Marketing Operations Strategy

Acquiring customers too fast could be hazardous to your business

It’s easy to get caught up in the thinking that acquiring lots and lots of customers is the fast pass to success, but many small businesses and startups try to do that too quickly and that may be a mistake.

Even fast-growing technology companies like Amazon, Airbnb and Uber acquired their first customers at a high cost and without technology and they treated their first customers very differently than the millions of customers they are able to attract now, according to research by Thales Teixeira, a Harvard Business School professor and author of the new book Unlocking the Customer Value Chain: How Decoupling Drives Customer Disruption.

It is a common misconception, particularly among tech entrepreneurs, that they need to invest in lots of technology up front to grow their customer bases, when in fact the opposite is usually true, said Teixeira, who has been studying new business creation for more than a decade.

Here are a few of his tips:

  •  When you acquire your first few customers, ask “why did they buy from me and not the alternative?” Explore and understand that with each one. At this stage, don’t go too deep into the process of optimizing to get as many customers as possible at the lowest cost possible because you need time and resources to build a better product or service. Your first customers will help with that.
  • Your first customers do more for your business than just give you a check, he said. They offer valuable insights and feedback about your product or service – they are essentially your R&D department. They also spread the gospel of your company through word of mouth. With your first customers, your goal is to learn as much as you can, not to scale fast.
  • Even tech companies like Etsy, Uber and Netflix did not use technology to snag their first customers. In Etsy’s case, the founders attended craft fairs and markets all over the country to recruit their first sellers, their customers, for the fledgling website. You likely will not find valuable first customers by plastering ads all over the internet, he says.
  • Reward your early customers, the ones who took a chance on you even when you were still figuring things out. These could be product or service discounts, VIP memberships or invitations to events.
  • It is not technology that drives disruption, he says – it’s the changing wants, needs and behaviors of customers.  The entrepreneurs’ focus should be on finding that one thing they can do better for their customers than the competition and that their customers love. Technology is the enabler  that speeds up the growth process — but that’s after you know what process you want to speed up. You don’t want to speed up a bad process, TTeixeira says.

“In the early phase of a company, acquiring customers is your main job, your only job and all that you have to focus on. And the way to acquire customers if you’re going to build better products, or you’re going to create a better relationship, or do whatever it takes. You do that with a goal of acquiring enough customers to be able to just survive another day,” he says in Harvard Business Review.

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