

 

b) Acquisition marketing tactics

With more than 3 million mobile apps available on Google PlayStore in 2017 (and 2 million for Apple AppStore), it's difficult to rely solely on word-of-mouth to promote your mobile app and generate downloads.

However, there are a multitude of channels to promote your app and generate downloads.

To give you a simple and comprehensible overview of the existing channels, here are the main ones: 

 

Free channels (list not exhaustive):

Disclaimer: Free channels are never 100% free. Even if they do not represent a cost in “euros”, they take time and therefore represent a cost in terms of human resources.

  • Articles published on a media or a third-party blog (press relations)

  • Trade shows and events (networking)

  • SEO / Natural referencing

  • E-mail

  • Social networks (organic posts free of charge)

 

Paid channels (list not exhaustive):

  • Search: Adwords (incl. YouTube Ads, Gmail Ads, ...)

  • Display: via Adwords or social media (LinkedIn, Facebook/Instagram, Twitter, Snapchat, …)

  • Specific display programmes: Google Universal App Campaigns, Facebook App Campaigns, AdMob, AdColony, …

  • Remarketing / retargeting: 

    • En display : via Adwords or Facebook

    • By email: Adroll etc.

  • Others:

    • Affiliate marketing

    • Native advertising

    • Performance-based e-mail marketing

    • Sponsored or editorial blog posts

    • TV / radio spots

 

c) Performance indicators to follow up

Before the acquisition stage, two elements are decisive:

- Target audience segmentation, i.e. "Who are the people most likely to be interested in my mobile application?" (My target group will be a combination of criteria, such as: age, gender, marital status, geographic location, interests, profession, job position, religion, political convictions, ...)

- Target audience touchpoints identification, i.e. "In which physical or virtual places, or through which media can I reach and engage with this target group?" (Several touchpoints may seem relevant: a Facebook group, TV show, a trade show event, ...)

 

The indicators to follow (each week and per channel) to evaluate the performance of my acquisition tactics:

As a first step:

  • CAC (Customer Acquisition Cost); to measure per channel => what budget should I spend on average to generate 1 new download on Facebook / AdWords / ...?

  • Number of app users (cumulative)

As a second step :

  • Ads performance (search and display): CPC (Cost Per Click), CPM (cost per 1000 impressions, clicks vs. installations ratio, ...

  • App profitability: ROAS (Return On Advertising Spending), ROI (Return On Investment), ...


d) Success story : Clash Royale


Source : Pinterest

 

With more than $400 Million advertising investment in 2015 alone, SuperCell (the publisher of Clash Royale, Clash of Clans & BoomBeach) has shown that mobile ad spending can rise to levels like those practiced by the distribution giants.

Television, radio, bus stops, display, sponsored posts ... SuperCell has literally used almost every advertising channel available to promote its games; and for good reason: their demographic target ranges from 12 to 55 years old.

 
II. ACTIVATION 

 

 

a) Key objective of the Activation stage

On average, 89% of users abandon an application within 7 days of installation (Adjust). So basically, you only have one week to demonstrate the added value of your app to those who downloaded it…

The goal of the activation phase is to transform the maximum number of people who have just downloaded your app into 'real' users (for example, to use the mobile app of “Chauffeur Privé”, the user needs to register and set his credit card information. Otherwise he will not be able to launch a ride request). It all starts with defining what we call a "key-event": the event that switches a non-user (who has only downloaded your application) into a user (who actually used it).

This "key event" totally depends on the nature of your activity; it's up to you to identify it. For example:  

  • ATransportation app (e.g. Chauffeur-Privé): the key-event is the registration (including the setup of the credit card information)

  • M-Commerce app (e.g. Amazon): the key-event is the first catalogue search

  • Media app (e.g. Allociné): the key event will be the first time the user uses the app

 

b) Activation marketing tactics

You have understood: activating users is not an easy task. It is not easy to stand out in a world where most of the apps are free ... and with such a huge number of apps available (3.7M on the PlayStore, more than 2M on the AppStore -> see here).

To transform an app 'downloader' into a user, you must do two things: make sure that the user opens the app he has downloaded (1) and lead him to the key-event (2).

(1) To get the person to open the application, there are several tactics: 

  • CGoogle UAC campaign focused on in-app event (i.e. not on download volume)

  • Easy registration (via Facebook Connect or Google / Gmail Connect)

  • Retargeting (via display, email, SMS, push notifications, ...)

  • User-friendly tutorial / FAQ

  • Welcome email programme

  • Clear call-to-action (in emails, SMS, notifications, ...)

  • Welcome credit (for example, 10 € discount offered on the first order)

  • The quality of the user experience 

(2) To lead the user to the "key-event", it is essential to offer a high-quality onboarding experience. When the user opens your app for the first time, guide him step by step, eventually leading him to complete the key action.

If your application contains advanced features, it is customary to provide a "crescendo"-like onboarding that will allow the user a gradual use of the app, by going from essential features to the most specific and complex features.

