How to take a structured approach to customer acquisition
"At its most basic: when things like branding and email campaigns and ads go in -> users, customers, and revenue should come out. This is your funnel." —How to tell if your marketing is working
The first part of that quote describes customer acquisition, which is also called "demand generation" or "lead generation" or "performance marketing" or "growth" or "flywheel" or "top of the funnel" or "ToFu".
To..Fu?
The top of the funnel [get it?] is when someone encounters your startup or product and becomes interested in seeing if you solve a problem they have.
When someone reads about you on HN or hears about you on a podcast or sees a demo you give at a meetup or comes to a talk you present at a conference or reads one of your blog posts or clicks on a link that takes them to your website or starts a free trial or... that's ToFu.
Your GTM dictates how you make the ToFu
GT...what? Go to market. Your GTM is the answer to these questions:
[1] What problem are you solving? [2] For who? [3] How do they value that? [4] Where do you find them? [5] How do they find you? [6] What combination of words, pictures, actions, situations, and incentives will get them to give you money for it? [7] How much will they pay? [8] Is it possible to make enough money or get enough users to stay alive? [9] How good a business can this become? [10] How big a company can this be?
The answers will determine how specifically you acquire customers.
For example: if you’re selling enterprise software that costs $250,000 per year, sponsoring the free-to-attend AWS Summits will get you precisely nowhere in terms of getting in front of people who might have that kind of budget and become customers.
Want a primer on GTM? Read Until you do this, your startup is purely theoretical.
Change your GTM? Time for a new ToFu recipe
Decide to lower prices so someone can pay with a credit card up front instead of a with invoicing and purchase orders and NET30 payment?
Change who your selling to from the VP of Engineering to the Head of Data Science?
Raise a ton of VC money and have to acquire a ton more users than you used to, but making money is no longer important?
It's time to change how you acquire customers!
Minimum Viable ToFu
When you are just starting out, you need some basic sense of what your acquisition strategy is going to be to focus your efforts.
Are you going to focus on content marketing and SEO to generate inbound interest from people who find you via search or hear about on a podcast etc organically, that you're not paying to be on?
Are you going to focus on sponsoring events, tradeshows, etc with a booth and giveaways that are paid for in hard money before any potential user or customer signs up for anything?
Are you going to focus on sending outbound emails and make phone calls to people who may have never heard of you before and run local activities like dinners with someone tech-famous in the field to get them to listen to your pitch?
The simple reason for this is that you can't possibly do everything, or do everything well, all at once. That's true. But there's a more important reason. The people you hire or contract out to create great content optimized for SEO are not the same people who know how to run an events program that creates great experiences.
ToFu Tactics
Once you have a strategy, you have to decide what to actually do to implement it.
Let's say your acquisition strategy is to do both organic and paid inbound marketing plus sponsoring conferences. Your inbound tactics might look like this.
- SEO optimization on your marketing site against a specific set of search terms and phrases A, B, C, D, and E
- Weekly cadence of 2-3 blog posts about A-E that interleave 1) commentary on relevant new thing in the industry, 2) specific and practical how-to guides, 3) customer testimonial or case study or feature announcement or twitch stream or webinar etc
- SEM inventory analysis, testing, and campaigns against A-E leading to landing pages with some animated gifs and...
- A/B testing of two CTAs on the landing pages: 1) get a personalized demo or 2) start a 14 day free trial
And your event tactics might be:
- Sponsor 6 conferences a year: 1 large event per half and 1 smaller event per quarter
- Select booths directly next to or across from competitor X OR directly next to or across from partner Y
- Submit one talk by each founder at every event
- End every talk with a promotion of your booth for a demo and giveaway
- Send staff to every session that has anything to do with your space to engage with participants that they ask to come to your booth for a demo and giveaway
- Do contributions to the NAACP LDF instead of giving swag and give people custom badge stickers to show they helped donate
- Place 1–2 large screens in the booth to give concurrent demos in a one-to-many format at the edges while maintaining 1–2 interior spots for custom private demos
Tactics go stale
Every tactic has a half-life and will eventually stop working as well as it used to.
For example: if search ads against jobs-to-be-done oriented terms aren’t working well anymore..
- Maybe your brand has achieved maximal power and people are searching for it directly by name [good!]
- Maybe you’ve hit inventory limits [bad!]
A tactic that has leveled off is not necessarily a bad thing, as long as it's still doing the job of acquisition.
A tactic that’s on the downslope is bad. But if it's low cost/effort, then it may still be worth continuing as long as it's producing incremental acquisition.
If none of your tactics are working well even though you know your execution is good, then you might have a strategy problem.
ToFu Metrics
There are only two real metrics that matter: volume and conversion. Volume = total number of people entering the top of your funnel. Conversion = the percentage of those people who move to the next stage, whatever that is.
- 250,000 people are clicking your search ads every week but only 5 sign up for a free trial for your product which costs $10/mo? This is bad.
- 1000 people read a deeply technical how-to blog post you wrote every week and 10 sign up for a free trial for your product which costs $99/mo? This is good.
A few key metrics will help you understand whether how well your ToFu is working.
- Volume into the ToFu
- Conversion rate out from the ToFu
- Cost Per Lead (CPL) to get a person into the ToFu, which might be a CPM or CPC etc
- The amount of pipeline or revenue you can attribute per lead at the ToFu—if you charge $100/yr and only 1% of leads become customers and you have 100 leads, then each unqualified lead at the ToFu is worth at most $1
- Customer Acquisition Cost (CAC), or the money you spend to get a customer or user... often viewed as being equivalent to CPL unfortunately
- Payback Period: how long it takes you to earn back your CAC from the money that customer or user makes for you
- The change in all of the above numbers over time
And some heuristics will make it easy to understand the numbers.
- Higher conversion rates suggest leads are of higher quality and/or your messaging and offers are better targeted
- Higher volumes or lower costs suggest the better ToFu tactics and/or low competition
- Shorter payback periods suggest better marketing contribution to revenue
As you get more practice at going to market, what really matters is being able to understand the contribution of marketing time and money to revenue or user growth. And your marketing staff should be able to roughly understand how that contribution breaks down by tactic.
Funnel Template
Here's a basic funnel template I made as a starting point. Feel free to fork and put it to work!
ToFu is just the beginning of your funnel
There's also a middle and bottom of your funnel. Being bad at those can easily destroy the gains you've made in acquisition and growth at the top.
Aim to get good at the whole thing. Learn more here: How to tell if your marketing is working.
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Good luck!