“What is the most clever customer acquisition strategy you have ever seen?” asked Patrick O’Shaughnessy on Twitter last month.
What is the most clever customer acquisition strategy you’ve ever seen?
— Patrick OShaughnessy (@patrick_oshag) April 21, 2021
His tweet (1) racked up hundreds of responses. Today, let’s take a look at some of our favorite strategies and lessons learned.
What’s a Customer Acquisition Strategy?
It is a set of activities that businesses use to bring in new customers. Any successful customer acquisition strategy involves using a sustainable and systematic approach that can evolve over time.
While it may sound straightforward, it can be pretty challenging to find new growth opportunities and customer acquisition strategies in an increasingly crowded marketplace.
There are over a billion emails sent every day by MailChimp alone. There are more than 10 million blog posts published every day (2). In today’s era, you can only win by acquiring paying consumers in a way that differentiates you from the competitors and creates an enthusiastic and loyal consumer base.
“The only aim of a business is to make and keep a customer.”
– Peter F. Drucker, the father of modern management (3).
The Cost of Customer Acquisition
The customer acquisition cost, typically referred to as CAC, is easily divided into a simple formula.
CA̧C is the cost spent acquiring new consumers, marketing expenses divided by the number of acquired consumers for that particular period.
For instance, if you spend 100 USD in a year and acquire 100 consumers, your CAC is 1 USD.
Customer Acquisition Strategies
Win Minds and Hearts
When you are getting the word out about your products, you need to question yourself – To whom your prospects and customers turn for advice when looking to make a purchasing decision or learn about great solutions.
According to Karen Peacock, Intercom’s CEO (4), you need to understand who influencers your customers most and earn their trust. You will need to win both their minds and hearts.
Suppose you are selling payroll and accounting businesses; who would be the best influencers? An accountant makes sense, right?
When small businesses make decisions about accounting and payroll, they need to be great for accountants, winning their minds and hearts to help drive word of mouth.
Once you find trusted advisers to your target customers and prospects, you need to help them do four things: know, use, love, and recommend your services or products.
- Know: They can not recommend your product or service if they don’t know about it.
- Use: They will have to use and understand your product to build their confidence.
- Love: It is crucial to understand what matters to those people the most. Ensure they are experiencing the real value and see the value your product will offer to others. It is also about giving them an emotionally engaging experience to win their hearts and mind and get them excited.
- Recommend: Find ways for influencers to amplify the love. Make things easy and rewarding for them to recommend your product. You can use things such as referral fees to align your business interests.
The Takeaway: One of the best ways to get more people to use your product or service is to use different methods to motivate your influencers.
Learn the Difference Between Short-Term Hacks and Long-Term Acquisition Strategy – h3
Most of the new businesses use short-term sales strategies to get their first ten customers. While these short-term strategies are great at the start, they are terrible for sustainable growth. As the business scale, you will need to transition to more long-term strategies, says Steli Efti, Chief Officer at Close.com (5).
A short-term practice is one that you will not continue doing in the future, such as:
- Visiting new consumer in person
- Handling each support call
- Following up personally with every new user
- Tapping into your professional and personal network to get customers
It is the long-term strategy that will help you scale your business like;
- Cold calling and emailing
- Building a drip-email campaign
- Creating a scalable customer acquisition process and lead generation
The Takeaway: You will need to keep these numbers in mind as your business grows.
- 0 to 10 consumers: 90% short-term strategies and 10% long-term strategies.
- 10 to 100 consumers: 80% short-term strategies and 20% long-term strategies
- 100+ consumers: 20% short-term strategies and 80% long-term strategies.
Customer Value Must Be Higher Than Customer Acquisition Cost – h3
There is a silly old business expression (6):
“We are going to lose a dollar on every deal, but we will make it up in volume.”
It is also a greatly common way that venture-funded businesses think about growing. As we discussed in our previous article, Valuation Bubble of the Indian Startup Ecosystem, startups often think they can burn through tons of money to acquire consumers and think about monetization later.
However, no matter how much volume you have, if you do not make money on any of the transactions, you will not make money at all.
If we look at several of the initially successful companies that have come and gone in the past 36 months, that is what they were doing.
Even though these businesses had incredibly experienced and smart people, their underlying business model was broken. They were creating volume businesses without a clear plan for solving the profitability issue.
To create a viable business, you need to ensure that the consumer value is higher than the customer acquisition cost.
The Takeaway: While you don’t need to solve the profitability issue on day one of your business, you need to plan how to make that happen.
Figure Out Product-Channel Fit after Product-Market Fit
As soon as you figure out product-market fit, you need to immediately find out what Brian Balfour (7) and Andrew Chen call product-channel fit.
“You need to find your marketing channels, especially the one or two you can use to go from where you are at present to that next level.”
