high achievers reveal how they do it

the StartupSmart awardS 2014

Six online strategies

for customer acquisition

2Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

Introduction

When it comes to growing your startup’s user base there is no one-size-fits-all approach.

The strategy and considerations vary according to what market you’re in, your budget and ultimately the profile of your prospective clients.

For example, there’s no point spending hours developing a social media presence when your target audience is not there. What we can do though is learn from those who are getting it right and extrapolate their success to our situation.

But it can get confusing.

While shareable content is all the rage, there are some people who have thrown doubt on its sustainability. According to marketing consultant Mark Schaefer, two factors impact the economics of content marketing – the amount of content available and the amount of content consumed (supply and demand).

“Of course the volume of free content is exploding at a ridiculous rate. Depending on what study you read, the amount of available web-based content (the supply) is doubling every nine to 24 months. Unimaginable, really.

“However, our ability to consume that content (the demand) is finite. There are only so many hours in a day and even if we consume content while we eat, work and drive, there is a theoretical and inviolable limit to consumption, which we are now approaching.

“This intersection of finite content consumption and rising content availability will create a tremor I call ‘The Content Shock’. In a situation where content supply is exponentially exploding while content demand is flat, we would predict that individuals, companies, and brands would have to ‘pay’ consumers more and more just to get them to see the same amount of content. And that is exactly what is happening.”

It comes down to this: figuring out how to acquire customers is often as hard as figuring out what your product should be exactly.

The StartupSmart Awards 2014 celebrated the best achievements in Australia’s startup sector. A plethora of inspiring new businesses entered categories such as the Best Startup, the Best Startup Idea, the Fastest Growing Startup and more.

It was not just the winners, but the entrants also all showed sophisticated approaches to acquiring new customers.

In this StartupSmart eBook, we look at the successful online strategies that have enabled Australia’s top startups that entered the awards to expand their customer base.

It’s worth noting that no startup relies on a single strategy. There are many ways to grow your customer base, but you’ll find motivating ideas that could be right for your business.

Bronwen Clune, Editor, StartupSmart

3Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

Digital advertising is still an effective way to grow a startup. While it does involve market spend, it can deliver results through the ability to highly target the users you are going after.

There are a number of different types of digital advertising but the broad categories are display advertising and search advertising.

While the success of one over the other depends entirely on the startup (a startup that offers something completely new is not going to do well with search, for example), the thing that sets online advertising apart from the others is that it is a measured advertising mechanism. This means that you have a basis on which to improve and experiment with your message, with the goal of reducing your customer acquisition cost.

It’s rarely the case that startups rely on paid advertising alone, with small budgets and the desire for more organic forms of growth part of the startup ethos. However, a lot of entries in the StartupSmart Awards highlighted paid advertising as an effective part of their strategy.

Tripcover, which covers car rental excess, is just one example. This is an interesting case, because ‘car insurance’ is a highly searched and competitive term. Tripcover spend $1000 a month (much less than traditional advertising would cost) and also rely on social media and of course simple word-of-mouth.

When using paid digital advertising it’s important to work out your acquisition cost and continually work to improve it. You can expect it to be high in the beginning, but you should aim for improvement every week, until you find your limitation.

Digital advertising1

Paws for Life CEO Mike Frizell, COO Philipp Liver and CTO James Edwards

4Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

Another great user of advertising was pet food delivery business Paws for Life, which has a very data-driven approach:

“Through our subscription service model customers can opt in to an automatically recurring delivery of pet supplies. This makes individual customers highly valuable as they commit to buy from Paws for Life on a long-term basis.

“An incredibly data-driven company, we track how customers interact with Paws for Life over their lifetime and are constantly monitoring the numbers for patterns or change. Through this analytical, growth-hacking approach, we are able to remain nimble and spend marketing dollars accordingly.

“Paws for Life uses a combination of search engine marketing, email marketing, display advertising, community engagement with competitions, content creation and social media. We also have strategic partnerships and promotions with like-minded brands.

“Another important source of acquisition is referrals, as people share our service with their friends. We facilitate word-of-mouth by delighting our customers with our value, service and efficiency and encourage them to review us on our site.”

turn your ideas into opportunitiesAs a smart business owner you know that sound strategy underpins success. As partners with Start Up Smart, we invite you to explore options for reaching your goals in a complimentary two hour Q&A session with a DFK Business Advisor.

