Customer Acquisition

A deeper look at understanding customer acquisition and learning how to harness it for sustained business growth.

Feb 09, 2021

‘Customer acquisition is the process of bringing new customers or clients to your business. The goal of this process is to create a systematic, sustainable acquisition strategy that can evolve with new trends and changes.’ - Hubspot

I couldn’t have said it better myself. Acquisition deals with the strategy a business needs to employ in order to catch the attention of its target audience and convert them into paying customers.

Acquisition is one of the most discussed concepts in business because it defines success. A successful business needs paying customers. It is an essential component without which a business would not be able to grow.

Now that we understand the importance of Acquisition let's jump right in. When acquiring customers, the rule of thumb is to ensure that you are not spending more money acquiring customers than you stand to gain from them. Ensuring acquisition efforts are as cost effective as possible is always good for business.

An ideal LTV ( Life Time Value of Customer) : CAC (Customer Acquisition Cost) ratio should be 3:1. The value of a customer should be three times more than the cost of acquiring them. If the ratio is close i.e.1:1, you are spending too much. If it’s 5:1, you are spending too little. In fact, you are probably missing out on business. We will discuss LTV and CAC in depth in my upcoming articles.

Also before you launch a full fledged campaign to increase acquisition. As a prerequisite it is expected that there exists a Product Market Fit i.e. not only does your product solve a user problem but also the target market finds your product compelling.

If you want the short of it Acquisition involves reaching out to and converting strangers into paying customers and then promoters. Acquisition revolves around the answers to the below questions -

How many users do we have?
What channels are the most effective in getting users?
- With regards to cost, time etc
How do we define active users? How many active users do we have?
How and why has the user base grown over time?
- Pro tip - Define metrics and create a funnel to keep an eye out for the conversion of a user from a Visitor > Lead > Qualified lead > Customer

If you want to take a deeper look into understanding the concepts involved in Acquisition and how to hack Acquisition to create sustained growth for your product then continue reading.

The 2 main components of customer acquisition are

Language Market Fit - It is the measure of the effectiveness of the language used across your product on its target audience.

Channel Product Fit - It is the measure of the effectiveness of the marketing channels used in getting the target users.

Let's first take a deeper look at Language Market Fit.

Language Market Fit is how well your company's language resonates with the people you're trying to reach. You can reach new people, scale growth and retain customers by finding language-market fit.

It is important that the language that you use to describe and market your product resonates with the target audience and motivates them to try your product.

Messaging used to describe product - Includes all messaging used in the product, tag lines, value prop descriptions, landing page scripts, text used throughout the product on features, pages etc

Messaging used in marketing product - Includes all messages used in marketing whether through app notification, emails, online ads, print ads, articles etc

However your audience discovers your product. It is imperative that the first message they see must be able to deliver the value proposition of your product. So that the customers understand the core value delivered by your product and are convinced to give it a try. This means that the language you use must directly connect with a need or desire they have in order to hook them.

Writing marketing copy is not an exact science but it can be perfected by applying the rigor of scientific experimentation to this creative process i.e. by using A/B testing. What this means is that you don’t have to be a marketing savant like Jobs to get Language Market Fit, A/B testing will get you there.

Website copy can be easily swapped and tested using tools like Optimizely and Visual Website Optimizer. Most email marketing systems like Salesforce or Mailchimp support changing email copy such as subject line or call to action. Also online advertising platforms like Facebook and Google let you test many different versions of ads.

(Pro tip - While working on creating the Language Market Fit for your product it is good practice to define the persona of your product so as to have clarity on how you want to portray yourself through the right language and tone.)

Why I am telling you all this is because a Language Market Fit is the difference between roaring success and failure. The media site Upworthy dedicates their growth to their dedication to seeking Language market Fit. Just ask Eli Pariser, the founder of Upworthy, according to whom a “good headline can be the difference between 1,000 people and 1,000,000 reading an article”. So whether your product is a news article, an app or a retail website you can use the method to optimize your messaging

In the words of Seth Godin, “we drink the [Coca Cola] can, not the beverage”. We need to understand and leverage the power of language through A/B testing in our constant endeavor to win customers and grow our business. As changing the language changes everything: it changes the way people perceive your product, their behavior, and interactions.

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Okay, Now let's take a deeper look at Channel Product Fit

Choosing a marketing channel is not like investing in the stock market where you need to diversify your investment into various businesses and sectors in order to mitigate risks and maximize investments. Marketers commonly make this mistake of diversifying efforts across a variety of channels. This in turn results in them spreading their resources too thin which doesn’t allow them to focus their effort on optimizing one or a couple of channels likely to be most effective.

