If you were building a new house for yourself, would buying bricks be enough? You can stockpile them all you want but until you get some mortar to stick those bricks upright, you won’t have a foundation or walls or even a roof to shelter under.
Running a B2B business is no different. Simply winning new customers isn’t enough. They are like bricks, acting as foundational pieces. But unless you can retain those customers, and make them act like mortar, your structure won’t hold on.
Factoring in cost, keeping existing customers happy is a no-brainer. Studies show it can be up to four to five times cheaper than acquiring new ones.
Enter the RARRA framework, a customer-centric model that goes beyond the traditional focus on acquiring customers. It prioritizes retention, activation, referral, and revenue, with acquisition strategically placed at the end.
Breaking down the RARRA framework
Developed from the original pirate metrics funnel, AARRR, RARRA is specifically tailored for B2B businesses. It’s kind of like a remix of the AARRR framework.
Product managers and product marketers can use it to pick the key metrics that really matter at each step, from making sure new customers get the hang of your product (activation) to turn them into raving fans (referral).
Retention: This is all about keeping your existing customers happy and making them come back to your product day after day. Keeping customers happy means they’ll spend more over time – they’re more likely to upgrade plans or invest in additional features over time.
Activation: Here's where you show your customers the real value behind your B2B product. It’s about transforming a newly acquired customer into an active and engaged user who experiences the "wow" or the "aha moment" and starts using your product regularly.
Referral: Happy customers become your biggest cheerleaders! The goal of referral is to encourage them to spread the word about your product. Think of it like them inviting their friends to your exclusive club. When customers genuinely love your product, they'll naturally recommend it to others, generating free advertising and new leads for you.
Revenue: Now that your customers are activated and raving fans, it's time to focus on revenue growth. This could involve optimizing your sales funnel, offering upsells and cross-sells, or simply making it easier for existing customers to keep doing business with you.
Acquisition: Don't forget, you still need to find new customers to join your club! Acquisition is about attracting qualified leads who have the potential to become long-term, valuable customers.
The order of stages in the RARRA framework might seem unusual at first glance, prioritizing retention over acquisition. However, there's a strategic logic behind this seemingly "random" order that benefits B2B companies in the long run.
- Focus on value before acquisition: B2B products are often complex. The RARRA framework emphasizes building value for existing customers first. This way you can test out your product’s "promise" and deliver value while establishing trust before actively seeking new clients. Imagine spending a lot of money to acquire new customers who ultimately are unhappy with your product, its workflows, or perhaps the UI, and churn quickly. Not ideal!
- Retention is cost-effective: Acquiring new customers is expensive for B2B businesses. By prioritizing retention, you maximize the value you extract from existing clients, leading to a higher return on investment compared to constantly acquiring new ones. Think of it like nurturing a loyal customer base that keeps bringing in revenue, versus constantly needing to find new sources of income. Loyal customers tend to spend more over time. They trust you and know they'll get a good product or service from you, so they're more likely to buy repeatedly from you.
- Retention breeds positive recommendations: Happy customers become brand advocates, generating valuable word-of-mouth promotion and organic leads through referrals. The RARRA framework positions referrals as a natural outcome of a positive customer experience, leveraging the power of existing relationships to bring in new business at a lower cost.
- Acquisition with purpose: By focusing on retention first, you gain valuable insights into your ideal customer profile (ICP). This allows you to target acquisition efforts towards attracting leads with a higher potential for long-term value and a better fit for your product. Imagine acquiring customers who are a good match for what you offer, leading to higher conversion rates and reduced churn, instead of shooting your marketing campaigns out into the dark and hoping that your tactics work.
Is RARRA going to be right for your SaaS business?
The RARRA framework offers a compelling alternative to the traditional AARRR funnel for SaaS companies. But how do you know if it's the right framework for you to adopt? Here's a breakdown to help you decide.