To book please contact our Executive Officer, Liz Binet call 1300 DFK ANZ email lbinet@dfkanz.com

Definition of ‘Acquisition Cost’

1. Acquisition costs recognise more realistic costs on a company’s financial statements. The acquisition cost of property and equipment recognises any discounts or additional costs that the company will experience.

2. Customer acquisition costs are also important for companies to measure, as it aids in planning future capital allocations to things like marketing budgets and sales discounts. The company should also look at customer loyalty and whether the company will be able to retain customers easily.

Source: Investopedia

5Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

This is a big one for startups for three reasons: (1) it’s free (2) it means you’re getting something right! (3) people trust what their friends recommend to them over anything else.

The definition of word-of-mouth (WOM) is oral or written recommendation by a satisfied customer to the prospective customers of a good or service.

To generate WOM one has to deliver something well and truly beyond what a customer was expecting – or else why would they recommend you to their friends?

This requires one fundamental thing that is key to WOM: having a brilliant product.

Personal finance app Pocketbook, awarded our Best New Startup Award, has essentially grown through amazing WOM, in conjunction with press coverage.

Here is what they said about their approach:

“We grew from 1000 users to 60,000 (60x) from January 1, 2013. We did this on no marketing spending and primarily on the back of generating media stories, having users refer each other (WOM) and app store coverage.

“Based on the merit of the product itself, we now have our own Whirlpool thread and we’ve been heavily featured by Apple. Our philosophy is that a great product solving a significant problem is easier to do marketing for. So we do significant homework to get our product right. Listening to users every single day via our feedback system and doing rounds of face-to-face interviews.”

Our philosophy is that a great product solving a significant problem is easier to do marketing for.

Word-of-mouth2

“

Pocketbook founders Alvin Singh and Bosco Tan

6Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

The last word should go to our Best Startup Award winner Vinomofo, which has this one pinned down:

“We are big believers that marketing starts with product. Get your product right, and look after the customers you do have, and they will tell their friends about you. That’s been our core strategy, and most of our growth has come from word-of-mouth. We’ve built our database of nearly 250,000 largely organically, off those principles.

Get your product right, and look after the customers you do have, and they will tell their friends about you.

“Complementing that has been a content-driven SEO strategy to give us a valid and genuine search presence, and a PR strategy positioned around consumer engagement and industry representation. We’ve only invested in sustainable, profitable marketing, with foundations based on real engagement.”

Top Tips:Here’s an interesting thought from Entrepreneur.com:

Don’t promise it in your ads: Although it’s tempting to promise the thing you’re counting on to trigger word-of-mouth, these promises will only eliminate the possibility of your customers becoming your ambassadors. Why would a customer repeat what you say about yourself in your ads? You must allow your customers to deliver the good news. Don’t rob your ambassadors of their moment in the sun.

“

Vinomofo Founders Justin Dry and Andre Eikmeier

7Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

As your business evolves, so does your need for strategic business advice.

If you know it’s time to explore your options for support and advice, we’d love to talk.

As partners of Start Up Smart, we’d like to offer you a complimentary two hour Q&A session with a DFK Business Advisor.

Wherever you’re going, there will always be challenges. We help you solve them.

To book your Q&A session please contact our Executive Officer, Liz Binet on 1300 DFK ANZ or lbinet@dfkanz.com

If you would like further information you can visit www.dfkanz.com

determined to reach the top?

8Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

Building up a following on social media is not a quick-win strategy; it takes time, consistency and persistence. The benefits are huge though in that you create an engaging brand if you get it right.

The big pitfall to avoid here is being overly “salesy” in your posts. Remember this is “social” media and people don’t want their private spaces invaded with marketing pitches. Keep your content relative to the medium.

Here are some StartupSmart entrants who successfully used social media to acquire customers.

Furniture and lifestyle online store LivingStyles promotes its products and services via social media. This is how they do it:

“Through Facebook we ask customers to refer friends to join our free membership. We send a daily newsletter to those members and we have built up our registered membership to over 260,000 in 18 months. Many of our new customers come from word-of-mouth recommendations and we have an excellent personal customer service.

“We are proud to say we have over 7000 likes on Facebook. LivingStyles launched in October 2012. As of January 2014, our website visits numbered 195,000; that includes 100,000 unique visitors. LivingStyles has also employed SEO tactics to optimise its website and we have registered with online business directories.”

The makers of Quad Lock, a device that allows you to attach your iPhone to your bike, also use social media as their main tool of choice for customer acquisition:

“Most sales have been achieved through our own online store, acquiring many thousands of customers through social media and inbound marketing techniques.

