Episode 31: Customer Acquisition
Think about this with your first customer. Does your first customer have the gravitas – the gravitational pull – to attract other customers to your business like the one George, whom you’ll meet in this episode, got his velvet hooks into for his first customer? Seems like an apt metaphor for what you’re looking for. Something that grabs customers and brings them into your business from the get go, helps them get whatever job done that they need doing, and yet is soft enough to do no harm. So, come aboard with Doug and Glenn and enjoy the ride into space with them on this episode of Conversations on Startups.
Transcript
Glenn Suart 0:00
The first thing you have to think about is, What benefits, again, are you selling to your customers and then who are the right customers? Then you can probably find customers. If you don’t do that, you’re just shooting in the dark.
Doug Ross 0:25
Welcome to Conversations on Startups, a podcast brought to you by Douglas Ross, author of the book, Spark Click Go: How to Bring Your Creative Business Idea to Life, and Glenn Suart, of Today’s Great Idea, a radio series featuring over 300 origin stories of businesses, brands and inventions that have changed the culture. Welcome to today’s conversation.
Glenn Suart 0:49
Hey, Doug, how you doing?
Doug Ross 0:50
I’m doing well. Glenn. Welcome to Conversations on Startups. Today, Glenn, we are talking about customer acquisition.
Glenn Suart 1:00
Oh, very important. But do we really care about customers? At all?
Doug Ross 1:04
Can we have a business without customers?
Glenn Suart 1:06
Not really! That’s right. So how you acquire them is really important. You have any good examples to talk about? Because I got one that’s quite interesting.
Doug Ross 1:16
Well, I can’t beat that. I mean, I would… I would hope to… I would always hope to make it interesting. But with that lead in, let’s go for it.
Glenn Suart 1:24
All right. So this is about choosing the right customer. And sometimes you have to sort of [futz] around until you… until you find the right customer. George grew up in the Swiss Alps. And after graduating from school, he became an engineer. One day, he was hiking in the mountains with his dog, and they came back covered in burrs. Now, most people would just be mad, but not George. George had an idea, and… that… one that would not go away. So for 10 years, he came up with this idea… he worked on it. And he called it the zipperless zipper. And it was a terrific idea, he thought. And he launched it with great fanfare, and of course, nobody seemed interested whatsoever. And so, he hadn’t found the right customer yet. But then a small US government agency called the National Aeronautic and Space Administration got [a hold of] George’s idea. And soon every NASA astronaut was using George’s zipperless zipper. And of course, all the astronauts are doing it so then everybody else wants it. Because once they saw it, people realized, it’s good for the astronauts, it’s good for me. Today, eight years later, after that walk in the Swiss Alps, it’s everywhere and it’s [still] named after the combination of two French words meaning velvet hooks in English. Any idea what I’m talking about?
Doug Ross 2:40
Well its funny. Last episode, you gave me a word that was part German. Yep. German for water, which I think was vasser, something like that, and oil… and oil, the Greek word for oil. And that was Vaseline. This one’s… it’s got to be Velcro.
Glenn Suart 3:07
That is correct. It is Velcro. And it’s based on the French words, velour crochet.
Doug Ross 3:14
I did not know that.
Glenn Suart 3:16
But that’s exactly right. The key thing here is you[‘ve] got to know who your customers are. And just because you have a great invention, it could be still great, but if you can’t really get the right benefits, that’s critical. [The] NASA was interested because it did something for astronauts that was very easy. And of course, Velcro is everywhere now. So from a customer acquisition point of view, the first thing you have to think about is, What benefits, again, are you selling to your customers and then who are the right customers? Then you can probably find customers. If you don’t do that, you’re just shooting in the dark, I think.
Din 3:53
You’re listening to Conversations on Startups with Doug and Glenn, thanks for joining us. Let’s get back to the show.
Doug Ross 4:02
Oh, that’s… yeah, really interesting. Thinking about the value of that first customer and drawing in other customers. Of course, there is a giant gap in your story.