It's better, as google founder and CEO Larry Page has said, to put “more wood behind fewer arrows'' or in the famous words of billionaire Paypal co founder Peter Theil “It is very likely that one channel is optimal. Most companies get zero distribution channels to work. Poor distribution-not product-is the number cause of failure. If you get just one channel to work you have a great business. If you try for several but don’t nail one, you’re finished. Distribution follows the power law."

That last part is key - “distribution follows the power law.” In other words, at a given moment in time a company that has product channel fit will get 70%+ of their growth from one channel.

At a high level there are 2 phases which you use in choosing your best marketing channel -

Discovery - You need to experiment with a range of options in a structured way. Do your research, prioritize down to a few and run cheap experiments to zero in a one or two with the perfect fit. A step by step guide for the same can be found later in this article.
Categories of marketing channels -
- Viral/ Word of Mouth - Social media (Facebook, Pinterest, Snapchat), Friend referral programs, Online video, Community engagement, Contests and giveaways, platform integration, crowdfunding, games and quizzes
- Organic - Search engine optimization, public relations and speaking, content marketing, app store optimization, free tools, email marketing, community building, strategic partnership, contributed articles, website merchandising
- Paid - Offline ads (TV, print, billboards), online ads (Facebook, Google Ads, Youtube), affiliate advertising, influencer campaigns, radio, retargeting, ads network, sponsorship
Atif Awan, the Vice President of Growth and International Products at Linkedin created this chart to help you zero in on your channel type.

Optimization - You will need to work on maximizing the cost and reach to keep scaling.

Lets dive deeper into the Discovery and Optimization phases. There are 2 methods which can help you home in on your best fit of marketing channels -

Bullseye framework
Brian Balfour’s 5 step to customer acquisition

Bullseye framework by Gabriel Weinberg founder of duckduckgo.

The framework proposes that you sift through all 19 channels to find one that works best for you. I am not going to explain each and every channel as its explained fairly well in the linked articles. Please find below an outline of the Bullseye framework.

Step 1 - Outer ring

Brainstorm long and deep for the strategy for each channel

Step 2 - Middle ring

Run cheap traction tests parallely in the channels that seem most promising. The tests should answer the following questions.

How much will it cost to acquire customers through this channel?
How many customers are available through this channel?
Are the customers that you are getting through this channel the kind of customers that you want right now?

Step 3 - Inner ring

You should now have an understanding of the channel that moves the needle the most for you. You should direct your effort and resources and solely focus on your core channel. You’ve hit the bullseye.

Brian Balfour’s 5 steps to choose your customer acquisition channel

Step 1: What Are You Optimizing For?

Learning - You might be trying to learn something specific about engagement, interest among a certain target audience, monetization ,etc.
Volume - There will be a time in your business when you will want to prove that you can go from a certain base amount of customers, to moving the needle in a meaningful way
Cost - Optimizing your CPA to get more out of your budget.

Step 2: What are your constraints?

Time - Do you have a specific optimal window to reach your audience? Do you only have 3 months of cash left?
Money - Are you well funded, or bootstrapping? Do you need to extend your runway?
Target audience - Do you need to reach someone really specific?
Legal - Are you taking on an old industry with litigious stalwarts? (i.e. Uber, Music Industry, etc)

Step 3: Setup Your Channel Matrix.

Building a channel matrix helps give you three things:
- A methodical process to evaluate each channel
- A way to compare each channel on the same attributes
- A visual organization of the information for each channel

Step 4: Fill In Values Of Channel Matrix With Low, Med, High

You aren’t trying to predict exact values. Get enough information to make educated comparisons of each channel relative to each other.

Step 5: Choose 1 - 2 Channels As Hypotheses

In a perfect world you want channels with the following values:
Targeting - High, Cost - Low, Input Time - Low, Output Time - Low, Control - High, Scale - High
You will rarely get a channel that fits those values perfectly so the question is how do you prioritize? This is where the work you put into Step 1 and Step 2 come in. Sort your channels using your constraints as a guide. If your biggest constraint is money, then look at channels that have a low cost as first priority and come closest to the ideal values for the other attributes.

Either of the above mentioned methods i.e. The Bullseye Framework or The 5 Step plan will help you hypothesize on a marketing/customer acquisition channel that is a perfect fit for your product. Post this you must run multiple experiments to prove its viability in achieving your goals.

Customer acquisition is the fuel of any organization. Any business needs a continuous feed of new customers to succeed so you cannot give up marketing to new customers, hence you must zero in on a strategy which enables judicious allocation of resources to marketing while ensuring maximum output/value.

That being said one cannot stop at acquisition only. Post acquisition strategy needs to be employed to activate and retain the customers for sustained success. Learn more about the Activation and Retention strategy in my upcoming articles.

Let me know what you think about the article in the comment section.

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