“We have now shipped product to 100 countries and over 4000 cities. Quad Lock Facebook page has 100,000 followers and is growing fast. Email campaigns and the addition of new products throughout the year have also played a huge part in the company’s growth as we have had great success in selling our new products to existing customers.

“We now have a very strong email database of over 20,000 customers. Excellent industry and customer reviews have also strengthened sales and increased traffic to the site. We have over 900 verified customer reviews on www.quadlockcase.com with an average rating of 4.5 stars.”

Social media3

9Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

Rewarding your customers for referring friends is a common startup tactic to acquire new users. This can be as simple as giving them access – many social media startups pioneered this strategy by only giving access to users invited by their friends. This has the advantage of populating a service with people’s social circles, which is a stronger way of making them stay. People go where there friends go.

An extremely interesting example of a unique and very successful “rewards” strategy is Australian cyber security site Bugcrowd, who literally ask hackers to break customer’s sites and get rewarded with bounties (real money!).

Here’s what Bugcrowd has to say about their customer acquisition strategy:

“Bugcrowd is a two-sided marketplace that requires both the acquisition and participation of testers, as well as paying companies who desire an effective method of discovering vulnerabilities.

“In the initial stages we focused on attracting the crowd of testers by running introductory bounties with smaller businesses and pro-bono bounties for worthwhile charities like the Cancer Council and Movember.

“Our initial crowd size allowed us to then market to bigger businesses which we use as social evidence of the effectiveness of our innovative business model. Before long we closed instantly recognisable names like Poli payments, Coles, and Google.

“We will draw even more customers by providing a range of services that cater to companies at all stages. We have the social proof and people now know this works.

“By providing an open-source responsible disclosure policy, we are able to attract startups introducing themselves to security services. A responsible disclosure policy provides transparent rules to hackers who discover security vulnerabilities in a company app, and acts as low-hanging fruit that naturally leads to the adoption of a bug bounty program.

“Our product plans then progress from limited bounty management to fully-managed solutions for companies interested in benefitting from bug bounties without any of the hassles.

“As of Feb 17, 2014, we’ve run 61 bug bounty programs, acquired 7000 security testers, and have received over 8900 bug submissions via our Crowdcontrol platform.

We’ve proven bug bounties as a successful model, and are quickly becoming recognised as the premier firm in crowdsourced security.

“We understand the importance of testers to our business model, which is why tester support and community engagement are priorities for our sustainable growth. In addition to our @bugcrowd twitter, we manage a @bugcrowdops to answer tester questions and celebrate their wins!

“We’ve recently hired Marisa Fagan, who helped start and run Facebook’s bug bounty program. She’ll be engaging the tester community, and help us increase Bugcrowd awareness through events and security engagement.

Customer rewards/referral programs

4

“

10Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

“Our blog stays active with tester content, how-to tutorials, Bugcrowd features, and general InfoSec thoughts. Because bug bounties are a rising trend in security, we’re working to maintain ourselves as thought leaders in this space through white papers, press, and articles.

By becoming the recognised leader in bug bounties, we plan on being the next big startup out of Sydney!”

Another great example, with a more traditional rewards program is Infinity NBN Co. Here is how they go about it:

“As a startup retail services provider of NBN Co, we utilise their weekly, monthly and quarterly database to identify new, existing and soon-to-be-ready for service residences around Australia. We run a direct marketing campaign with a number of ancillary promotional reward and recognition programs to support our new brand and acceptance of our offer.

“We offer existing customers a ‘Refer and Save’ program which encourages and rewards them for referring our company to their friends, work colleagues and neighbours. We integrate our social media initiatives by encouraging our customers to enter our competitions and we try to educate our Facebook followers with regular, relevant information about their services.

“We work closely with inner city real estate agents to ensure our product and service is offered to new residents in their complexes and we constantly review our existing customer database to find ways to improve services, offer discounts or recommend they consider product changes to better suit their needs.

“We actively participate in any trade fairs in new estates where our services are most in demand and we will also go first to market by door knocking residents the day they are able to be connected to the new NBN. We take great pride in being first to market and backing up our offer with the best quality customer service in the industry.”

“

11Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

While social media is now a proven method to acquire customers, at the end of the day people need content to share – and it has to be shareable.

As a content marketer, you need to be able to generate an unending stream of interesting, unique, and valuable content ideas. That can be much harder than it sounds.