Glenn Suart 4:12
Yes, there is.
Doug Ross 4:12
One giant leap for man… one small step for man, one giant leap for mankind. So the giant leap in your story is, How is it that NASA came to know about the zipperless zipper that nobody was using?
Glenn Suart 4:28
Well, to be honest, I can’t remember exactly. When I did this story it was a couple years ago. I should know the answer. But I believe there was a persistence there and trying to figure out who benefits and then just going to the places that… where they’re doing something different. You gotta find the right people, and it’s hard. It’s not easy. But there’s a customer for virtually everything. If you just look hard enough.
Doug Ross 4:53
And in this case you want a customer that sticks. No?
Glenn Suart 4:56
That was good. I liked [that one].
Doug Ross 5:00
We’re good with the puns and the… and the dad style jokes and whatnot on this podcast. But no, so many things I’m thinking about with your example. It’s also a really good example of product development, and doing that from something in nature. There’s a whole thing in the medical field, which is biomimicry. And that’s looking at how nature does these things. I’m sure we could look at a lot of examples in nature for, not quite customer acquisition, but how things are attracted to other things. So in this example, though, I love this idea of finding that kind of a… sort of a marquee customer…
Glenn Suart 5:41
That’s right.
Doug Ross 5:41
…and in that particular case. And regardless of whether we can fill in the gaps there as to how they found them…. What was the gentleman’s name was it George ?
Glenn Suart 5:50
George, yeah.
Doug Ross 5:51
Maybe George had a contact with someone at NASA, maybe he was inspired by space travel and he thought, hmmm, Must be really hard for those guys to use zippers – who knows? But this customer acquisition as a startup and getting that first customer is super important. One of the things you’re trying to overcome is the fact that you don’t have a reputation, you don’t have a brand as we’ve mentioned, before. You’re building a brand. You don’t have people that you can point to as verified users in the beginning so you can’t say oh, Hey, just call up this person – essentially a referral /[reference]. There’s a lot of things that you don’t have. But if you flip that on its side, I think you could come up with a lot of ideas for getting this first customer. So for example, this lack of having anybody who has used your product, and by the way, not just used your product, experienced your customer service, gotten to know you as a company, all this kind of stuff. If you flip that around, and you said, Well, we know that’s really important, and you’ve got to start with somebody, even if it’s one customer… I think you need to realize when you’re in that startup mode… is that you’ve got to put a lot of effort into that first customer and perhaps a lot more than you would do when you get things going and you can build some momentum. And so therefore, it may not be efficient, or efficiency that[‘s] your goal… is… with getting that first customer, not even necessarily scalability for your whole customer acquisition approach, but it’s just putting in massive effort, collaborating, maybe with this first customer, doing whatever it takes to get this first customer or first set of customers.
Glenn Suart 7:51
I think that’s exactly right. Yeah, you have to work hard. But how do you work hard? Like some people, if you can’t do the things you talked about, you can’t be the big brand guy, What can you offer? You can offer a nimbleness, you can offer savings in terms of cost or savings in terms of time to people. It’s again, the benefits of what you’re offering is… a lot of people are willing to try stuff simply because it might be inexpensive. They’ll try it for free. See how it goes – the risk free offer.
Doug Ross 8:25
Yeah, some sort of risk free offer, risk free terms, something like that. Customization. Attention, as you mentioned. So you say look, let’s say it’s a b2b situation that you’re talking about. We will come in, we will work with your people, we will help you install this, we will have someone there that’s going to monitor it, work with your folks until it is really working well for you and bringing you benefits. And you’re, in a sense, you’re probably ironing out a few things either about your product, your service, your… something with that initial customer, and so it’s a collaborative thing. And they’re willing to do it to get an advantage, because you’re giving them this attention, or you’re doing it for free, as you said… that initial customer. I think you have to be willing to go that extra mile, especially if it’s NASA!