Five reasons to consider RARRA for business growth:
- High customer lifetime value (CLTV): If your SaaS product aims to maintain long-term relationships so you can tap into recurring revenue, a focus on retention can yield significant returns.
- Complex B2B product: For B2B offerings that are complex, ensuring user activation and value realization is crucial. RARRA can help you prioritize this.
- Limited marketing budget: Focusing on retaining and upselling existing customers can be more cost-effective than constant new client acquisition.
- Market saturation: In a crowded market, customer retention becomes even more critical for maintaining a competitive advantage.
- High customer acquisition costs (CAC): If your CAC is high, prioritizing retention strategies can significantly improve ROI.
Two drawbacks to consider:
- Rapid growth required: If your strategy demands rapid user acquisition, the RARRA framework might appear slower. However, long-term, loyal customers can contribute to sustainable growth.
- Strong brand awareness: RARRA leverages referrals as a natural outcome. If your brand awareness is low, you might be better off focusing on building a base first i.e. acquiring new customers before maximizing referrals.
Ultimately, the best way to determine if RARRA is right for you is to test and iterate. Track your key metrics, analyze customer behavior, and compare the results of different approaches.
Using RARRA framework to fuel SaaS growth
The RARRA framework is a powerful tool for B2B SaaS companies to cultivate long-term customer relationships and fuel sustainable growth.
Here are some ideas that you can put to the test while implementing the RARRA framework.
Retention – turn customers into happy, loyal fans
- Prioritize customer success: Invest in dedicated customer success programs that guide users through onboarding, address their specific needs throughout their relationship with you, and proactively address any challenges.
- Nurture customer relationships: Build strong relationships with your customers through personalized communication and educational resources like in-app tutorials, help center articles, and a knowledge base.
- Gather customer feedback: Regularly collect feedback through surveys and user interviews to understand customer pain points and areas where you can improve upon your product.
- Reward loyalty: Implement loyalty programs or offer exclusive benefits to incentivize customers so they stick around for longer.
Activation – help users discover value fast
- Craft a seamless onboarding experience: Design a smooth onboarding process that familiarizes users with your product's core features and gets them up and running quickly. You can also invest in self-service onboarding to help new users learn about the platform independently.
- Offer free trials and demos: Allow potential customers to experience the value proposition firsthand with free trials or interactive demos.
- Create engaging in-app tutorials: Develop intuitive user guides and tutorials within your SaaS platform to guide users through key features so they can reach the activation moment quickly.
- Track user behavior and analyze activation rates: Monitor user behavior data to identify roadblocks in the activation process and optimize your onboarding strategy for maximum impact.
Referral – tap into the power of advocacy
- Develop a compelling referral program: Design a referral program with attractive incentives that encourage satisfied customers to recommend your product to their network.
- Make it easy to refer: Streamline the referral process with user-friendly referral links, social sharing buttons, and built-in referral functionality within your SaaS product – the easier it is for your users to recommend you, the higher the chance that they’ll do it!
- Recognize and reward top referrers: Showcase and reward your top referrers – it gives users an incentive to do some good for you.
- Integrate customer advocacy into your content strategy: Feature success stories and testimonials from satisfied customers to build trust and inspire referrals.
Revenue – optimize for higher customer lifetime value
- Tailor pricing models for value: Offer different pricing tiers that cater to diverse customer needs and encourage upgrades as users discover more value.
- Explore upselling and cross-selling opportunities: Identify opportunities to introduce existing customers to additional features or related services that enhance their experience and generate additional revenue.
- Focus on customer satisfaction: High customer satisfaction leads to higher revenue through continued use, renewals, and potential upsell opportunities.
Acquisition – attract the right customers
- Target high-value customers: Refine your ideal customer profile (ICP) to focus acquisition efforts on attracting leads with a higher potential for long-term value.
- Content marketing for thought leadership: Develop valuable content that addresses your target audience's pain points and establishes your brand as an industry leader.
- Leverage social media marketing strategically: Engage your target audience on relevant social media platforms to increase brand awareness and attract qualified leads.
