Building It Is Not Enough: 5 Practical Tips On User Acquisition

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Building It Is Not Enough: 5 Practical Tips On User Acquisition

 

The following is a guest post by Brian Balfour, Co-Founder and CMO of Boundless. You can read more of his writing on his blog at BrianBalfour.com.

Stories about the growth of "hot" startups such as Facebook, Instagram, AirBNB, and others have created a belief that if you build the right product, customer acquisition will be easy. Don't be fooled. These stories are the exception, not the rule, and don't tell the entire story of the immense effort it took to grow their customer bases. Finding scalable acquisition channels is a time consuming and strategic effort.

If you build it, they may not come.

field of dreams

You probably have a product roadmap and a development process. But do you have a process and plan to discovering your scalable customer acquisition channels? For software development we have well documented processes such as Agile, Waterfall and Kanban. For finding product market fit we have an increasingly defined process in customer development and the lean startup methodology.

Finding scalable customer acquisition channels is as much of a process as software development or finding product market fit. Here are five mistakes to avoid in finding your initial customer acquisition channels.

1. Do Not Test A Lot Of Channels At Once

This is the ol' throw stuff against the wall and see what sticks strategy. Unfortunately this rarely works. Consider this, with Facebook ads you typically need to change your creative every 24-48 hours across 10 - 20 different segmentation combinations, with 4 - 10 ads per combination. That is in addition to all of the landing page testing you'll need to do for those combinations. It is easily a full time role. Think you will have time to focus on another channel at the same time?

Inbound marketing takes an incredible amount of time for content development. SEO requires testing thousands of page combinations, time to build influential links, and plenty of on-page optimization. My point is, properly testing any single customer acquisition channel is extremely time consuming and requires focus.

It is easy to think that the fastest way to find a channel is to test a lot at once. But with limited resources it is the exact opposite. Let's look at it a different way. If you had very limited engineering resources, would you have them try to build 4 different products at once to find one that works? I hope not. You would end up with 4 partially built products with little information on which one is going to to work.

Instead, you would likely evaluate each product idea, strategically choose one, focus, iterate on it for at least a couple months, and only then decide to keep moving forward or move on. Finding scalable customer acquisition requires a similar amount of strategic decisions, focus, and iteration.

The quickest way to finding your first scalable channel with limited resources is to focus on one at a single time and iterate based on feedback (metrics) just like you would with building product. At Boundless, we have been lucky to have enough resources to test two channels at once. But even with close to $10M in funding, we won't go beyond testing and optimizing two channels for awhile. Don't underestimate what it takes to properly test and optimize a single customer acquisition channel.

2. Diversity Of Channels Is Not Important In The Early Stage

Entire companies are typically built on the back of one or two channels. Look how far Zynga has gotten with basically two channels - Facebook Ads and Viral Mechanics. Only now are they starting to diversify with the launch of their new platform. Facebook itself relied completely on viral growth until they had reached millions of users. Only then did they start optimizing for SEO. AirBNB grew their initial user base almost completely on the back of craigslist.

For reasons discussed in number one, diversity of channels actually increases your risk that you never find a scalable channel at all. Remember this - momentum of growth trumps diversity of channels. Once you find a channel that is working at a small scale, don't be tempted to add another channel to the mix. Instead, focus on optimizing, scaling, and milking your initial channel for all its worth.

Your goal in the early stages is to grow as fast as possible with limited resources. Finding further growth in a channel that is already working is typically easier than finding a completely new acquisition channel. When you start to reach the max potential (where the growth curve starts to flatten), only then should you add another channel to the mix.

3. Paying For Users Is Ok

Magical stories of instant viral growth has formed a negative stigma around paying for users especially in the early days of a product. Entrepreneurs almost feel guilty if they pay for users. This leads to startup pitches that often include a slide that says "we've grown to X# of users with out paying for a single one."

Every, and I mean every, acquisition channel costs money. It is just a question of whether the cost is direct or indirect. Channels such as PPC obviously have a direct cost. However channels such as SEO and Viral are commonly seen as "free" channels. They aren't. To properly optimize SEO and Viral mechanics takes significant engineering and other employees' time. That time is costing you money. The cost is indirect, but you are still paying for users.

