btw, note that AARRR isn’t exactly sequential… in fact, i’d emphasize Activation & Retention *first*, then go after Acquisition & Referral, then optimize for Revenue

Recently, I have caught a couple of my Customer Development clients optimizing the metrics in the “wrong” order, so Dave’s comment bears repeating and perhaps some expounding upon.

The Pirate Says “AARRR”

The anagram is ordered by user experience:

A – Acquisition – User is directed to your site;

A – Activation – User signs up or is otherwise engaged;

R – Retention – User keeps coming back, i.e., is engaged over time;

R – Referral – User invites others;

R – Revenue – User pays or is otherwise monetized;

This is not, however, the order in which you should optimize your product while building your business.  The order (and truly, the metrics themselves) are dependent upon your business model.

For B2C Free, Say RRAAR

Retention – Nail engagement so that users want to or must come back;

Referral – Your business model requires massive user growth, so your product must require referrals to work or must be so cool it just happens;

Activation – Once your users are here to stay and inviting others, optimize their conversion funnel.

Acquisition – Now you’re ready to blow up acquisition.  (Good time to get investment funding.)

Revenue – Millions of users?  Time to monetize.

For B2C or B2B Freemium, Cheer RRRAA!

Retention – Nail engagement so that users want to or must come back;

Revenue – If your business model requires users or businesses to pay, you need to figure out what they’ll pay for before you blow-up anything;

Referral – Since you’re likely not a true network-effects business, you optimize referral after revenue.  Optimizing referral is actually part retention, part funnel optimization.  Users are so happy they will refer others to your site or provide you testimonials or speak to the press, etc.  Not much sense in blowing up your acquisition, however, until you have that level of passion.

Activation – This refers to Blank’s “Sales and Marketing roadmap.”  Here you understand and optimize your sales funnel.

Acquisition – OK, now you can hire that PR firm.

For Enterprise B2B, Cheer an alternative RRRAA!

R – Revenue – If you’re selling to businesses the number one thing you need to prove is that someone cares enough about what you’re providing to give you money for it.

R – Referral – As above, referral in this context means that your customers are willing to sing your praises publicly.

A – Activation – In this context, activation is understanding your sales and marketing roadmap.

A – Acquisition – After you nail your sales and marketing roadmap, you’re ready to feed the top of the funnel.

R – Retention – In enterprise B2B, you often don’t have a subscription model, but may be charging annually for maintenance and support.

Note that you will always need to do some level of “acquisition” in order to figure out and optimize the other stuff.  But the point is that you’re not concentrating on or optimizing acquisition at the start.  Exact order of AARRR is debatable from one business to another, so use above as guidelines only.

My book was (is) trite and sophomoric. After all, what insights do most 20-somethings have worth sharing? A lack of experience — a lack of failure — makes pontification shallow. One of my younger brothers, who was trying to make a living as a painter at the time, had a great comment. He said that he felt my book, like his art, was merely trying to say too much. That it wasn’t that we didn’t have good things to say, but that there was lack of discipline in focusing and examining in greater depth a few ideas, rather than “letting it all hang out.”

I think young entrepreneurs suffer from a similar malady. But I’m going to leave it to you to ponder the connection between this and customer development and lean startups.

I actually bring this up because I recently did my first customer development presentation and I think I tried to say too much! I’m no Eric Ries, but really, I’m not a bad presenter. This was my first attempt at a new presentation and admittedly, I did not dedicate the proper time to building the deck up front.

So now the presentation has been made available on video.  I forced myself to watch it, which frankly, was rather painful. You know what I mean if you’ve ever watched yourself “perform.” FWIW, I’m going to share it with you. Maybe you’ll find something of value!

BTW, it cuts short not because I was removed with a hook, but rather due to technical glitches. (Yeah, right.)

Insights on how to improve or which parts you’d like me to concentrate on would be of great help!

• need to be revenue focused, rather than # of leads focused;
• marketing taking greater responsibility for pipeline management;
• measuring, testing, refining every step of way through pipeline;
• identified information and activity overload problem;

A few key points still missing, IMHO.

First, in today’s environment, business needs to be profits-focused, not just revenue-focused.  This is a critical distinction.   An expensive advertising campaign may add more leads to your pipeline, some of whom eventually buy.  You’ve increased revenue, but hurt the short-term bottom line.   (Arguably there may be longer-term benefits from raising “awareness” through advertising.)

Second, this may just be a language thing, but I’m guessing not.   Marketing and sales professionals continue to talk about the “sales process,” e.g., the necessity to create activities and produce collateral that “nurture” customers through the sales cycle.   Despite the fact that this webinar correctly identified information overload as a problem, the end recommendations still pushed for “getting all the information the sales team needs into their hands.”  Step back!  This is classic reactive marketing and emblematic of VP of Sales (& Marketing) driven marketing.

