Activation: Are users satisfied after the first experience?
Retention: Do people come back to you?
Referral: Do people recommend your product?
You link the metrics that best fit your product or service to these five phases. The idea is that you gain insight into the associated micro and macro conversions, so that you can influence them. You also gain better insight into your product, so that you can continue to test, build and learn. You must learn from data and experiences and change your product, business model or market where necessary.
AARRR metrics
Step 8. Sell
The title of this step is a bit misleading, as it is not about selling your product or service, but about attracting investors. Investors mainly look at your team, the market and your product to assess its potential.
The experience and execution power of your team is the most important. Only a well-composed team allows the different forces to excel. Research shows that the most successful entrepreneur is in his forties, has a backpack full of leadership experience and thorough knowledge of the market. In addition, more than half of the scale-ups studied were founded by a diverse and expert team, instead of by an individual entrepreneur.
Investors are excited about rapid growth and a large market. To assess the market, the Total Addressable Market (TAM, the annual return if you have 100% market share), the Serviceable Available Market (SAM, the share of the TAM that you can target with your marketing and sales) and the Share of Market (SOM, the realistic percentage of the market that a company has or aspires to).
The product and especially its status is the third criterion. An investor wants to know exactly where you stand, what you have and have not validated, what steps still need to be taken and how the capital will help you reach the next milestone.
Investment Readiness Level
The Investment Readiness Level canada mobile number list makes clear where an innovation stands in the development: which milestones have been achieved, which steps still need to be taken and which assumptions have been converted into facts. The model consists of nine levels, which include looking at the business plan, the problem and its solution and the most important metrics. If you have reached the highest level, you have a proven growth model that solves an existing customer need and is interesting for investors.
Step 9. Find your product-market fit
In addition to your gut feeling, you can use three methods to investigate whether you have achieved the ideal product-market fit with your solution. If your company has product-market fit, this means that your product or service fits well with the needs of a market that has sufficient potential. The book mentions the Net Promoter Score (NPS), the Sean Ellis method and the retention curve.