When Pirate metrics were first introduced, Revenue was placed at the very bottom of the funnel.
But in my version of the AAARRR growth metrics, I place Revenue right after Activation. A lot of startups and marketers use this version as it fits most naturally into the lifecycle of a startup customer.
What is the Revenue stage?
It’s all about the money. Ask the question: How many users start paying for your product or service? It’s important to think in revenue in terms of both the number of users who pay for your product as well as the actual revenue (in amount) that you can bring in.
Based on different business models, what you’re measuring will be slightly different. If you’re running a recurring subscription business, and a customer has paid for an annual plan, you’re going to assume that revenue amount from the customer for the next one year. Using the amount here, we can calculate our Potential Order Value and compare it with our CAC.
You can also predict LTV using prediction models at this stage but I would warn against that for new startups and businesses.
Revenue Metrics and Examples
Here are some examples of the Revenue stage from different types of businesses:
- Customer signs an annual B2B services contract
- Customer pays for a premium version of a freemium product
- Customer purchases any paid plan of a product
- Customer places an order on an eCommerce website
These actions that generate revenue for the company will be marked in the revenue stage of the funnel.
In the next chapter, we will look at the Retention stage of the funnel.