Glenn Suart 9:19
Yeah, for sure. Especially the big guys, but most people don’t have those kinds of opportunities to go after the big ones. And sometimes those big opportunities take a long time to build a relationship with before they even [try] stuff. They’re not going to just try something because, Oh, it’s inexpensive. If you’re an astronaut, you want the thing to work. So they tested it out, I’m sure, a million times before they used it in space.
Doug Ross 9:44
We’d like to think so.
Glenn Suart 9:46
I think though, for the… most entrepreneurs, it’s trying to keep it simple. It’s important to get people to try your product or service and get the feedback necessary, so that you can then go to [similar] businesses once you’ve proven it out.
Doug Ross 10:02
Hey podcast listeners, we’re gonna take a short break now. If you’re enjoying the show, feel free to invite your friends, remember to subscribe, and if you want to help spread the word leave us a review on Apple Podcasts or your favorite podcast app. Each episode of Conversations on Startups focuses on a single topic. If you want to comment on something you’ve heard on the podcast, or suggest a topic for us to cover in a future episode, send an email to: go@todaysgreatidea.com or douglas@sparkclickgo.com. Glenn and I appreciate you and hope you find our uncut and unrehearsed stories, perspectives, and tips helpful. Speaking of helpful stuff, let’s pick up where we left off.
Doug Ross 10:48
And there’s a whole group in almost any market, there’s a subset of people that are looking for what is new, what’s different, and these sort of innovators exist almost everywhere and that’s the type of person you should look for because they will use almost anything that’s new. And of course, if it’s new and better, you’ve got a chance to build a business there. So I think you can find those people. And you should actively be… What would be the right word? Cultivating a relationship with them before you have your product or service built, you could potentially work with some of these folks, do co-development with them. So right there, you’re building in that initial customer as part of your product development, that could be cool. And even without that… that… just getting to know them, starting to embed yourself in their community, reading the media that they read, that kind of thing so that when you are ready to do your release, you’ve got the group in mind and they are waiting for you as well. [Yep.] So it doesn’t necessarily have to be complicated. Let’s say you don’t do any of that co-development on the product development side of things. You just think about, Who are these folks that like to use the new stuff? You find them, you reach out to them, you say, Hey, guys, we’re doing this release, would you like to be part of it? Maybe you hold an event for these folks and you showcase your new toy, whatever it is, in some way. You do demos, you… you mix in some of these other things that we talked about, these benefits, terms, or you give it free for these initial folks. And maybe you’re asking for something in return, maybe it’s feedback to you as an organization, maybe it’s a review, post a video, post something on Instagram, there’s a little bit of a quid pro quo when you’re doing something that’s of benefit to them.
Glenn Suart 12:50
So all this, essentially what you’ve talked about is effort. And effort has a cost. So you really, when you’re thinking this through… yes, things might be expensive, whatever, but time and energy – your customer acquisition at the beginning, will be very expensive, with the goal over time of reducing that cost. A good example would be cellular phone companies, mobile phone companies. They spend a lot of money, especially in the beginning, getting customers. They had a lot of marketing dollars, but then over time they get an extra million customers and they spent $100 million well that year to get those million customers, [then] the price [cost of acquiring a customer] drops to $100, essentially, from maybe $500 at the beginning. That’s how you have to think about this. There is a cost to customer acquisition, and you should know roughly what it is.
Doug Ross 13:47
Yeah, I think so. Yeah, that’s probably the general trend that… that you should expect. And with that time and energy – what I would add to that Glenn – would be the people… that you as the founder, or your most senior people, may need to be quite involved in this at the beginning. It’s not like you have a sales force and you have the sort of patterns built in terms of how you’re going to acquire people. You’ve got to be really involved until you get something that definitely works. And the goal over time, of course, is whatever your customer acquisition costs are, those need to be less than the money you’re bringing in. Of course, we need to get to that. But at this starting time the economics are kind of reversed, and you’re investing to get those first customers. I think about the software startup I worked… I was a co- founder with and working with in California… we spent so much time on those first customers – this was pricing their Airbnbs [yeah]- and so we would do a lot of analysis on their particular offering for these hosts, as they’re termed, and we would provide a lot of that extra sort of analysis because we were wanting to be close to the customer, we wanted them to know that we really cared about them. We wanted to learn from them and vice versa. And we working with our software in the beginning, we wanted to hear a lot from them too. How’s it working? How do you know? How could we improve it? All of those sorts of things were happening. So it was really high touch type of work at the beginning, when you’re building those foundations for your customer acquisition.