- Track acquisition metrics and optimize channels: Monitor the effectiveness of your acquisition efforts and allocate resources towards channels that generate the highest ROI.
RARRA metrics to measure success at different stages
To find out whether the RARRA framework is impacting your business positively, consider tracking these metrics at each stage.
Retention metrics
- Customer churn rate: This metric tracks the percentage of customers who cancel your service within a specific timeframe (e.g., monthly or annually). A lower churn rate indicates that you are retaining your customers successfully.
- Net promoter score (NPS): Measures customer loyalty and satisfaction. NPS scores range from -100 (extremely dissatisfied) to +100 (extremely satisfied). Higher NPS scores indicate a strong likelihood of customer retention and referrals.
- Customer satisfaction (CSAT): Gauges customer satisfaction with specific interactions or experiences. CSAT scores are often measured on a scale of 1 (very dissatisfied) to 5 (very satisfied). High CSAT scores indicate positive customer sentiment and a reduced risk of churn.
Activation metrics
- Activation rate: Tracks the percentage of acquired customers who complete a desired action within a set timeframe (e.g., sign up for a paid plan or complete a tutorial for a key feature). A high activation rate indicates successful onboarding and value realization.
- Time to value (TTV): Measures the average time it takes for a customer to experience the core value proposition of your SaaS product. A shorter TTV indicates efficient onboarding and user activation.
- Daily/monthly active users (DAU/MAU): Tracks user engagement by measuring the number of users actively interacting with your SaaS product on a daily or monthly basis. High DAU/MAU indicates that your user base is active and there’s potential for continued value discovery.
Referral metrics
- Net promoter score (NPS) (can be used again here): A high NPS score reflects satisfied customers who are more likely to recommend your product to others.
- Referral rate: Tracks the percentage of existing customers who refer new customers to your SaaS product. A high referral rate indicates successful customer advocacy and organic lead generation.
- Customer lifetime value (CLTV): Measures the total revenue a customer generates over their entire relationship with your company. A high CLTV suggests strong customer retention and potential for referral-driven growth.
Revenue metrics
- Average revenue per user (ARPU): Tracks the average monthly or annual revenue generated from each paying user. High ARPU indicates successful pricing strategies and potential for upselling or cross-selling opportunities.
- Customer lifetime value (CLTV) (can be used again here): High CLTV indicates a strong revenue stream from existing customers and the potential for recurring revenue through continued use and referrals.
- Monthly recurring revenue (MRR): Tracks the predictable monthly revenue generated from subscriptions and recurring fees. A growing MRR indicates sustainable growth and successful customer retention efforts.
Acquisition metrics
- Cost per acquisition (CAC): Tracks the average cost of acquiring a new customer. A lower CAC indicates efficient acquisition strategies and a positive return on investment (ROI).
- Lead generation rate: Measures the number of qualified leads generated through your marketing and sales efforts within a specific timeframe. A high lead generation rate provides a healthy pipeline for potential customer acquisition.
- Conversion rate: Tracks the percentage of leads that convert into paying customers. A high conversion rate indicates effective marketing campaigns and successful sales processes.
Maintain a competitive advantage by building a strategy based on RARRA
Simply acquiring customers isn't enough, especially if you’re in the B2B world. To truly thrive and be relevant to your customers, you need to cultivate long-term,high-value relationships. The RARRA framework offers a strategic edge over those stuck in an acquisition-only mentality.
RARRA empowers you to optimize your resources. It guides you to optimize the most value out of existing customers while strategically attracting new ones. This ensures you're not wasting resources on a leaky funnel.
More importantly, RARRA focuses on customer lifetime value. By prioritizing retention and activation, you build a loyal customer base that generates recurring revenue and fuels organic growth through referrals.
By prioritizing your customers’ experiences through the RARRA framework, you secure a steady revenue stream and cultivate a powerful network of advocates who propel your B2B business toward long-term success. It's a win-win for everyone involved.
