Acquiring customers continues to be a necessary and in my opinion the single biggest challenge for every company. There is a car wash in my neighborhood with a big banner that reads “We accept our competitors coupons”. I find it fascinating for two reasons. First of all, his competitors are incurring the cost of creating, printing and distributing coupons and he is benefiting from that. Secondly, what is amazing about his approach is that he is actually helping protect the margins of the local car-washes, since this strategy will discourage competitors from printing coupons. A win-win! What this gas station owner had discovered is something that an amazing number of companies fail to uncover, profitable customer acquisition.
Customer acquisition can be further divided into time and money. Simply speaking….
Customer acquisition cost < the life-time value of the customer
Customer acquisition time < your runway (per your business plan)
Given the economy, it was interesting to think about companies who have been able to create non-linear customer acquisition model. Note, I want to keep the discussion of value proposition and traditional customer acquisitions out of this post.
Some non-linear examples that I liked are…
Hotmail – Here the company put a viral marketing signature were a link to a registration page was embedded in every email that was sent out. This idea worked probably because of its simplicity and novelty.
Gmail – Late into the game of free email, Google leveraged the popularity of its search product to launch its Gmail offering. They managed to create scarcity out of practically limitless bits and bytes. The invitation only model created a buzz where people felt good when their friends sent them an invitation to the get a free account. It didn’t cost me anything to send this invitation to 10 friends and family.
SalesForce – SaaS breaks a lot of paradigms vs. traditional s/w license models, but it fundamentally does not change the customer acquisition model. It requires a different model, nobody has really figured it out yet. SalesForce however, riding on the SaaS bandwagon, got the media/ analyst to cover their story. They were being invited (and won) RFP where their competitors with more feature rich product could not compete.
WebEx – They became the default name (like Xerox for photocopiers) to describe web conferencing. This was probably because they were the first, but supported by some clever marketing.
MCI – with their not so popular friends and family program. You have to grant them for creativity.
SAP – Riding on the Y2K and the restructuring mantra that was led by the Big 6 in the 90’s. They showed the way that you need to play into the value chain to succeed. For every dollar SAP made, their implementation partners made 6 times more. Now that is a value proposition that could motivate any channel partners to sell your product.
In my opinion too many start-up rely on viral marketing, SEO strategies, blogging, friends-and-family, professional networks… Seen it fail more times than succeed. If only customer acquisition was as easy as that.
In the last decade I have worked with many start-ups and in the last few quarters built many more products for other companies… coding is easy, acquiring customers is a hard code to crack.
Popularity: 15% [?]
August 19th, 2009 at 4:38 pm
The google “invite only” idea was one of the best I have seen for promoting a freemail. There was an element of exclusiveness there while people were also doing the promotion on googles behalf when they sent their invites. They were even getting sold on ebay.
Nice read