AARRR! Mixpanel for Pirates (updated!)

Dave McClure's Startup Metrics for Pirates has become something of a bible for startups focused on collecting data and iterating quickly. His premise is simple - building a startup is hard! To succeed, you need to design and test constantly throughout both marketing and product. Marketers must design and test multiple channels, measuring effectiveness deep down the funnel rather than on the surface. Product designers should rigorously test new features through split testing and measuring impact on conversion.

For founders, less is more; the entire team should be focused on five key metrics: Acquisition, Activation, Retention, Referral, and Revenue.

Luckily for all of you pirates out there, Mixpanel is the perfect tool for tracking AARRR....

Acquisition

The key to understanding user acquisition is understanding which ad networks, widgets, campaigns, affiliates or SEO/SEM are sending you valuable traffic. Dave McClure calls these "best-performing conversion channels" and emphasizes that these are not channels sending you tons of pageviews, but channels sending you users that users that do something meaningful. This might mean viewing a movie, downloading a plug-in, playing a game, entering an email address - it's really up to you. All that matters is that you determine your meaningful events and judge your sources of traffic accordingly.

Mixpanel lets you easily track these meaningful events and segment them by source, campaign, medium, keyword, etc. Here is a sample Segmentation report. We are digging into an event that is more meaningful than a "pageview" - we're looking at a Browse, or search, event. Most likely, users that hit my landing page and actually browsed for an item are a good audience for me, and are much more likely to use my product than visitors who bounced after hitting the site. Breaking this out by ad source, we can see that HeyZap is the best source of traffic that performs this meaningful action.

An even more sophisticated approach to judging sources of traffic would be to run your retention reports by source to see not only which campaigns are sending you valuable traffic, but which campaigns are sending you traffic that returns over and over again. This is something unique to Mixpanel; I'll get more into this under Retention.

Dave McClure also mentions audience segmentation - who are these users? What age/gender/geography do they represent? Mixpanel Segmentation lets you drill deeply down into your conversion event, asking questions like, "Of the female visitors who came from Google, live in New Mexico, and purchased a pillow, what does their age distribution look like? What keywords did they search for?" It is imperative that you know who your customers/users are! No tool out there lets you dig as deep as Mixpanel.

Activation

So you've worked hard to get these valuable users to your website by optimizing your sources of traffic. Now, you need to make sure these users have a "happy first visit." Do they move through your app or website seamlessly? Are there certain pages or steps where you are losing or stalling a chunk of your traffic? McClure suggests constant A/B testing of your landing page as well as every added feature, with the key goal of increasing conversion.

Luckily for you pirates, it's a breeze to set up conversion split tests in Mixpanel. In the screenshot below, we are testing a sign-up form to see whether our alpha test has a greater conversion rate than our baseline. We can easily see that our test version outperformed our baseline, and we could drill down even further to see the impact by particular audience types as well as the impact on median time between steps.

Retention

So far, so good - you've optimized your traffic and created a happy first touch. Now, you need to keep your users coming back! You also need to be able to tell whether the changes you're making are impacting retention in a positive or negative way. The key to monitoring changes in retention is to view it by cohort groups.

Mixpanel uniquely gives you the ability to break your retention into cohort groups (birth classes) as well as to segment it by attributes like Source, Gender, Age, City, Device, Version, etc. This way, you can see not only whether your retention is getting better over time, but you can ask questions like "Are my changes increasing retention of my target audience - women who came to my site via Facebook?"

The question I'm frequently asked is, "This is all well and good, but how do I get my retention to go up?"

Well, Mixpanel gives you a great tool for this: Engage.

Engage lets you target your audience by very specific attributes and then test to see if the users you reach out to are reacting to your emails/notifications. For example, you could target users who have made multiple purchases in the past but haven't been to your site in two weeks to let them know about an event you're hosting in San Francisco, and then use funnels to see if these notifications are driving them back to your site or - even better - whether these notifications are impacting retention.

Referral

Once your product is battle-tested and beloved, it's time for viral marketing. This is your cheapest source of traffic, and one that bodes well for the success of your business - users like your product so much, they want to share the experience with others!

In Mixpanel, an easy way to start is by tracking shares, or even generation of shares, by adding tags in the URL. For example, we could easily segment an event called "share" by a property called "social network" -

You can take this even further to track conversion of these shares. We recently wrote a blog post on Tracking Virality with Funnels, which explains in detail how to track number of invites sent and percentage of those invites converted.

Tracking conversion of shares gives you two powerful tools: you can calculate your K-factor as well as see which users are contributing to your virality. Using mixpanel.people.increment, you can tally the number of share events fired by a user. Perhaps you'd like to thank them for their support directly via Mixpanel Engage? After all, it is certainly important to focus on the retention of your biggest evangelists!

Revenue

All of the previous four metrics were really teeing up the most important metric - revenue. Your revenue model is entirely up to you, and, of course, varies with each business. That said, measuring and tracking the lifetime value of a customer is an incredibly powerful tool to understand how much you can spend to acquire those customers while remaining profitable.

When you know who your most valuable customers are, you know who to focus on and where to focus development efforts. You'll be able to see if 18-24 year old men in San Francisco or 18-24 year old women in New York spend more money in your app. You can measure which acquisition channel delivers the most valuable customers and how this changes over time. In a nutshell, you can optimize your product and your marketing around the most important metric of all - dollars.

So...are YOU a pirate navigating formidable seas? Mixpanel can get you to your treasure. Ahoy, mates!