Apr 20th 09
To Pay Or Not To Pay To Acquire Users?
I recently heard a VC say that startups “should spend the least amount of money possible on marketing.” This is a healthier attitude than the opposite prescription of undisciplined land grab, but a better approach is pure ROI marketing. Marketing opportunities that offer a fast payback with additional profit margin are a key component for reaching your startup’s full market potential.
Work from Free to Paid Drivers
Ultimately my goal with any startup is to acquire the highest number of qualified users possible – at a positive return on investment. But it often takes several months after “launching” to transition to aggressive scaling.
I like to start with free customer acquisition channels since they obviously offer the best opportunity to generate a positive ROI. Free drivers may include viral marketing, self-implemented SEO and listing with any directories that are appropriate for your product. Leveraging this early user flow we optimize the first user experience for the right target users and introduce a business model that generates sufficient revenue to fund future paid user acquisition. When we start developing paid channels, we work our way through the lowest hanging fruit first, beginning with demand harvesting channels, later adding demand creation channels.
Kill the Opportunity for the Competition
If your growth is accelerating, you will attract competition. And this competition will likely be savvy enough to replicate the customer acquisition and monetization approaches that you worked hard to invent. So it is important to make it as difficult as possible for them to get traction. I know some of you are saying “but your recent post told us to ignore the competition.” My point was not to ignore the competition forever, simply to ignore them while you are figuring out a repeatable, positive ROI way to acquire customers. Competition (especially those that are spending irrationally) will distract you from this critical task.
But once you have optimized the first user experience and introduced a business model that generates sufficient revenue to fund user acquisition, it’s time to focus your marketing efforts to aggressively build new customer acquisition channels and scaling existing channels – both free and paid.
Posted in Acquiring Customers, Budgeting, Competitors, Demand Creation, Demand Harvesting, Free Marketing Channels, Launch, viral marketing
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