500 Startups Growth Handbook

Customer Acquisition

Of all the acquisition channels (Adwords, FB ads, influencer marketing, content marketing, SEO, email marketing….) what are the one or two that are the right fit for you, right now? How to focus on cost optimization and scaling once you’re post P/M Fit?

To pick the one or two right channels for you right now, there are many ways to slice and dice all available customer acquisition channels. Among the many ways to slice and dice the channels to pick the right one for you, we’ll use two filters: (1) cost/time (2) business-channel fit (explained in separate sections below)

What do you have more of? Time or Money?

Cost: How much you can afford to spend to acquire a customer (target CAC)? How long can you wait before you recover your cost? Can you afford the pay back period?

Time: How much time do you have? (If someone has a gun to your head, waiting for SEO to kick in may not be wise, whereas ppc can be like a tap you can turn on and off at will)

This helps you move directionally towards organic or paid.

Which channel is the right fit for your business? Business-Channel Fit.

(1) Persona-Channel Fit: The channels that your potential customers use (where do they hang out, what do they read, how do they consume information, how do they communicate etc etc…). Are your users on web or mobile? Are they snapchat users or snail mail readers?

(2) Product-Channel Fit: Is your product a vitamin or a pain killer? If your target customer is already searching for your problem or solution, SEM and SEO are great channels. If not, you’re better off going with Facebook/Influencers/Youtube/Referrals etc.). Is your product something your customer would buy within 2 mins of seeing it or would they require a lot more research & convincing to buy. Can your product be easily understood as a visual/photo/infographic or as a blog post?

(3) Use-case Channel Fit: What are the most frequent use cases for the channels you picked and what level of awareness does your audience have about your problem or product? Are they already brand aware (your brand) or solution aware (solutions like yours) or problem aware? The further behind they are in this awareness funnel, the more time or $$$ you have to spend to educate them before this audience will turn into customers. Depending on what you’re focused on (ex: educating about problem vs educating about solutions vs creating trust for your brand) you might have to use different channels. For example, YouTube/Content Marketing can be used more for education, whereas Facebook, Pinterest, Instagram, etc. can be used more for staying top of mind and conversions of those who are already aware; Influencers can increase trust and create awareness. In reality, most channels can be used for most purposes, it’s a matter of whether you can afford the $$$ or time it takes.

Scalability of Channel

Depending on stage of company, you might need different volumes of traffic (more is not always good, if you’re early, don’t open up the firehose when the bucket is leaky - i.e if you don’t have a great product or retention yet, why would you want to spend money on bringing more traffic only to lose them quickly). In initial stages, when you’re testing messaging, target customer, product usage or retention, you might not need very high volume of traffic - you just need enough to test. Especially at this stage, look for niche channels, or better yet, communities, that are not overcrowded by advertisers. Example: mailing lists, posting on craigslist, communities (Facebook groups, Linkedin Groups, sub-reddits) etc. If you did pay attention to learning about your customer in customer development (link), you’d know where your potential customers hang-out or where they get their information from.

But when you have a sticky product and ready to open up the firehose on customer acquisition, most likely you’re not constrained by $$$, but you’re constrained by time, in which case you’re looking for highly scalable channels - i.e channels with large audiences, where you can spend more money with minimal incremental effort while maintaining the ROI. Once the growth of a channel plateaus, move to the next channel and experiment again to see if you can find even MORE growth from that.

If you’re Post P/M Fit, you’re probably focused more on understanding true cost, optimizing CAC and scalability of the channel. Measure, optimize conversion rates, operationalize, automate - for each channel, use a similar process you use to optimize product. Calculate your LTV and CPA, track how effective this channel is, and operationalize to reduce costs.

Common Mistakes Founders Make

“We have spent $0 on marketing”- and being proud of this. Paid marketing is like a tap you can turn on and off - you have more control over when and how much traffic you can drive. With paid marketing, you’re limited by your budget and the volume of traffic available in each channel.
Trying to test multiple channels in parallel. This is super resource intensive. Re-read the business/channel fit section above, read this link to strategically pick the one (or max two) channel to test at a time
Growing using multiple channels in parallel. You will end up exploiting neither channels fully/properly. Once you find a channel that works for your business, it’s like hitting a vein in a goldmine, you mine it fully before you go in search of a different vein. It takes a LOT of effort to optimize one channel to the max.
Regardless of channel, you need to know the basics of creating compelling copy & creatives, and create custom landing pages for campaigns to maximize ROI.

Real World Examples

13 Winning Customer Acquisition Examples

Related Keywords

Content Marketing, SEO, Landing Pages, Churn, Email Marketing, Inbound Marketing, Conversion Rate Optimization, retention, A/B testing, customer acquisition channels