 

c) Performance indicators to follow 

The key performance indicator of the activation phase is linked to your key-event. The challenge of the activation phase is to maximise the number of users who complete the key action, because on it depends if the users choose to keep your app on their smartphone or not.

The KPIs to watch: 

  • The uninstall rate during the first week

  • The rate of "key-events" (e.g. registration rate) compared to the number of downloads, within 7 days after installation.


d) Success story : Chauffeur Privé 

Source : CBNews

 

The “Chauffeur Privé” application is free of charge so there is no entry barrier for installation.

However, to transform the people who have downloaded your app into 'real' users, it's another matter. It’s about finding the right incentive to get them to make their first ride request (which implies to register and fill in credit card details).

How to convince people who have downloaded the Chauffeur Privé app to use it for the first time, especially when they often already use a competing app, such as Uber?

Chauffeur Privé succeeded in this by sending the app “downloaders” a discount code (10€) to be used on their first ride, as well as by optimising its onboarding experience (programmed emails and push notifications highlighting the app benefits, such as nice and easy to use interface, availability of a customer service representative etc.) 

 

III. RETENTION 

 

 

a) Key objective of the Retention stage

Retention (or re-engagement) accounts for all the means necessary to keep your users active on your app, make them return regularly, etc.

As we observed for the Acquisition and Activation stages, finding new users and getting them to use your mobile app has a non-negligible cost; that's why investing in the retention of your users is crucial. Ignoring the retention stage would be like filling a bottomless pit...

 

b) Retention marketing tactics 

Many tactics exist to maximise retention: 

  • Push notifications

  • Personalised content

  • Rewards program

  • Promotional offers

  • Retargeting

  • VIP / Premium status

  • Gamification (levels)

  • Sharing mechanisms (social media)

  • Technical performance optimisation (reducing bugs)

 

c) Performance indicators to follow

Several KPIs can measure retention: but the ‘right’ KPI depends on your activity, your app and its specificities. For example, an app that measures the quality of your sleep will naturally have more frequent sessions than an app like Google Maps that you might use 3 to 5 times a day.

Here are the best KPIs on which to base your analysis: 

  • Number of weekly or monthly sessions

  • Session duration 

  • App abandonment rate after 7, 15, 30 and 90 days

  • Activity rate after 7, 15, 30 and 90 days


d) Success story : Tinder

Source : TechCrunch

 

The famous dating app Tinder mixes several interesting tactics to maximise its retention rate.

Firstly, Tinder uses a freemium model that allows users to subscribe to a paid version (monthly subscription) to take advantage of advanced features (localised searches, unlimited swipes etc.).

This enables to Tinder to engage and monetise users.

Secondly, this social network is known for its push notification reminders that are triggered when a lack of activity is detected in a user.

Finally, the built-in messaging system allows users to exchange with their "match" and generates a notification for each message (by default), which is an effective way to boost daily activity on the application, since the user is required to return to the app to access the received messages.

 

IV. REFERRAL 

 

 

a) The key objective of the Referral stage

Referral refers to the step that relies on virality (= word-of-mouth) to get other users to download your app.

When effective, the referral system can lower the cost of acquiring new users since each actual user potentially brings back new ones.

 

b) Referral marketing tactics

Unlike the other stages discussed in this article, the referral stage focuses on the user and the value proposition to convince users to recruit other users.

In general, financial tactics (monetary incentive) and social tactics (sharing, virality) are the most effective - and therefore the most used.

Some examples:

  • Referral programs with rewards for the sponsor and the referred member(s)

  • Promotional coupons to share

  • Shares on social media (results etc.)

  • Monitoring user ratings and reviews on stores

  • Responding to user reviews


c) Performance indicators to follow

Depending on the features and type of the referral program, the KPIs to be monitored might have to be changed.

Here are a few: 

  • Number of new users recruited per participant 

  • Return on Investment (ROI)

  • Participation rate of the programme

  • Success rate on the programme

  • Conversion rate on recruited users

 

d) Success story : Dropbox

Source : Academy Hostnet 

 

With a 3900% growth (yes, you read right!) in only 15 months’ time (they went from 1000 users to more than 4 million thanks to Referral!), the Dropbox Referral programme is a world-class case study in the tech world today.

The principle: each user gained 500Mb of additional free storage space (in addition to the free 500Mb received in the beginning), as soon as one of his friends registered in consequence of his recommendation (and this, up to 16Gb in total).

Devilishly effective.

 

V. REVENUE

 

 

a) The key objective of the Revenue stage

The objective of the Revenue phase is to succeed in unleashing in app purchases, to succeed in monetising the app.

This raises the question of choosing an appropriate business model for your app. Here are the most common business models: 

  • Free, but funded by ads

  • Freemium:

    • Free, with optional in-app purchases

    • Free, with optional subscription

  • Paying on departure:

    • with 100% free use from that point forward

    • with optional in-app purchases

 

Among these examples of business models, the last two are the least common; only a handful of apps that require up-front payment to download succeed. Indeed, more than 94% of mobile apps are free to downloadt.