Glenn Suart 15:33
So, what’s the summary then for our listeners, in your mind?
Din 15:37
You’re listening to Conversations on Startups with Doug and Glenn. Thanks for joining us, let’s get back to the show.
Doug Ross 15:46
Well, you mentioned with your NASA story that it was really important to think about who that first customer might be. And part of that sounded like a, if you don’t already know who’s going to benefit the most, and if it doesn’t turn out to be who you thought it was at the beginning, you might just have to keep looking, maybe there’s somebody else. So I think that’s part of it, finding the right person. Someone where it [your product or service] can really benefit, because they’re [your first customer is] more likely to want to use it. So you’ve got to find the right person or type of customer – I think is sort of a theme that we had there. And then thinking of the type of customer that could attract other customers as part of it. [Yep] And this last part, we were talking about high resource intensity, maybe not a profitable customer acquisition approach at first, while you’re… you’re working on effectiveness, not efficiency at the beginning. And then eventually you want to switch over. I think those are some reasonable themes that would cut across a lot of startups.
Glenn Suart 16:49
[Yep] I think so too. Customer acquisition is extremely important, resource intensive… and you need to spend money to make money.
Doug Ross 16:58
Think of Richard Branson and doing his stunts, when he launches his new businesses. Those little stunts cost a lot of money. And he doesn’t do them every day. But he does them to mark, Hey, I’ve got a new airline, or a new mobile phone company, or a new X. Whatever, Virgin X on how he… how he launches it. PR, you know, using PR, whatever strength the… you have, to get these new customers. So yeah, very important. And then that rolls into marketing, which we’ve talked about in other episodes. So Glenn, important to every business, this customer acquisition piece, no question about it. Not easy to do, but lots of creative ways to do it in the beginning. And I think we’ve tried to talk about that a lot… in a lot of our episodes. When you’re an entrepreneur, you’ve got to find the creative approaches here. So let’s say you need to get a cape on and walk down Main Street with your brand colors at the beginning. Okay, so do it! Whatever it is that that’s gonna get you those initial customers. Anything else, Glenn on that, that you would add to wrap up customer acquisition?
Glenn Suart 18:09
I think we’ve got that right. Happy to hear back from the audience, though.
Doug Ross 18:12
Yeah, as always. And we’re very thankful for our audience. And we love to have ideas as to what to talk about or how to improve our… our show. Next time, Glenn? What are we going to talk about next time?
Glenn Suart 18:27
I was thinking that maybe a good subject would be movies or television shows about startups, and the challenges they show and the real stuff and the stuff they don’t show. But maybe there’s some inspirational movies and television shows that our listeners might like to hear about.
Doug Ross 18:48
Well, that sounds like fun. I can think of a couple and I can think of a few things that have been recommended to me in the past that I’ve not watched. So great idea. Let’s do that next time. This has been Conversations on Startups with Doug and Glenn. I’m Doug Ross.
Glenn Suart 19:05
And I’m Glenn Suart. See you next time.
Doug Ross 19:17
Conversations on Startups is a production of Glenn Suart and Douglas Ross. We hope you’re having fun listening but mostly that you take action on your business idea. For more inspiration visit our websites: todaysgreatidea.com and sparkclickgo.com. Another episode of Conversations on Startups will drop soon, or is already available to binge. Thanks for joining us, and remember to subscribe and invite your friends. See ya next time!
Transcribed by https://otter.ai