Those "free" channels are certainly valuable in the long term. But they often come with short term disadvantages. For example, SEO typically takes months of effort before you gain meaningful traffic. In the early stages, speed of learning is the most valuable thing. Do you really want to wait a few months to learn the same thing you could learn in less time with another channel?

Viral growth deserves its own mention here. It is the treasure that most entrepreneurs are seeking. They want to be the next Pinterest or Instagram. Keep in mind a lot of products aren't suited for viral growth. I think a lot of entrepreneurs overestimate whether or not their product is a fit for pure viral growth. If your business isn't suited for viral growth, that doesn't mean you have a bad business. You just need to find a different customer acquisition strategy.

4. You Only Need 3 Tools To Test Your Customer Acquisition Channels

The "measure everything" mantra has lead to a belief that an array of tools is needed to find a scalable channel. Between analytics, A/B testing, ad platforms, feedback, support and a host of other tools it is easy to get lost. If you wanted to learn to play basketball, would you go out and spend $1000 on the latest gear first? Or would you just grab a ball, find a hoop and start playing? Hopefully you answered the latter.

To test any customer acquisition channel all you typically need is Google Analytics, Excel, and some basic SQL skills. Those three things will take you surprisingly far for any channel before you need anything else. Don't get caught up with the tools, just get testing.

5. Avoid The Button Color A/B Testing Rabbit Hole

The rise in A/B testing and other analytics tools have created fairy tale stories of changing a button color, or moving the CTA from the left to the right and suddenly you have game changing improvements. Once again, these stories are the exception, not the rule. It typically takes 10 A/B tests to find one that produces any improvement at all. And when you do have a positive improvement, it is typically incremental instead of game changing.

Being metrics focused is important. But knowing how to properly influence them is even more critical.

In the early stage you should not be focused on incremental improvements. Your initial CPA for any new channel is likely to be a factor off from your target. That means you need to try and make big improvements to understand the viability of the channel. To see big improvements, focus on messaging, targeting and activation methods. Save your color experiments for when you are ready to optimize and scale a channel. Not when you are testing the viability of a channel.  

---

What do you think?  Any additional tips on how to acquire users for early-stage product?

Posted by Dharmesh Shah on Wed, May 02, 2012

COMMENTS

Wow thanks for the timely article! We have a very limited budget and are debating spreading our dollars around different channels.

posted on Wednesday, May 02, 2012 at 1:52 PM by Andrea Fuentes


Very smart and practical points, particularly on when A/B testing is useful.

posted on Wednesday, May 02, 2012 at 2:07 PM by arjun moorthy


Hi Andrea, glad it could help. Definitely strategically choose the one or two channels that you think have the best chance of performing and concentrate on those. 
 
One thing I didn't talk about is how expensive properly testing different iterations of a channel. People underestimate the cost as well.  
 
Best of luck! 
 
Brian Balfour

posted on Wednesday, May 02, 2012 at 2:14 PM by Brian Balfour


Products and services that benefit the most from viral marketing are those with a network character, meaning they increase in value when more people are using it and are of little value with few users. 
 
Examples of businesses with a network character are phones, Facebook and other membership based products/services and multi-user games, etc.  
 
For these companies, the cost of acquiring customers may include giving the service or product (phones) free to people, to accelerate building the network.

posted on Wednesday, May 02, 2012 at 2:24 PM by Mary Brophy


The whole premise behind the A/B testing and multi-color call to actions is to create business for marketing professionals and companies selling marketing automation. 
 
Business owners who don't trust their own instincts or the evidence in front of them put dollars into programs that yield very little return.  
 
If I had a nickle for every time a Boston base marketing automation company wrote in their blogs that Facebook was better than LinkedIn for B2B leads I would be a rich man, despite evidence to the contrary.  
 
Focus on developing your audience through the use of content and promote the content on LinkedIn, if you're a b2b company. The advise of well known marketing people is aimed at getting them clients, not helping you get new clients.  
 
