Common Mistakes Startups Face in Finding the Customer Acquisition Channels

By | June 1, 2015


CUSTOMER ACQUISITION
For building a successful startup, apart from fund and products, it is very important to be able to attract customer to buy the product. If the startup is not able to make people buy its products there would be no meaning to start and run a business. To be able to convince the customers to buy the products, the company must have customer acquisition strategy. Customer acquisition is nothing but the process of persuading a consumer to purchase a company’s goods or service.



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The cost to incur in the process of customer acquisition is an important measure for a business to calculate the value each customer could bring to the business. Calculating the customer acquisition costs and figuring the scalable channels for acquisition are the hardest part of building a startup. Not many get it right. There are some common mistakes and issues the startups face in finding the initial customer acquisition channels. Some of the common mistakes are mentioned below:

1.Trying too many channels at once:
Many startups work on the old notion of throwing many stuff at the wall and see what sticks. But unfortunately, this hardly works. Focusing on many channels to acquire customers is only waste of time and effort, as the entrepreneur would be focusing on everything and would fail to notice the one that is showing results. Rather, focusing one’s attention on one customer acquisition channel and directing the time and resources on testing it would serve productive. Testing takes a lot of time and consumes a lot of energy. It is easier to think that finding a productive channel would be quick when lots of channels are tested t one but with the limited resources, it is actually the exact opposite. For instance, if a person has very limited engineering resources, would the person want to build four different products at one and find where one works? No, if he does he may end up making four unfinished products without any information on which one is going to work. It would be best to strategically analyse every idea and choose one and study for few months and then decide to move forward. Finding scalable customer acquisition requires the same effort and iteration. The quickest way to find the first scalable channel with limited resources is to test one item and work based on its feedback. Testing on many channels will not get the entrepreneur anywhere.

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2.Diversity of channels at the initial stage:
Most of the startups have only one or two channels on their spinal cord. For instance, Zynga is built on two channels -Facebook ads and Viral Mechanics. Only after stabilizing in the business, they diversify to launch in new platforms. The giant social networking site Facebook completely relied on viral growth until they reached millions of users. Same applies to AirBnB, that is completely based on the back of craigslist. The common reason for the company to avoid diversifying may increase the risk and never be able to find the optimum scalable channel. If one finds the channel that works perfectly at a small-scale, its best to work on optimizing, scaling and squeezing the initial channel to get everything rather than being carried off to add another channel.

At the initial stages, the ultimate goal has to be to grow fast with the resources in hand rather than finding new one. Channeling further growth in the already successful channel is easier and cost-effective rather than finding new acquisition channel. Only when the growth curve begins to flatten, the company can think about adding another channel to the mix to add the growth further.

3.Paying for users:
The very many stories in the internet about the instant viral growth has formed negative stigma to the concept of paying the uses particularly in the early days of the product. Conscience of the entrepreneurs prick if they pay for users. It is common to find slides in the startup pitches that states, “we have grown to xx users without paying for a single one,” as pride. On needs to pay for every acquisition channel. Nothing comes for free. The problem lies whether the cost is incurred directly or indirectly.

Channels like pay-per-click obviously have a direct cost. But channels like search engine optimization or SEO and Viral are mostly seen as free channel. But apparently, it is not free. To completely make use of the SEO and viral strategy, lot of research is needed which thereby needs employees and thereby incurs cost for their job done and time. This cost is indirect. Though SEOs are worthy in long-term, it takes long time to show some results and meaningful traffic. But at the initial stages, the company may not have so much time and resources in hand to wait for longer periods. Faster the company learns better it is for the company. So it is better for the company to check other channels.

Almost the same applies for the viral. Every businessman aspires to become next Facebook or Whatsapp, which is why they seek for viral. But it is important to know that viral channels does not suit all the businesses. It does not suit many products. Many entrepreneurs overestimate their product to fit viral growth. It does not mean the business is bad if viral way does not suit the business. It just means the entrepreneur has to find a different means of channel for his customer acquisition strategy that suits his business better.

4.Using many tools to test the channel:
The belief to measure everything has made many believe to make use of wide range of tools to find the right scalable channel. The variety of tools are quite wide-spread which includes A/B testing, ad platforms, feedback, support and many other tools which can confuse anyone and make them feel the need to try out everything to find the right tool. But that is not right. If one has started to learn Tennis, one would not get the latest gears in the market by spending a bomb, rather would get a tennis racquet and ball to start with. Same applies here too. To rightly test the right customer acquisition channel, all that one needs is Google Analytics, Excel and some basic SQL skills. Those three are more than enough to test any channel before the need for anything else arises. It is wrong to be carried off with different tools, just start off with what’s in hand.

5.Wrong myths:
There are serious wrong myths doing the rounds around the fields. The increased usage of the A/B testing and other analytics tools have built stories that changing the button color or moving the CTA to left from right could change the game. These stories may be too but it is not the rule or applies for everyone. IT takes nearly 10 A/B tests to get the one that shows some improvement. When the positive improvement is spotted, it is incremental and cannot be called game changing. Knowing how the metrics could be properly influenced is the core. Incremental improvements are not what is needed at the initial stages. At the early stages, the CPA may be more of a factor than the target itself. So more steps have to be taken to know the feasibility of the channel. To see drastic improvements, it is important to center on the messaging, targeting and activation methods and not on color experiments. Color experiments are more suited for the business that is prepared to optimize and scale a channel.



Avoiding the above discussed myths would help the company in finding the right channel to acquire customer and in calculating the right scalable technique.