Here are some impressive stats on why companies should invest in content marketing:

» 61% of consumers say they feel better about a company that delivers custom content, they are also more likely to buy from that company. (Custom Content Council);

» LinkedIn generates more leads for B2B companies than Facebook, Twitter or blogs individually;

» Interesting content is a top three reason people follow brands on social media (Content+);

» 90% of consumers find custom content useful and 78% believe that organisations providing custom content are interested in building good relationships with them (TMG Custom Media);

» Blogs give websites 434% more indexed pages and 97% more indexed links (Content+);

» B2B companies with blogs generate 67% more leads per month on average than non-blogging firms (Social Media B2B).

Here’s how Australian online furniture and lifestyle company Temple & Webster is using content marketing:

“Temple & Webster’s member database has seen substantial growth over the past 12 months of over 1000%, now with over 600,000 registered members who are highly engaged and passionate about home and decor.

“Our goal is to attract the right type of person to Temple & Webster to ensure a high lifetime value and engagement with our daily email (OTR, CTR) site (UVs, PVs) and content.”

Shareable content/content marketing

5

12Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

It’s an old but necessary customer acquisition tool: search engine optimisation (SEO).

Startup business Smart SEO had an advantage, being an SEO consultant themselves, but they’ve used it to build up their business:

“Being an online marketing agency, we have utilised our SEO and social media skills internally, targeting a higher-end market which has seen Smart SEO acquire accounts from larger Australian companies and brands. Alongside this, other offline marketing strategies have been performed, being cinema and radio, which have proved quite effective.”

Search engine optimisation6

Case StudyHow CreditorWatch built a customer acquisition strategy to suit its situation and resources.

“CreditorWatch aims to provide B2B businesses with an end-to-end, innovative and easy to use online credit management solutions that is affordable to all businesses. The majority of our customers pay just $29 per month.

“For the first two years of its life, CreditorWatch focused only on acquiring SMEs as customers. We felt that the corporate end of the market was sewn up by our two big established competitors who seemingly had no interest in SMEs.

“What we soon discovered was that the data, in the form of payment defaults, that our SME customers were registering was considered extremely valuable by the corporates and only through CreditorWatch could they access it.

“We also realised that a big portion of the corporate market (the lower end in terms of size) was extremely price sensitive and often ignored from a customer service standpoint by the larger incumbents. As a result in early 2013 we began targeting corporate customers as well as continuing with our SME acquisition strategy.”

13Six online StrategieS for cuStomer acquiSition

----------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------

Here are some key points of the CreditorWatch Customer acquisition strategy:

Corporate aCquisition:

We’d never been able to justify hiring expensive salespeople to sell $29 monthly subscriptions. However, the corporate strategy changed all that. We hired employees with industry experience and went about chasing corporate customers who were looking for new data to better manage their debtors, more affordable reports and a little bit of love and customer service. At the start of 2013 corporate customer made up less than 5% of revenue, by the end of the year they accounted for nearly 30%.

Continued sMe aCquisition:

In 2012 we ran a big marketing campaign above and below the line, nationwide, to gain customers and disseminate our brand. This budget was not available again in 2013, so we were forced to rely upon more affordable means.

seo and uX/ui:

Throughout the last 12 months we have been continually optimising our site to improve our SEO and rankings. We have created a business profile page for every business in Australia and routinely rank above other business listing sites like Yellow Pages. This delivers over 400,000 visitors to our sites a month and has meant we were forced to optimise our site for conversions. Search engines accounted for about 60% of our new users.

Free trials:

Our free trial offering further enticed visitors to give CreditorWatch a try, even if they had only stumbled across the site by accident. From here we were able to demonstrate the features and benefits of an account and convert them into paying customers.

one-oFF reports:

Similarly, we offer one-off credit, or company, reports at a discount compared to other providers. We then have an internal customer relations team who make contact with these one-off customers and provide them with information about our monthly accounts.

one-oFF reports:

We started 2013 with close to 10,000 users and we worked hard to use them as our spruikers. Through various promotions and incentives we encouraged our users to push CreditorWatch to their networks, rewarding both our user and the new customer for joining CreditorWatch. By the end of 2013 we had close to 24,000 users.

turn your ideas into opportunitiesAs a smart business owner you know that sound strategy underpins success. As partners with Start Up Smart, we invite you to explore options for reaching your goals in a complimentary two hour Q&A session with a DFK Business Advisor.

To book please contact our Executive Officer, Liz Binet call 1300 DFK ANZ email lbinet@dfkanz.com