"In ancient times having power meant having access to data. Today having power means knowing what to ignore." — Yuval Noah Harari  Homo Deus: A History of Tomorrow

In the age of big data, there are an infinite amount of metrics that can be tracked by your team. However, most of those metrics are meaningless for growth.

Growth has its own metrics that will yield the biggest insights for economic impact. If the growth team can’t explain how a certain product change will impact a certain growth metric, then its not worth doing.

As someone who's worked with almost every type of digital product company, ranging from startups to enterprises, I've repeatedly seen the struggle to pinpoint the metrics that truly reflect the health and growth of a digital product. Many default to Dave McClure's AARRR framework, which has been a staple since 2007. Also known as the pirate metrics ("arrr!", AARRR stands for Acquisition, Activation, Retention, Revenue, and Referral, and provides a structured approach to measuring and improving growth KPIs.

Almost any article on growth metrics will inevitably mention it, and indeed, it is a fantastic framework. Yet despite its popularity, there are several limitations to the AARRR framework that warrant a closer look.

However, while it has its merits, the AARRR framework has key limitations that are often overlooked. After all, it was invented in 2007, the same year Airbnb was founded and Apple stocks was $7 a share. Digital products were still in its infancy, and the industry has matured quite a bit since then. While much of it still holds impressively relevant, we're overdue for an updated framework. In this article, we'll dive into the issues surrounding this popular framework and introduce a new, comprehensive framework that can help you understand 100% of the reasons why your product isn’t growing.

The Downsides of the AARRR Framework

Outdated Definitions

One of the most significant limitations of the AARRR framework is its outdated definitions. Coined during the infancy of digital products, it has struggled to adapt to the advancements in technology and the diversification of online businesses. The framework's heavy focus on websites makes it less effective for newer digital platforms, such as mobile applications, SaaS products, and eCommerce platforms. Modernization of the definitions is crucial for the framework to remain relevant across all platforms.

Referral as a Flawed Metric

Referrals, while an important growth tactic, present a critical flaw when it comes to measurement. A significant portion of referrals, notably word-of-mouth, are not digitally traceable, making them a subpar metric. Furthermore, since it's an optional metric that can theoretically be zero and still allow the company to succeed, relying on referrals as a key indicator can skew your understanding of your product's performance.

Memorability Matters

Although the AARRR acronym aims to be catchy, it often falls short in practice. The repetition of the 'R' letter makes it hard to remember what each stands for, leading to difficulties in adopting the framework effectively within a team setting. A memorable and user-friendly acronym is crucial for rapid and efficient framework adoption.

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Given the limitations of the AARRR framework, a new metric system is in order. That's why, with the companies I help, I use an updated version of the AARRR framework, an AARRR v2.0, called LAMER.

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Introducing LAMER Growth Metrics

Did your co-workers think metrics couldn't be more boring of a subject? Well, tell them to strap in, because their metrics are about to get LAMER. Despite it's silly name, the LAMER framework offers a more holistic and updated approach to growth metrics. One that blends the best of previous frameworks, while being easy to remember and understand. One that focuses on allowing product teams to figure out exactly which part of their product needs to do better.

LAMER stands for Lead, Activation, Monetization, Engagement and Retention. The biggest differences from AARRR, is its emphasis on Engagement, the recursive loop of retention back to monetization, and of course its acronym memorability. Let's explore the reasons why LAMER is a better choice for businesses today.

Definition of the 5 metric categories:

Lead - Amount and quality of visitors

Activation - Rate of users experiencing product value for the first time.

Monetization - Revenue and conversion to becoming a paid user.

Engagement - Breadth, depth and frequency of core actions and value.

Retention - Amount of users and customers coming back over time.

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By categorizing metrics under these five broad parent metrics, LAMER captures not only the linear progression of a user through their journey of a product as a funnel but also accounts for the cyclical nature of customer relationships; once a user becomes a customer, you want to retain them as customers who keep coming back.

Furthermore, each category in LAMER is also broken down into sub-metrics, creating a multi-level funnel or cycle that allows for granular analysis.

LAMER: A closer look

While LAMER is a funnel in itself, the magic lies in its recursive design: each component of the main funnel also houses its own 'mini-funnel.' This results in an extremely detailed, yet easy-to-follow, guide to optimizing every step of your customer’s journey.

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Lead

1. Landing:  Users land on your website or product
2. Exploration: Users start investigating your product or service in more detail.
3. Start Activation: Users show interest of becoming an active user (e.g. clicks sign up button or exploring more than 1 article on a news site)

Activation

1. Value Setup: Users go through the setup steps necessary to receive value from your product (e.g. account creation or onboarding)
2. First Value Moment (Aha moment): Users experience the product's value for the first time.
3. Habit Moment: Users perform behaviors that indicate they will likely continue to stay with the product (e.g. watches 3 videos in 30 days)

Monetization

1. Monetization Moment: Users start paying or generating revenue for a product
2. Revenue Expansion: Attempting to generate more revenuer per user (e.g. upsell, cross-sell, or raising prices)
3. Customer Retention: The repeated action of the monetization over time (e.g. % of users who continued their subscription)

Engagement

1. Feature Usage: Users performing actions that they gain value from.
2. Deeper Usage: They get more value from your product through using more features, using it more frequently, or using it deeper.
3. User Retention: The repeated action of obtaining value over time (e.g. % of users who stayed on Instagram a month after they joined)

Retention

1. User/Customer Retention: See Customer or User Retention.

The concept of mini-funnels/loop within each LAMER metric adds a layer of granularity that can be invaluable for businesses focusing on data-driven growth. These mini-funnels allow teams to break down each stage into actionable components. For example, under "Activation," the mini-funnel might include stages like 'Value Setup,' 'First Value Moment,' and 'Habit Moment,' offering nuanced insights into how users are interacting with the product from initial setup to habit formation. This structure not only enriches the data but also provides actionable insights that can guide iterative improvements. Teams can thus identify bottlenecks, friction points, or opportunities at multiple stages in the user journey, instead of treating it as a single, monolithic step.

Navigating LAMER as a Team

It's essential for various teams within your organization to understand their role in the LAMER funnel:

• Marketing Teams: Primarily responsible for the "Lead" phase, focusing on driving high-quality traffic.
• Growth Teams: Ownership of the "Monetization" and parts of the "Lead" phase, working on increasing revenue via converting more users into customers and keeping them as customers.
• Product Teams: These are the omniscient overseers of all phases, especially excelling in the "Activation", "Retention", and "Engagement" stages.

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In Conclusion

The LAMER framework acts as a crucial guide for data-driven growth. Its flexibility, depth, and focus on engagement set it apart from other models. With a little investment in understanding its intricacies, LAMER can provide a detailed roadmap for taking your product to the next level of growth. Future chapters will delve deeper into each mini-funnel, providing actionable strategies to optimize each phase effectively.

So the next time someone tells you that metrics are boring and aren't working, tell them that their metrics could always get LAMER. Pirates are out of fashion anyways.

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