Key question to ask:  what is the buyer’s process.

Third, “who is the prospect” was asked at the end of the webinar, when it should have been slide 1.   Even if your company was able to handle multiple segments before the economy tanked, you need to reassess to determine what are your profitable segments now. See point 1.

Comments welcome.

So to oversimplify, the classic failure might look like:

1. Build financial model based on revenue and go-to-market assumptions and present to the Board;
2. Develop product;
3. Hire VP of Sales w/ relevant contacts;
4. Build sales plan based on promises to the board;
5. Hire field sales team;
6. Hire marketing person to support sales;
7. Burn cash, miss milestones;
8. Go back to board with new assumptions;
9. Build sales plan based on new promises;
10. Rinse. Repeat.

At this point, the company has opportunistically sold some amount of product, but doesn’t necessarily know anything more about the market than when they started.  The company has likely already missed revenue targets, which leads to a greater desperation to make more sales.  The company becomes increasingly opportunistic.  Even if they manage to hit their revised numbers, the company is in trouble.  It is difficult to scale opportunism.

So what’s missing?

What is missing is a market-centric approach to the business plan.  What’s missing is an analytical approach to the go-to-market strategy; a systematic way of determining Which is the most efficient segment?, Who is my best buyer?, Wow do I reach them?, How much will it cost?, How do I know if I’ve chosen the right or wrong segment?, When Will I know?

Hence, we developed a specific process and subsequently implemented it, to a varying degree of success, at several companies.   The specific goal of was to achieve replicable sales in the specific segment, in which you will establish a beachhead, in order to Cross the Chasm.

The process is pretty simple on paper:

• pick a segment;
• document/refine your market assumptions;
• predict/update your metrics;
• go to market;
• measure progress;
• test for replicability;
• refine assumptions and metrics;
• iterate;

The approach is sound.  Problems lie ahead in execution, which I’ll dive into in a future post.

In the Bay Area I was a small fish in a large pond.  In San Diego, at least I’m a small fish in a small pond.

bah-dump, bump.

The San Diego market for marketing professionals certainly is different and has, not surprisingly, both its ups and downs.  Clearly, fewer opportunities exist for software and Internet high-tech marketers.  There are just not as many companies as in the SF Bay Area, including Silicon Valley.  San Diego has a strong bio tech industry, but the cross-over is not simple (or at least that’s the perception).  Wireless technology is big here, led by, of course, Qualcomm which has resulted in a number of wireless/telecom start-ups.    There certainly is some crossover into this market.  It’s my view, however, that a mini-bubble exists in that there are serious business model issues with some wireless start-ups, and I’m guessing the current economic downturn will expose these.  (I talk more about this in a separate post.)

Generally, I’m not feeling a lot of marketing love in San Diego.  Perhaps it is simply the natural evolution of a technology ecosystem.   First a region must build a strong technology base and then a demand for marketing expertise will emerge.  Despite the fact that San Diego-based WebSideStory was instrumental in leading the marketing ROI trend through its web analytics products, and the fact that there are several marketing related start-ups here, e.g., JuiceMetriQs, Island Data (now Overtone, I see), and Certona, generally, the idea that Marketing doesn’t mean Madison Ave, appears to me to be poorly understood.

(BTW, I don’t know the motivation, but Overtone moved its marketing organization to the Bay Area.  Aside from founders, until recently the entire Ortiva Wireless management team was from outside San Diego.   The same goes for Paraccel. Trend or merely emblematic of the state of San Diego resources?)

There is upside:

The community is tight.  The atmosphere is collegial and in general, one gets the feeling that all are “in this together” — this being the flourishing of San Diego’s tech community.  As I made my networking rounds when I first arrived, I heard the same people that I needed to get to know, repeatedly.  Several individuals made an effort to introduce me around, for which I am grateful.  Some of these include Leo Spiegel, Ruprecht Von Buttlar, Jeff Belk, and Carlton O’Neal.  (Much thanks!)

There are a number of good groups and organizations in town, including CONNECT, Tech Coast Angels, San Diego Venture Group, MIT forum, CommNexus, and San Diego Software Industry Council, but not so many as to make one feel inundated or incapable of keeping up.  They offer a steady stream of networking opportunities, workshops, quality speakers, etc.

Finally and most importantly, if it is the case that many San Diego entrepreneurs, technologists, or investors lack knowledge of process-oriented, metrics-driven high-tech marketing, well then, that represents an opportunity for education and for new voices to be heard.

Hmm, a pain point, an opportunity, I better get to work!