At the end of the day, there’s only two ways to acquire new customers.
Social, advertising, blogging, affiliates, direct mail, word-of-mouth, user invites…
All these channels fit into one of two acquisition strategies. Both can work beautifully but you need to know what game you’re in. Each requires different team structures and different strategies. Unless you pick one deliberately and have the strategy to back it, you won’t get anywhere at all.
Here they are.
The Organic Growth Engine
This is the fabled word-of-mouth we all say we do a great job at. Honestly, only a few of us build companies that truly grow from word-of mouth.
A lot of companies that reach impressive growth off of this engine proudly proclaim that they have a marketing budget of $0.
And they should be proud, it’s not easy to accelerate growth purely from word-of-mouth.
So how do you build an organic growth engine?
Double down on product and service.
Your product can’t just be good, it needs to be amazing. And your customer service can’t just solve problems, they need to provide a legendary level of service. Think of Zappos. If you go down this road, the only thing that matters is how happy you make your customers. You’ll need to dedicate a significant amount of your resources to product and customer support. You’ll need process for how to improve your product methodically every single month. You’ll need to ruthlessly perfect every detail.
You won’t achieve break-out organic growth by accident. You need to build a first-class team and product.
I should correct myself. Every once in awhile, a product becomes a market hit for seemingly no reason. It’s not even a great product but for whatever reason, people go nuts over it. Flappy Bird is a great example. You can’t manufacture this type of success, it’s like hitting the lottery. It might happen but you definitely don’t want to depend on it. And most of us will never experience it.
What about those viral invite systems? Don’t they count as organic growth?
Viral social networks do fit in this category. They take a great product then optimize their network effects and invite systems to spread their product as fast as possible. WhatsApp, Snapchat, Facebook, and all the other social apps that have spread like wildfire. But even with these crazy success stories, they all start with a great product that people love.
But you can’t hack virality.
Especially with the popularity of growth hacking these days, every junior marketer thinks they can build a quick invite system and follow in the footsteps of LinkedIn, Skype, or Dropbox.
Bolting an invite system to a lack-luster app isn’t going to get you anywhere. Your product needs to be good enough that it will spread even without an optimized invite system. Build an amazing product that people already want to share. Then make it even easier for them to do so.
So viral marketing engines aren’t an acquisition strategy. They merely take what’s already happening (an organic growth engine through word-of-mouth) and accelerate it by making the word-of-mouth even easier.
Even “viral” marketing campaigns don’t drive organic growth. These are in the paid engine of growth. It’s just a cheaper way to get more eyeballs on your marketing campaign. But you still have to pay for the campaign in the first place. Either out-right or with labor by having your team work on it.
The organic growth engine sounds amazing right?
After all, you’re getting customers for free. What’s not to like?
Well there’s one major downside.
You’re not in control. Your growth is entirely as the mercy of how much your customers talk about you. For many business, there isn’t a straight-forward way accelerate your acquisition at a predictable pace. Consumer tech products can usually optimize invite systems and activation rates (the number of people that start using a core feature of the product). For B2B or other products that depend heavily on word-of-mouth, you can’t systemically optimize your acquisition. You’ll need to keep going back to your product, improving it, and hoping word-of-mouth accelerates.
The only way to accelerate growth predictably is to start building a second paid growth engine to acquire customers.
Keep these points in mind if you go down the organic growth road:
- You won’t be able to predict or reliably accelerate growth from an organic growth engine.
- Commit as many resources as you can to product and customer service.
- Your entire team needs to be unbelievably annal with the smallest of details. The customer experiences needs to be perfected. Iterate endlessly on every piece customer touchpoint.
- Viral growth engines harness organic growth that’s already happening. You can’t bolt an invite system to a sub-par product and expect any results.
The Paid Growth Engine
This includes everything you currently spend on sales and marketing.
Did you just hire an field sales rep to find and close $100,000 deals? Paid growth. Building a blog to attract traffic and free trials? Paid growth. Television, Facebook, or billboard ads? Paid again.
“Organic” or inbound online marketing isn’t really an organic engine. It’s just a paid engine that you don’t pay directly for. Instead of dropping cash on ads of some kind, you hire people to write content, build systems, and attract customers with their labor. Your marketing budget is now their salaries.
Paid engines may be easier to understand (just go buy customers!) but that doesn’t make them any easier to execute.
Many paid channels simply won’t work for your target market. For whatever reason, you market won’t respond in that channel.
And the worst part is that the good channels are different for every business/market. Affiliates might work beautifully for one business but a slight change in the market can turn them into a total flop.
Let’s look at an easy example.
Targeting teenagers? The hippest social network might be a great source of growth for you. Going after senior Fortune 500 executives in their 50’s? Forget the social nonsense, try business conferences, networking, and outbound sales.
Differences get a lot more subtle than this. Hosting companies typically do really well with affiliate programs. Freelancers constantly recommend hosting for their clients so if you give them a affiliate deal and make them look good with a reliable product, it’s a great source of growth. Take the exact same affiliate program , apply it to some other SaaS app, and it completely fails.
Even worse, there’s always a learning curve with each channel.
The first time you jump into a new channel, you’re not going to do well. You not only need to learn the fundamentals of that channel, you also need to learn how your market responds to it.
This takes time and money to work through.
