ROI Case File No.408: Five Metrics Measuring the Stairs of Growth
Five Metrics Measuring the Stairs of Growth
Chapter 1: A Labyrinth of Invisible Variables
"We don't know what to measure."
AdVentures' president frankly confessed this. Before him lay a business model diagram for performance-based ad affiliate.
"The model is simple. If CPA—cost per acquisition—stays within certain limits, the difference becomes our margin. Distribute Meta ads, acquire conversions, earn revenue."
The president's finger traced the diagram. However, hesitation showed in that movement.
"But this business has countless variables. Which products to choose. Whether to go through ASP or contract directly with advertisers. How to create creatives. How to optimize distribution—"
"We lack expertise," he continued. "We understand case selection is most critical. But how to identify 'good cases.' What characteristics 'bad cases' have. We don't know that."
Impatience showed on his face.
"We want to launch in earnest right after the new year. Start with spot advisory, and if results emerge, we're considering switching to hands-on support. However—"
The president paused. "Where to start. What should be success metrics. That first step isn't visible."
The model was clear, but metrics to measure remained undefined. That was AdVentures' current state.
Chapter 2: The Pirate's Measurement Method
"For this case, the AARRR Model is optimal."
Gemini lined up five words vertically on the whiteboard. Acquisition, Activation, Retention, Revenue, Referral—connecting the initial letters makes "AARRR," a sound like a pirate's roar.
"The AARRR Model," I began explaining, "is a method that breaks down startup growth processes into five stages and clarifies metrics to measure at each. Also called 'Pirate Metrics.'"
The president leaned forward with interest. "Why pirates?"
"That's because," Claude smiled, "the sound of these five initial letters connected resembles a pirate's roar 'Arrr!' But more important than that sound is that these five stages represent 'stairs of growth.'"
"AdVentures' business also needs to climb these stairs one by one," I continued. "And clarifying what to measure and what to improve at each stage—that's the essence of the AARRR Model."
[First Stage: Acquisition - The First Meeting with Customers]
"First, Acquisition," Gemini began explaining.
"In AdVentures' case, what does 'acquisition' mean?"
The president answered while thinking. "Seeing Meta ads and visiting the landing page, perhaps?"
"Exactly," I nodded. "Metrics to measure here are 'acquisition cost' and 'acquisition number.' Specifically, CPC—cost per click, CTR—click-through rate, and daily visitor numbers."
"However," Claude added, "it's not just about increasing visitors. What's important is acquiring 'visitors with high conversion probability.'"
The president asked, "How do we determine that?"
"Case selection and ad creative optimization," Gemini answered. "For example, for beauty products, distribute ads to audiences highly interested in beauty. And create creatives that resonate with that audience."
"The success metric here," I organized, "is increasing visitor numbers while maintaining allowable CPC calculated backward from target CPA. First, this first stage needs establishing in reproducible form."
[Second Stage: Activation - Making Them Feel Value]
"Next, Activation," Claude explained.
"Even if visitors come to the landing page, there's no meaning if they immediately leave. We need them to feel 'this product is necessary for me.'"
The president looked at materials. "Meaning landing page quality?"
"Exactly," I answered. "Metrics to measure here are page dwell time, scroll depth, and most importantly 'conversion rate.'"
Gemini supplemented, "For example, if 100 people visit and 5 convert, the conversion rate is 5%. Record and compare this number for each case."
"And," Claude emphasized, "analyze patterns of high and low conversion rate cases. 'This industry's products tend to have high conversion rates' 'This type of creative is effective'—accumulate such insights."
The president's eyes brightened. "That becomes the criteria for case selection."
[Third Stage: Retention - Continuing Relationships]
"Third is Retention," I explained.
The president tilted his head. "But we handle one-time conversions. There aren't repeat purchases?"
"True, there's no customer repeat," Gemini answered. "But 'retention' in AdVentures' business means continuous relationships with advertisers."
"Ah, I see," the president showed understanding.
"Metrics to measure here," Claude organized, "are case continuation periods, monthly conversion stability, and continuation request rates from advertisers."
"For example," I showed a concrete example, "even if you achieve target CPA in the first month for a case, distribution becomes unstable the next month and CPA rises. This is a state of 'retention' failure."
"Why does that happen?"