 

posted on Wednesday, May 02, 2012 at 2:26 PM by Jon Nugent


@Jon Nugent 
 
Jon, I agree that a lot of the hype around A/B testing is driven by marketing companies. I think a lot of people don't realize that little changes like color or postion of CTA typically only produce incremental improvements and therefore can only be worth it at decently large scale.  
 
Those types of changes are much better suited in the optimization/scale phases...not the testing phase for a customer acquisition channel. 
 
Brian

posted on Wednesday, May 02, 2012 at 2:42 PM by Brian Balfour


Great article! I would add just two points: 
1) For any consumer website, it is critical to use cohort analysis to measure product change impact on user behavior. Users that just registered, are quite different from ones that have been engaged for several weeks, so being able to look at their activity separately is invaluable.  
2) Testing segments with google ads does require some sophisticated manipulation in adwords and is critical to figuring out which segments are working. 
 
For both of these, it's worthwhile to find an expert on both tools and walk through how instrument the tests, how to track the results and how to iterate - it will save you a lot of time and wasted energy! We've done this at LeanWagon, a site helping people eat healthy and lose weight, and it has paid off in spades. The key is to do it BEFORE you launch the new features, otherwise you may find that you are not tracking the right things and that you've lost invaluable time.

posted on Wednesday, May 02, 2012 at 3:19 PM by Greg Rublev


Great post, Brian, and very relevant to some stuff we are talking about at MyReci right now. 
 
Question - what type of process do you suggest we go through to choose the one of many customer acquisition channels we have access to? (You briefly addressed this in your response to Andrea above but some more detail would be helpful). 
 
Question 2: At what point do you recommend devoting development resources to building out features that will supplement the channel you've chosen (especially if those features are a "nice to have" but not "required")?

posted on Wednesday, May 02, 2012 at 3:58 PM by Vijay Nathan


I have a lot to learn from this. I also need to point out that there's a broken link. Check link to ...close to $10M in funding...

posted on Wednesday, May 02, 2012 at 5:01 PM by Joseph Wachira


Perfect timing. We are just launching our first product and I am trying to resist the impulse to go after all the channels. This article was very helpful as far as continuing to focus. I am also going to bug our developers about google analytics :). Thanks! Mary

posted on Wednesday, May 02, 2012 at 5:14 PM by Mary Juetten


Inspiring and note-taking-worthy article. The issue is how to determine which channel to pursue? Also, how about "magnetic content" as a potential channel? While you mention both paid ads & SEO, there was little mention to the entire trend of "magnetic digital content" that draws the user towards the product. But alot of the current trends are to provide relatable content that compliments your core product/service as a primary strategy for customer aquisition. But again, this brings up the issue of how to choose which channel is best to pursue?

posted on Wednesday, May 02, 2012 at 11:02 PM by Deborah


I am a hacker who just built up an interesting web-app, but am quite clueless on how to get it out to people. I don't have much money, just a great app. Any suggestions?

posted on Thursday, May 03, 2012 at 5:41 AM by RT


I also foundwww.usertesting.com to be very helpful with feedback. It's also fairly inexpensive.

posted on Thursday, May 03, 2012 at 9:51 AM by John Bailey


Thanks Brian -- we are wrestling with this question right now, particularly the issue of how to balance organic versus paid customer acquisition ... and how to do so with a limited budget. Interested in whether you have any advice on how to balance between the two? Trying to optimize the balance between burning cash and learning quickly. Thanks in advance.

posted on Friday, May 04, 2012 at 2:40 AM by Chris Aitken


Really Great information. Thanks for Sharing.

posted on Friday, May 04, 2012 at 7:19 AM by Böcek ilaçlama


Right now we are also working on same and even I was feeling that working on any type of channel is a full time job so how are we supposed to do so many different things all at once with limited resources. But thanks for your article, I think we are on the right track.