The share of free apps vs. paid apps on Google Play Store in 2018. Source : Statista

 

Overall, the trend is clearly Freemium model: free to download app offering either a subscription or in-app purchases. It is the freemium model that generates the most revenue because it enables to recruit more users: "free" to start with, and hoping to quickly converting the user to a paying user.

 

b) Revenue marketing tactics

Triggering a purchase on your mobile app is not an easy task. To do that you should use two types of tactics: (1) Offer an incentive and (2) create awareness around it.

(1) Offer an incentive to trigger a purchase:

  • A voucher on the first order

  • A time-limited offer or benefit (exceptional offer, free delivery/return / trial etc.)

(2) Promote your promotional offer through different channels:

  • Live chat

  • SMS

  • Push notifications

  • Emails

 

c) Performance indicators to follow 

  • User Ratio Free vs. Paid

  • Conversion rate on the purchase/ subscription pages

  • Daily/ weekly/ monthly sales turnover 

 

d) Success story : Spotify

Source : Statista

Launched in 2008, the music app Spotify – by a Swedish company already present in 60 countries – was a pioneer of a new way of accessing music, streaming. Behind its success: the mastery of acquisition, retention and audience monetisation tactics.

With 71 million subscribers paying a fee up to 10 €/ month and 159 million registered users, the Spotify team has created a UFO of the “Freemium world”. Indeed, the performance of its business model is exceptional: a 47% rate of paying users (in comparison to the total number of registered users) while the average conversion of freemium models (that work!) is usually around 10%.

Magic!

 

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To go further: LAARRRL, the Qwamplify approach of the AARRR Framework

 

Dave Mcclure’s AARRR framework, originally designed to describe the conversion tunnel for software, is a tool that is equally well suited to mobile applications.

Nevertheless, at Qwamplify, we think that the AARRR framework is a somewhat limited. That's why we enriched it with 2 additional elements, which enable to define the conversion tunnel entirely.

So, we transformed AARRR into LAARRRL!

 

The first "L" for Launch

The launch of an application is not trivial: it is even a decisive step that can condition the commercial success or failure of an application and influence the user life cycle significantly.

To learn more, read our article on the 7 crucial steps of launching a mobile app (coming soon).

 

The last "L" for Loyalty 

If retention is about measuring your ability to keep your users active, loyalty is about the mechanisms to put in place to maximise the lifetime value of your users; from revenue contribution to the level of engagement, throughout the life cycle.

It is therefore a double challenge: make users more active on the mobile app, at a higher frequency, but also to spend more (through up-sell and cross-sell). 

 

a) Marketing tactics to increase your user loyalty

In a similar way to retention, increasing loyalty consists of implementing features that lead your users to spend more time on your app, at more frequent intervals, and to get them to spend more ... and more often.

Here is a selection of engagement tactics:

  • Communities inside the app

  • Gamification (badges/trophies, statuses, VIP programs...)

  • Rewards program

  • Offers or promotions that generate cross-sell (to trigger the purchase of complementary products/ services)

  • Offers or promotions that generate up-sell (to increase the total purchase amount of a user and the average basket size, or to generate upgrades when there are multiple pricing plans available)

  • Win-back campaigns (awakening dormant users)

 

And all this, broadcasted via: live-chat, SMS, push notifications, internal messages, emails, phone calls....

 

b) Performance indicators to follow

The performance of a loyalty related strategy and tactical actions can be measured using the following indicators: 

  • Frequency of visit

  • Frequency of purchase

  • Average basket size

  • Session duration 

  • ARPU (Average Revenue Per User)

  • LTV (Lifetime Value = average income over the lifetime of the user)

  • Lifetime of a free user

  • Lifetime of a paid user

  • ROI (Return on Investment)

  • Number of active users (per day/ week/ month)

 

c) Success story : SnapChat

Daily active users of SnapChat (worldwide) - Source : Statista 2018

 

With more than 190 million daily active users in Q1 2018, SnapChat has managed to retain a large audience among young people under 30 years of age thanks to multiple mechanisms

  • Friends list

  • Private conversations

  • Stickers and "filters"

  • Mailbox related notifications

  • “Stories": shared short videos

All these features are focused on virality and a community effect that has been carefully designed for one purpose: boosting user engagement. Thus, Snapchat has become almost a “necessity” to its users, every day.

 

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Did you enjoy this article? Check out our mobile marketing related articles in our dedicated blog.

Are you a Mobile Marketing Professional and would like to discuss with our experts how to improve your marketing performance? Contact us and we’ll help you to conquer your market!

Paul Nguyen
Consultant and contributor at Qwamplifly

 

NOTES:
* Dave McLure, the founder of 500 Startups (an investment fund and start-up accelerator)
** Churn will be covered in depth in our soon coming article. Sign up for our newsletter to receive the next articles directly in your mailbox!