"Various factors exist," Gemini explained. "Ad fatigue—effects decline from continuing to use the same creative. Seasonality—depending on products, demand fluctuates by period. Competitor entry—other affiliates also enter successful cases."
"To increase Retention," Claude continued, "regular creative updates, portfolio management of multiple cases, and close communication with advertisers are necessary."
[Fourth Stage: Revenue - Maximizing Profit]
"Fourth is Revenue," I explained.
"If the first three stages stabilize, revenue naturally emerges. However, 'maximizing' revenue requires strategy."
The president asked, "Specifically?"
"First, margin setting," Gemini answered. "The difference between target CPA and actual CPA becomes margin, but how to set that target CPA. Too low and advertisers won't accept, too high and your own profit decreases."
"And case combinations," Claude supplemented. "Combining high-price, low-conversion-rate cases with low-price, high-conversion-rate cases achieves risk diversification and cash flow stability."
"Metrics to measure here," I organized, "are monthly total revenue, profit rate by case, and 'profit reproducibility.'"
"Reproducibility?"
"Yes. Even if large profit emerges once, if that can't be reproduced next month, it doesn't work as business. Establishing case combinations that stably generate profit monthly is Revenue's essence."
[Fifth Stage: Referral - Accelerating Growth]
"Finally, Referral," Claude explained.
The president looked puzzled. "In ad affiliate, referral means?"
"Referrals from advertisers," I answered. "If you produce results on one advertiser's case, that advertiser can refer you to other cases. Also, reputation spreads through advertiser networks, and new advertisers may directly request you."
Gemini supplemented, "Furthermore, relationships with ASP operators are important. ASPs preferentially refer good-condition cases to affiliates with track records."
"Metrics to measure here," Claude organized, "are new cases via referral, repeat request rates from existing advertisers, and priority case offers from ASPs."
"To increase Referral," I emphasized, "building trust relationships with advertisers and ASPs is essential beyond just producing results. Thorough reporting, communication quality, keeping promises—this 'accumulation of trust' generates referrals."
Chapter 3: One Stair at a Time
The president gazed at the five stages on the whiteboard.
"Optimizing all five simultaneously seems difficult."
"Exactly," I answered. "The AARRR Model's important lesson is 'climb stairs from bottom up.'"
"What do you mean?"
"First, without stabilizing Acquisition," Gemini explained, "the next stage is meaningless. With zero visitors, there's no Activation or anything."
"And if Activation isn't established, Retention can't be measured," Claude continued. "You can't maintain cases where conversions aren't occurring."
"Meaning, what AdVentures should focus on first," I organized, "are the two stages of Acquisition and Activation. Specifically, select the first three cases, acquire visitors through Meta ads, and measure conversion rates."
"Based on that data, record patterns of 'what type of cases can produce what conversion rates.'"
The president asked, "Those records inform next case selections?"
"Exactly right," I nodded. "And once you can stably produce conversions, advance to the Retention stage. Verify whether the same results can be reproduced across multiple months."
"After that, consider Revenue maximization strategy, and finally build Referral networks."
Claude smiled. "Climb one stair at a time, surely."
Chapter 4: The Power of Measurement
The president stood and bowed deeply.
"It's clear. First, we'll measure Acquisition and Activation with three cases."
After he left, Gemini said, "The AARRR Model is simple but powerful as a framework."
"Yes," I answered. "Many startups think 'let's just increase sales.' But looking only at sales as results, you can't tell what to improve."
"The AARRR Model breaks down the process leading to sales into five stages and clarifies metrics to measure at each stage," Claude organized.
"And what's important," I continued, "is recording numbers at each stage and finding patterns. 'This industry's cases average 3% conversion rate' 'This creative type has high CTR'—accumulation of such insights creates reproducible business models."
Outside the window, twilight light illuminated the office.
Three months later, a report arrived from AdVentures.
Trial operations with the first three cases clarified metrics at each stage. At Acquisition stage, average CPC was 80 yen, CTR 2.1%. At Activation stage, average conversion rate 4.3%—based on this data, they could now predict new case profitability in advance.
Moreover, they'd found cases that could stably keep CPA within targets, and preparations for full-scale scaling were complete.
The stairs were being climbed one step at a time, surely.
"To measure growth, break down the stairs. Acquisition, activation, retention, revenue, referral—at each of these five stages, define metrics, record, find patterns. And from the bottom stair, climb one by one. The AARRR Model teaches the science of growth through measurement."