The entire process of first investing in growth marketing is not; can you get social media ads to work or get AdWords to work, can you do SEO or content marketing?
You will have to invest in one or two.
The Takeaway: Let’s look at some of the biggest companies out there like Microsoft and Apple. These companies usually have one primary channel and two or three secondary channels.
A startup with limited funds has never been able to achieve success at multiple things simultaneously. Hence, find one main channel you want to enter, and then as you get that one working fine, you can go after the next, and then another one.
If you are trying to raise money, it is probably not wise to invest in content marketing or SEO as the main channel to move the needle since they take too long. Instead, spend your marketing budget on outbound sales or ads.
Free Acquisition Mechanism
According to Andrew Chen (8), General Partner at Andreessen Horowitz, every business needs a free acquisition mechanism.
There is a reason why SaaS companies have a recurring revenue model. It is also why a transactional marketplace such as Uber, which has many riders who use it every day for a commute, works so well.
That habit formation and regularity means the company has more lifetime value. Additionally, the engagement can power organic acquisition as customers naturally tell their friends about it.
Take a look at Slack or Dropbox, for instance. They tend to form a natural network. It offers every user an opportunity to acquire at least one of their co-workers.
Another example is DocuSign, where people collaborating within a workflow involve other people from different companies. Such businesses can be even more viral as they are more than something that will only exist within a company.
It allows you to get all the acquisitions for free.
When we look at some of the high-profile cases where chasing acquisition did not work, a couple of things work in concert to make it more challenging.
- First, you have a single channel acquisition model. It could be Facebook ads, Google ads, or SEO. However, you don’t have any organic virality.
- The second is specific to e-commerce when selling something like a car or a mattress, which happens infrequently. It leads you to an acquisition treadmill where sometimes you have got to run fast, and then when you reach a single point of failure, there is an arbitrage for some time.
One can create a pretty decent business if he can manage to hit it at the right moment. However, eventually, he needs to plan on losing it.
There is another reason why several gaming companies are hard to fund. There is built-in natural churn.
You will also have to be attentive about all these things when creating something in healthcare or fintech.
The Takeaway: Make sure you figure out how customer acquisition will play out in the long run.
Content is the Most Powerful Acquisition Channel – h3
Eric Siu, the Chairman of Single Grain (9), believes that content marketing is your most powerful customer acquisition channel. He sees content as the foundation.
And if you can get content marketing working, then you will be:
- able to retarget people
- build lookalike audiences on different channels
You can also bring your domain authority up by creating great content and building links. You can also write more content, collect more emails, and optimize your conversion rate from there. However, everything starts with content.
Media companies, for instance, are building agency divisions now. It is easier to build an audience first. Then from there, one can start to branch out.
Here is a flowchart by Aleyda Solis; The Content Re-usage Framework. One can follow it when creating content. It doesn’t mean one always has to be writing new things all the time. However, you can work things out pretty well by following this framework.
The Takeaway: Content marketing is the foundation for creating whatever you are trying to do in the long term. Yes, it takes time, but then again, anything good takes time. So, be patient.
Acquire Slow, Perfect the Product, Then Go Mainstream
Sujan Patel, the co-founder of Web Profits (10), made a mistake at his first SaaS venture, content marketer.io, pivoted to Mailshake.
They had an alright product, and they were still validating product-market fit. They went to town as a marketer, built an audience and an email list. They started blogging and got lots of traffic.
Some of their audience even started converting into customers. However, the feedback they got from the first month was, “I do not think the product is right for me. It does not fit.”
It is safe to say that the team wasted the whole channel with too many people still talking about them.
While it sounds like a good problem, it is a really bad one because the first impression people had about the product was that it does not work for them or is bad.
The Takeaway: If you don’t have a product that can fit a channel, don’t leverage it.
If you are figuring out your product in the early days of your business, lay the content foundation to be optimized or something that can rank.
Then go to town on channels that you can turn on and off, such as outbound or cold ads or emails. Make sure to turn them on to get data and feedback. Then, turn them off until you are ready.
Acquire Paying Customers
According to Rachel Hepworth, Slack’s Growth Marketing Head (11), a business should not always focus on acquiring free customers. They need to acquire customers with the potential of paying.
In the early days, Slack used to focus on “How many teams did they create?” Now, they have pivoted to “How many work teams did they create?”
While a huge amount of their team creation used to be social, based on how much people like the platform, it’s the work teams that pay Slack.
Later, they moved from looking at work teams created to look at what they call “early-activated work teams created,” teams that have invited someone to join.
A one-person Slack team is a lonely place and likely to fail.
Then, they looked if a team has invited multiple people or if they have exchanged any messages.
Since it has to be something folks can quickly achieve, the bar was fairly low. It allowed them to iterate and test off without waiting for a few months.
