Mar 7th 08

Awareness Building is a Waste of Startup Resources

 

It’s surprising how many CEO/Founders of startups tell me that they want to hire a VP Marketing to “build awareness.” 

Consider this: according to Inc Magazine , the average US consumer sees about 3,000 advertisements per day.  Can a startup really spend enough money to break through that clutter and build awareness?

For at least the first year or two, online consumer/prosumer/smb targeted startups should focus 100% of their non-PR media budget on acquiring customers.  Rather than buying a microsecond of awareness, you can actually use your limited funds to engage users in a real brand experience. Even for users that don’t convert to paying customers, you create a deeper impact by engaging people on your website.  And you can gain intelligence about such things as where and why potential customers are abandoning your acquisition funnel.

Focusing on customer acquisition over ”awareness” takes discipline.  There is always some amazing advertising opportunity that could lead to explosive growth.  Your odds are probably better buying a lottery ticket.

Building a strong customer acquisition engine is the best chance you have of creating long-term awareness.  At a certain scale, awareness/brand building makes sense.  But for the first year or two it’s a total waste of money.

Posted in Acquiring Customers, Building Awareness.

6 Responses to “Awareness Building is a Waste of Startup Resources”

  1. James Siminoff
    Mar 7, 2008 8:00 pm

    I agree 100%. You are much better off focusing all of your energy on your first 1,000 customers, build a base and then things will explode. Another great post Sean.

  2. Sean Murphy
    Mar 10, 2008 5:38 am

    I agree, adding to your customer list drives real word of mouth (vs. buzz about “what a cool app/technology/website”). Paying customers are the fastest way to positive cash flow.

  3. David Becker
    Mar 11, 2008 1:18 am

    Excellent post. There is still a fixation on brand and building brands awareness often at the expense of response and knowledge. Brand awareness sounds so old school or limiting. Learn first through carefully calibrated spending and research. Talk to customers. Listen. Refine. That doesn’t feel quite so macho or expensive as running a big ad campaign but at the end of the year you’ll have customers and know fairly well how they got there.

  4. Leo Chen
    Mar 14, 2008 3:44 am

    Totally agree with this post. Consumers have already been trained to tune out advertisements so paid advertising is very low ROI. I can’t name one ad I’ve seen online today. Instead, startups should focus on driving user engagement & quality experience. By doing this, you’re leveraging the word-of-mouth and viral nature of the web to drive adoption. Really enjoy reading your blog Sean.

  5. Sean Ellis
    Mar 14, 2008 4:36 am

    Thanks Leo, glad you are enjoying the blog.  Very good point that user acquisition is best way to leverage WOM and viral nature of web…  I checked out your blog.   Good luck with the new venture. 

  6. artur
    Jan 19, 2009 11:01 pm

    Sean,Im currently writing my b-plan for my niche web app ( with a total niche market of 2 million potential customers )..and the 1 item that has been eluding me is User Acquisition Cost. Although i agree with you 100% about the approach for the years 1-2 .. I still need to include a marketing budget for years 3 & 4 when we plan to really see growth.Do you think 15$/user ( paid users ) sounds right? perhaps you can glance at my bplan and spreadsheet for a sec to get a better idea of my offering?it would mean a lot to me..its my 1st startup. thanksartur

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