posted on Friday, May 04, 2012 at 7:23 AM by Seema Gupta


Great article, Brian - as usual - and quite timely for our purposes. An early mentor once cautioned that, "the thing you begin with will likely not be thing - but it will lead you to the thing." He may not have been eloquent, but he's ended up being right. As a cash-strapped start-up trying to boot-strap our way to our first operational growth round, we have had to be very clever in creating a low-cost/no-cost customer acquisition strategy. From that necessity emerged a product that not only uses third parties to recruit customers for our primary business, it provides us with a revenue source all its own. Early reaction to this product has been great with early adoption rates exceeding all expectations. So in our need to show scaleable customer growth and revenue metrics in order to attract next stage investment, we actually may have found "the thing".

posted on Friday, May 04, 2012 at 8:06 AM by Jason Brett


Great article! Well balanced and puts a lot of things into perspective. Especially, not wasting too much time on button testing. I've heard that alone could mean a substantial UIE (Unlikely Instagram Event) for your startup.

posted on Friday, May 04, 2012 at 12:53 PM by TVD


Testing, Testing, Testing is the key and Google Analytics is a great way of tracking your results

posted on Friday, May 04, 2012 at 5:12 PM by Web Hosting


Interesting post. Social media and web 2.0 is somewhat confusing for small businesses. Not many are competent enough to learn from material available on the web, they do not know what to look for. The benifits are therefore still small!

posted on Monday, May 14, 2012 at 4:19 AM by Hammad Siddiqui


Great advice! I'm already wary of the A/B pitfalls, so this will help me rethink my approach.

posted on Thursday, May 17, 2012 at 9:07 PM by Greg Steven


Thanks for the insight in the subject.

posted on Friday, May 18, 2012 at 12:23 AM by Shiv


Thanks for the insight into the subject.

posted on Friday, May 18, 2012 at 12:24 AM by shiv


Brian, 
 
How do you feel about telemarketing as a channel for a B2B product? Does it fit into the same rules you outlined of only testing one channel at a time? Or should it be taking place in additionton to the other channels no matter what? 
 
-Mike

posted on Sunday, May 20, 2012 at 7:00 AM by Mike Pierce


I love the tidbit about basketball. This is so true and so many people don't realize just getting out there and doing something is usually the best option (save for rare exceptions which may jeopardize your personal safety!). Let's just say the guy with the nicest set of golf clubs doesn't automatically win on the course!

posted on Sunday, May 20, 2012 at 12:33 PM by Vincent Hofmeister


Hi Brian, 
Excellent article! I really like the point where you mention that A/B testing is more of a exception, not the rule to be rigidly followed. This is very true in practical life. 
 
I understand testing can provide your with beneficial data, but after all, testing is still, testing!

posted on Saturday, June 02, 2012 at 2:16 AM by Robert


Brian, 
Thanks for the wonderful pointers! It really helps understand the basics and dos & don'ts of A/B testing. I will surely follow your advice in the next revision for my website.

posted on Monday, June 04, 2012 at 12:23 PM by David


Great article for a start point on produce development discussion. The one major point no one has brought to the table is that of protection of intellectual property rights. This is a very important issue that can be the tipping point for you companies success. There are major patent wars occurring now that history has never before witnessed. In fact, that’s all that the co-founder of Microsoft does with his new company is buy and fight patents. Look at Oracle vs. Google.  
 
Fact is the very patent laws have changed recently in this country, making it much more difficult for the small garage entrepreneur and start-ups to even enter the market place. Did you know there is a time-line and escalating cost associated with protecting your intellectual property patent? If you publicly expose your idea (software, web page, app, invention, etc.) a couple of bad things occur. 1). After public exposure; you have 1 year to file your patent or you lose your rights to it forever! 2). You give your competition the edge at beating you to the patent office.  
 
Because of these patent issues; I have been consulted to take down all implications of any of my ideas and not to post it anywhere publicly until the patent is complete. These are big money people that know what their taking about in today’s changing world. 
 
Can you imagine all your work and efforts being lost because you did not install this important issue in your product development strategy? Maybe the next team member you should hire would be a good patent attorney before you spend one more dime on an idea that may be owned by someone else.  

posted on Thursday, June 07, 2012 at 3:36 PM by GreenChief85


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