However, it was high enough to screen out many teams who have said they do not know more about Slack but want to get in there, experiment, and see.
And since the friction is so low to start a Slack team, one can drive several poor quality teams if he doesn’t pay attention.
The Takeaway: Know whether you are driving value for the company by not stopping at that team creation number and looking at the full metrics funnel.
Give Nice Deals to Your Customers
What is the last thing you purchased online? There are high chances that it was on sale or had a discount code or free shipping.
People enjoy discounts.
When you give them the feeling that they have “won” a deal, you will make them like your product more than a competitor’s (12).
You can have several ways with promotions.
Leverage your social media channels to run ads with coupons if you have a solid target demographic.
If you are more into drip campaigns or a popular blog, make your email list a money-making machine (13). Motivate people to subscribe to your newsletters and occasionally reward them for their inbox access with an exclusive offer.
When you have a less popular item in stock or dwindling inventory, put it to use either a limited quantity loss leader or throw it as a freebie on orders over a certain price or quantity.
It will allow you to free up your valuable space while also giving your customers a warm feeling that comes from getting a great deal.
However, remember that when craft these deals to lure your customers, pay attention to the time of the year and related trends.
The Takeaway: The only thing better than sales is a sale that connects your customers’ lifestyles.
Design a Helpful Website, Not Sophisticated
No one will care if your website has 1080p image sliders or embedded QR codes as long as visitors find what they are looking for and then buy it (14).
So, make things easy and simple.
Use a search bar for people that answer their queries. And when a visitor is ready to make a leap into becoming a customer, ensure that your site has a one-page checkout to make things as easy as possible.
Write detailed product descriptions that tell your customers what they are purchasing when they order. You would not buy something online without knowing what you are purchasing. So, consider the same when you think about your customers.
After that, ensure your order fulfillment process; get your customers the right product, in the right size and condition, and on time.
Another underrated feature is load time. You can not afford to lose traffic because of your slow load times.
Here Are Some More Examples
Go After the Most Difficult Users First
Justin Mateen, Tinder’s founder and former CMO stated in an interview with TechCrunch (15), “go after the hardest users first, as they can be your worst critics or greatest evangelists.”
For Tinder, that was university students at a time when dating platforms had a bad reputation.
To start, it sponsored a birthday party at the University of Southern Carolina. There was no entrance fee for those who downloaded the app. While only 400 people downloaded the app (16), it had over 4k downloads within a week.
Next, Tinder focused on fraternities and sororities by going door to door to encourage students to sign up, turning potential critics into evangelists.
I like Tinder’s – going to a frat and telling them all the sorority women were on the app, the going to the sorority and telling them all the frats were on the app.
— Steph Engle (@Soengle) April 22, 2021
The Takeaway: While it is tempting to go for the lowest-hanging fruit, going after your toughest user first, it may pay off in the long run.
Leverage the Kingpin(ners)
After starting at 3k users in its initial days, Pinterest turned to old-school word-of-mouth to fast-track its growth.
It started with grassroots, with the key focus on “power users.” They hosted meetups and events at local hobbyist stores and leveraged these users and active communities to spread the word. In short, they used a single artist, collector, or a scrapbooking club member as the catalyst for a whole neighborhood signing up.
The company again used a similar community-leader approach with its Pin-It-Forward campaign (19), encouraging handicraft bloggers and influential DIY to create boards around a particular theme to popularize the platform.
The Takeaway: One of the most effective ways to grow your user base is to target community leaders and nurture “power users.” As we discussed above, build rapport with influencers within your community.
A Salty Restaurateur
Embrace Bad Reviews
One response to Patrick’s tweet was an image of a chalkboard sign outside of a coffee shop that read (20), “come in and try the worst coffee one woman on Tripadvisor had in her life.”
Saw this on Twitter/Instagram 😀 pic.twitter.com/1CSQyd2PX0
— Isha (@Ishaaaa_m) April 22, 2021
It reminded us of a restaurant owner (21) who actively asked for 1-star reviews, even going so far as offering a 25% discount to people who left a bad review.
Within a few days, the stunt earned him more than 2.3k 1-start reviews and the distinction of being the worst-rated restaurant on Yelp. He created a career based on his bad review fame, and today, he offers private cooking events and classes that run up to 3k USD each.
The Takeaway: Do not shy away from criticism or bad reviews. Instead, use them to drive growth.
Bad reviews can also be good for your business as they prove that your good reviews are authentic. Because people are aware of fake reviews, a mix of both positive and negative feedback can build trust.
They can also boost your SEO as reviews account for 15.44% of Google ranking factors (22).
Lastly, doing an organized audit of negative reviews (23), both yours and your competitors’, will allow you to know the underlying pain points behind them, which can help you win more customers.