5 Building Blocks for YOUR Customer Acquisition Machine

Customer acquisition is a challenge that every startup is facing. Without customers you obviously can not have a business.

Even the best companies that build products that early customers want need to carefully think through how to acquire more customers.

Just throwing money at marketing is not the solve.

Inefficient customer acquisition could be massively wasteful and lead to startup failing.

Before you spend a lot of money on acquiring customers you need to understand who will be buying your product and why. More broadly, you need to come up with a plan, or really, a machine, that will help you acquire customers.

1. Customer segments/personas

 

Customer segments or customer personals are the starting point of your targeting.

Start by defining a few and writing a little narrative around then. You can do the same exercise for B2C or  B2B startup.

A company like soona, a 2048 ventures portfolio company, that helps brands crease fast casual photo and video content, may start by initially targeting all brands.

Then soona could refine their target as just D2C brands, or even further as just D2C CPG brands, because they have physical products and need photos and videos of these products.

They can further think about segmenting customers with perishable vs not perishable products, or customers that launch a lot new products or the ones that need photo and video.content seasonally.

soona can also analyze whether small brands vs big brands would differ in their purchasing behavior – amount of dollars spent, repeat frequency, etc.

As a result of this analysis soona team may decide on two initial customer segments – mid market beauty and cosmetics brands and mid market clothing brands.

With the refinement of customer segments, the targeting becomes straightforward.

Instead of targeting everyone, or all brands, soona can now target very specific types of companies. They can now buy advertising more efficiently. They can also reach out directly to relevant folks via email.

It doesn’t matter if your initial analysis of customer segments is right or wrong. What matters is the approach and intent to segment your customers.

If you are wrong it will be evident quickly as these segments will not buy. If you are right, you will keep iterating, and refining until you are confident you nail the segments and then you can start building new ones.

If you just don’t know who will buy, you can use generic ads and marketing to figure it out. That is when you run generic ads you can see who buys and then reverse engineer more narrow customer segments.

Of course this is a more costly exercise since you will be spending money on ads that are not targeted, so this is something you can do early on in the life cycle of the startup but not at scale.

2. Purchase Triggers

Triggers are closely related to personas and are equally important to get right.

Purchase Triggers explain why a customer of specific persona decides to purchase.

Let’s continue to use soona as an example. A marketing manager from a cosmetics is launching an instagram channel. This is a purchase trigger. She can’t do the launch without the content. She has the budget and is ready to buy. What she is looking for is affordability and convenience and this is exactly what soona provides.

On the other hand, a marketing manager from a fashion brand’s may need product videos and photos seasonally. Every season they launch a new collection, and need content to make content 1 month ahead of the launch. Similarly they have a budget and maybe ready to spend.

Understanding purchase triggers is critical because the customers who don’t have the need or don’t have the trigger will not buy.

That means that even if you have the right customer personas, but the triggers aren’t on now they will not buy your product.

What you want to do is to build collection of triggers and collection of customer segments as a part of your marketing toolbox.

Then, you figure out which triggers apply to which customers at any given time. This becomes input into your marketing, advertising and sales outreach.

You start with initial set segments and triggers and then iterate and refine.

3. Acquisition channels

Once you have personas and triggers in place the next piece is to think about the channels through which you will acquire customers.

If you are selling software to enterprise customers you will likely do more direct outreach. On the other end of the spectrum if you are D2C startup selling a physical product to consumers you will likely be doing paid advertising. And then there is a range in between.

Below is a list, by no means an exhaustive, of typical channels:

  • Direct sales
  • Resellers
  • Paid marketing via social media
  • Paid marketing via search
  • Content marketing
  • PR
  • Influencers
  • Referrals

The art and science of efficient customer acquisition is a mix of:

  • Finding the right, untapped, and scalable channels
  • Where you can target customers in your segments
  • That are ready to buy via the triggers you discovered

For example, soona, may use Facebook to target marketing managers in fashion companies and run a campaign 2 months ahead of the quarter.