The only way to hack this learning curve is to find someone with experience in the channel AND your market. You can’t just get by with experience in a particular channel since that channel may not work out for you. But if you can only choose one (market or channel), find someone with experience in your market. Find the channel experts after you’ve already validated the channel and know it’ll produce profitable customers consistently.
You need to run through as many channels as you can. Test each of them thoroughly enough to make sure that any failures are the result of a poor channel and not poor execution.
With deep pockets, this isn’t a big deal. Minimize your bets so you can repeatedly test different combos until you find one that produces plenty of customers. Once you’ve got one channel going, build out dedicated sales and marketing teams to optimize and scale your paid engine.
But for startups with a limited run-way, getting through the learning curve on each channel can really suck. If you don’t move fast enough, you won’t find the winning channel before you’re out of cash. Remember that the best way to hack this process is to find someone with experience in your target market. They’ll be able to get you headed in the right direction.
Once you do find a great channel to grow from, it’s not all gumdrops and roses. Every channel has diminishing returns. You can only acquire so much traffic, buy so many ads, or run so many campaigns at a given time. Deeper pockets don’t solve this problem. Each channel has a cap on growth no matter how much cash you have at the ready.
So as soon as you find a great channel to build from, start experimenting with others to keep you growing after you hit the cap on the first.
Keep these points in mind if you go down the paid engine road:
- It’s a margin game, make sure you can afford what you’re buying customers at.
- Every channel works differently for each market. Just because a channel works in one market doesn’t mean it will work in yours.
- Be wary of the learning curve in each channel. Make sure poor channel performance is from a bad fit with your market instead of poor execution.
- To short-cut the learning curve, find someone with experience in your target market (experience with a particular channel isn’t good enough).
- Great channels only get you so far, you’ll hit diminishing returns sooner or later. Find new channels of growth before you need them.
Building Both Growth Engines
You can build both engines. But you can’t excel at both.
This comes down to priorities. Pure and simple.
You won’t be able to build a world-class paid acquisition team while building a world-class product. Not only will you push your team in too many directions which prevents world-class execution, you’ll face plenty of decisions that force you to make trade-offs between each.
How hard do you push your sales and conversions? Do you use every spammy tactic out there to drive conversions at all costs and minimize your cost per acquisition? Or do you take it easy and focus on product? You’ll need to draw the line somewhere. You won’t be able to position yourself as the “amazing company that bends over backwards to delight customers” while spamming them upsell offers.
Think of it as a continuum. At one end of the spectrum, you have a 100% paid engine business. Your product might suck or it’s just average. But you’re able to achieve great growth rates because your have your marketing/sales machine DIALED. You’re squeezing every penny out of your acquisition process. Plenty of companies go this route.
Or you could build a 100% organic engine and focus entirely on the quality of your product. You won’t even have a marketing team. And if you dominate your industry, you’ll be able to brag about how you had a $0 marketing budget the whole time.
Either option can work well but you won’t be able to do both at the same time.
You can also blend them, maybe 70% organic and 30% paid. Build a great product that’s a clear priority for your team but you also do a few core marketing projects exceptionally well. You’re not building a paid engine at all costs, it’s there to support and accelerate an already thriving organic engine.
Apple is a blend. Obviously, the vast majority of their resources go into their products. But they also do a great job at a few key marketing tasks. Not only do their product announcements capture the attention of the entire tech industry, they’ve run great television ads like Get a Mac (I’m a Mac), Think Different (Crazy Ones), or even their newer Intention ad. They’ve made their organic growth engine the priority while spending at least a little time doing an excellent job at a few key channels.
Whichever route you decide to go, make sure to make it clear which one is your priority. When it comes time to make sacrifices, which engine gets the goods? Are you going to double down on product or hire that ace growth hacker that will drive conversions at all costs?
The Growth Blend that I Recommend
When you first get traction for your business or are trying to accelerate an established business, make sure that you have some organic growth. This doesn’t need to be industry-shattering growth but you should still see a bit of growth if you take your foot off the marketing peddle. This way you know that you have a solid product and that people want to talk about it.
Marketing gets so much easier when you build from a foundation of a great product. If your product sucks, it’s still possible to grow but your margin of error is razor thin. So start with a great product as your foundation.
Then build out marketing/sales teams to test channels, find the one’s that’ll scale, and optimize your acquisition strategy.
This would break down to a 80/20% blend. Product is the priority with marketing accelerating growth at a few key leverage points.
This is the most consistent path to growth that I’ve seen. Start by building a great product then build a focused machine to funnel customers into it as fast as you can. It’s also more fun since you’re growing a product people love, helping people solve problems, and don’t need to resort to spammy strategies.
This isn’t the only path. Pick the one that fits the vision of your company the best.
I have a tight budget for my startup, https://movesavers.co.uk/ I have spent the past week, looking at LinkedIn profiles for a growth strategist to no avail. I stumbled upon your post on GH, I have learned a lot from this article. I now know where to focus my energy on growth, and using the right folks. One question, is using one of my competitors PPC agency which has done amazingly well for them a good idea since they know all the channels and techniques for the market?
Lars Lofgren says
I’d consider that a conflict of interest. And if they’re an upstanding agency, they should turn you down if you’re a direct competitor of one of their clients.
Remember the learning goes both ways.