This article is part 4 of a four-part Startups Playbook Series (see part 1 here, part 2 here, part 3 here). Navigating the Startup ecosystem to build a business is a daunting, stressful, costly, and often lonely journey. But the reward for when you make it - priceless. Having the right tools, direction, and support is often the lifeline between success and failure. This series will guide you through 4 business-critical areas you’ll want to nail in order to keep you on the road to success.
Early customer acquisition, or ‘traction’ in startup lingo, is a vital step that no founder can afford to delay. Given its importance and urgency, it is something you should approach methodically. While one size cannot fit all, there are still a few guiding steps, building blocks, and general approaches you can use.
The importance of your early customers
Early customers are worth a lot more beyond the monetary revenue they bring in. Independent buyers offer validation for your product or service and for your ability to reach them. This aspect is a key focus for early investors and lack of traction can be a deal-breaker in some cases, depending on your stage of development. Real-world traction will speak much louder than any potential growth numbers you put in your pitch deck.
Who is your customer?
Carefully determine the target audience for your product because getting it wrong can mean that a perfectly viable but misdirected product brings the whole house down. For this, think through who your product or service has been built for. In this, try to drill down to the finest possible detail of the niche you are targeting that can adopt what you offer. Don’t hesitate to start with the one customer segment that you think is most relevant even if you think you can go broader. Study that segment intently to pitch it right before you think about other segments.
New solutions in the market depend on early adopters, especially if your solution is an innovation. These are the first people willing to try your as yet unproven solution. Why? Because they are either facing an unsolved problem that is affecting them so badly that they will try ANYTHING. Or (as is the won’t of early adopters), they are eager to try new things in order to keep up their image of early entrants into new trends. These early adopters are vital to your traction because they are the first link in the sales book chain. Early adopters are typically influencers who bring in the early majority, the larger body of your sales book. The early majority is then followed by the late majority, who sustain your business over the longer term. Invest heavily in identifying early adopters carefully; they have the desire, risk appetite, money, and desperate need to try your solution and consequently become its ambassadors.
The potential customers who can be early adopters will include persons or businesses who:
Have a problem that needs solving
Realize they have this problem and its consequences
Are actively seeking to solve this problem
Will pay for even a ‘potential’ solution like yours
Where is your customer?
Seeking out your early adopters will require a lot of effort (if it was that easy…). You will need to follow your sector deeply and widely. Follow social media handles of potential users and competitors to get a sense of who is seeking what to solve for which problem. Reviews and feedback on competitors’ solutions are a great source for identifying what is missing and who is looking for it. Discussion forums are a great source as well. Finally, you may have to shell out hard cash for paid meetup groups that discuss happenings in your space.
How do you attract your customer?
Content is king in attracting early adopters once you have identified them and their needs. Develop content that speaks to and educates your target audience across your website, blogs, speaking engagements, and social media. This content should demonstrate your knowledge of the pain points and your expertise in the sector to build an audience for your solution. Try to succinctly answer:
What problem are you solving for users?
Why is your technology/product the right solution?
If possible, provide case studies and/or examples
You will be surprised by how much traffic is still driven by google searches. So, SEO still matters - keyword optimization, topic clusters, and back-linking are important and once you have an audience on your website, you need to be sure the user experience doesn’t disappoint. Also, hygiene checks that get overlooked - ensure your website is mobile and voice search-friendly.
Finally, don’t cringe at spending, especially in the early days. No one expects Seed or pre-Series A startups to have scaled paid marketing campaigns, but testing paid acquisition channels for effectiveness is valuable. Spending on “influencers” like bloggers, Instagrammers, YouTubers, Ted Talkers or professional reviewers also provide a quick leg up to visibility and reach.
The customer hook
Once you have the attention of your potential early customers, free versions or free trials usually work well to hook them. Use judgment here since early adopters may not mind paying (willingness to pay is actually a defining trait of early adopters). Also, a freebie may backfire for some categories of customers who may perceive it to be a sign of inadequate quality or lack of confidence on your part.
Getting early adopters to use your solution is not the end of it. Be sure to observe user engagement and interaction, which is invaluable real-world feedback. This will help you to answer questions like:
When and why are trial users converting to becoming paid users?
What do the usage patterns and customer feedback tell you about existing and desired product features?
This is especially true for trial customers that do not convert to paid ones because they rarely bother with constructive feedback. You don’t want a litany of unimpressed users out there about whom you know nothing.
At this stage, don’t make changes to product features just to make a set of possible customers happy. Remember that if you are getting feedback asking for changes, you may have picked the wrong segment and need to go back to the drawing board on targeting rather than the product itself.
Also, don’t cast your net too wide in the hope that targeting more segments will mean that at least some will convert into customers. Go through the grind of listing segments (geographies, demographics, platforms, etc.) you won’t serve at this stage in order to refine your search.
If you have a B2B solution, then don’t try to pitch it to the top executives of organizations. Access will be harder, getting and retaining their attention even harder, and this set of people may even be disconnected from the problems you are proposing to solve.
Early customer acquisition can be a difficult and daunting task for startups and pitfalls abound. Fortunately success can be found with a targeted approach, continuous refinement, and a persistent focus on the needs of your primary customers. Good luck on your journey and let us know if we can help.
About Juan and Alec:
This article is co-authored by Juan Scarlett and Alec Wright, Founders and Managing Directors of OneValley Ventures. Juan leads the investment strategy and execution for the OneValley Fund and growth-stage investments with OneValley partners; while Alec focuses on pre-seed and seed investments in the enterprise software, big data, digital health and education and learning technology markets. They have both served on the boards of several companies and have 20+ years of experience in technology investing and research