By targeting campaign precisely and understanding the trigger to purchase, which in this case is a new seasonal collection, soona is able to get the most out of their marketing spend.

When thinking about channels it is important to think about cost and conversion as a matrix. Ideally, you’d want to find the most inexpensive channel that yields, but that rarely exists.

What makes sense is to effectively let all the channels compete for your marketing dollars.

Build a matrix where you record cost of acquiring a customer (CAC) and conversion – that is, how well this specific channel converts. You can then rank each channel in terms of value that it drives.

You then take your marketing budget and allocate it between the channels, and constantly measure and refine.

4. Conversion Funnel

Provided that you segmented your customers, understood their purchase triggers, and identified your acquisition channels, the last piece of your customer acquisition framework is optimizing the so called Conversion Funnel.

We’ve written extensively here about the Funnels and their importance of many aspects of startup.  Conversion Funnel is a critical piece, because the bugs and inefficiencies in it are costly.

Things that you want to pay close attention to:

  • Making sure there are no bugs in your signup process
  • Having least possible number of steps to purchase or sign up
  • If you are selling a product, optimizing shopping cart experience
  • Making sure your copy and visuals are simple and clear
  • A/B or experiment with different landing pages

More sophisticated marketing teams will have individual landing pages for different customer segments, different triggers and different channels.

By creating a very specific landing page, you can be sure that you are very relevant and targeted. For example, soona may have a different landing page for a fashion brand than for cosmetics brand. Similarly, a landing page that is specific to seasonality can be different from a year round page, it can have different copy, different feel and colors.

All of these micro optimizations matter. In aggregate, they typically yield substantially superior customer experience and conversions.

By creating different flows you also give yourself the ability to really test things out for different audiences and really figure out what works.

5. Code and Automation

What we’ve discussed so far are pieces of your Customer Acquisition strategies. By combining all these concepts you can create a machine that constantly learns, improves and gets better and cheaper at acquiring customers.

And by machine, we mean code.

Customer Acquisition is not something that you can keep in your head or even in a spreadsheet.

Today the best marketing teams rely heavily on engineering and code. These teams start with hypothesis and then land on automated customer acquisition engines that algorithmically segment customers, learn triggers, stack rank channels and optimize conversion funnels.

While this may sound like a daunting task, you should invest in building this machine very early in your startup lifecycle.

Create a hypothesis for customer segments, triggers very early on, during your customer discovery process. As soon as you gain confidence in your product, and strong group of early customers, start investing in automating your customer acquisition, and keep iterating.

Your method,  discipline and code will pay off.

 

Product and Marketing Startup Advice Startups

Alex Iskold View All →

Engineer, Immigrant. Vegan. 3x Founder, Managing Partner @2048vc. Previously ran @techstars in NYC. I write #startuphacks: http://alexiskold.net .

3 Comments Leave a comment

  1. Great post, Alex.

    Do you have any examples of, or tips for products that have to master an internal flywheel of distribution—namely an app that MUST be used with a group? How to best optimize the onboarding process, inviting other group members, incentives, etc.

    I can see how each of these points would fit in (namely understanding your customer personas, and purchase/download trigger), just wondering if you have more specific thoughts or resources.

    Liked by 1 person

  2. Network effects are definitely the right topic to explore, appreciate the link.

    My key takeaway is about optimizing the feedback loop—keeping it simple = making it strong, cyclical, and ultimately self-sustaining/replicating.

    You also touched on an interesting point regarding the difference between the size of the network (Twitter has more virality, while Facebook has a deeper social graph).

    This sort of intuition is what has drawn us towards making our product constrained to the key groups in your life, and handmade for those relationships. This tweet is something we keep in mind: https://twitter.com/briannorgard/status/1166048116144885760?s=12.

    Thanks for the response, and enjoy your Thanksgiving!

    Liked by 1 person

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