Don’t Acquire Customers, Manufacture Them

customer-segmentation-funnel

by NEIL PATEL on FEBRUARY 25, 2013

What’s the easiest way to grow your company? Acquire customers,right?

I used to live by that philosophy when I first became an entrepreneur, but acquiring them can be very expensive when you are first starting out. Plus, how do you know what customers you should be acquiring?

Starting up a Google AdWords campaign or some Facebook ads may sound simple, but if you don’t know exactly what kind of customers you should be acquiring, you’ll end up losing a lot of money. And even if you do know what customers to go after, you can still lose money.

So if you are just starting out, focus your energy on manufacturing customers… not acquiring them. So how do you manufacture them?

Well, manufacturing involves 3 steps:

  1. You choose your market carefully
  2. Fulfill your promises
  3. Add your secret sauce

Here’s how you can manufacture customers:

Chose your market carefully

Who’s your target market?

Is it 18-35 year olds males, who make between $100,000 and $150,000 a year who live in Los Angeles, California? That’s a classic example of targeting… but even if you get your targeting that niche, it won’t work.

Why?

Not every 18 to 35 year old male who makes $100,000 to $150,000 a year in Los Angeles faces the same problems.

The reason this is important because if you target the wrong demographic and get feedback for product or service you are trying to create, you’ll get information that could derail your business. The last thing you want to do is create something that your ideal customer won’t want to buy.

A good example of choosing your marketing carefully is the story of howAPPfog came about. The founder Lucas, who hangs out on Hack News noticed there were people like him who had similar issues when it came to developing and deploying applications. But instead of assuming those people where in his target market, he decided to test things out.

He popped up a landing page where people could signup to his APPfog service, the thing was, the product wasn’t actually created, he just made it seem like it was so he could get an understanding of how many people wanted a service that helped them with application development and deployment.

Within 24 hours 800 people signed up for his service. And four weeks later 4000 people signed up for it.

Now that Lucas knew there was a potential demand for his solution, he decided to require them fill out a survey if they wanted to be let into a beta offering. They survey went against conventional marketing wisdom as it mainly contained open ended questions, and required 30 minutes of your time to be completed.

Naturally you would think that most people wouldn’t fill it out, but the demand for his solution was so high that he was able to get 2000 people to complete it. This also allowed him weed out all of the people who weren’t in his target market because only those with that deep pain, would have filled out such a survey.

Amazingly, out of four thousand, two thousand people filled out the survey! He had found a group of people who shared the same problem and who felt deeply about it.

And it doesn’t have to just stop with web-based products or service.Betabrand is a company who is very careful about finding the right market as they know it is the first step in manufacturing customers.

Every time they consider releasing new clothing products, they first find the customer group, and then tests clothing ideas for them.

bike pants

They tested out the concept of “bike to work pants”. In which you flip out a flag in the back pocket and fold up the cuffs and you have reflective material to improve visibility on the road. Tuck them away and you have slacks suitable for work.

Each new article of clothing is a minimal viable product. They only make a hundred or so, reach out reach out to their target market, and test the waters. And although bike to work pants blew up, the important thing to realize is that not all of their ideas succeed. To minimize losses, they create low volume runs of clothing items for new ideas, and if they do well, they continually improve the product. If it doesn’t, they dump the idea.

If you want to create a similar type of success, you need to describe who you think your passionate early adopters might be. In other words those who don’t care if your product is perfect, they just want it now.

Then go find them, hang out with them and understand them deeply. Invite 10 to be on your “customer advisory board”. When doing so realize that it’s not good enough that you are one of them. Go confirm there are more of you out there and that you actually understand their problems.

Fulfill your promises

The next step in manufacturing customers is to help solve their pain. In other words, you are going to have to deliver on what you promised. By this point you’ve already identified a group of people who have a pain or passion they feel deeply about and you are going to address that somehow.

The key with solving that pain and delivering what you promised is that your whole brand and company has to be a part of it. Every interaction you have with the customer affects the promise and therefore your ability to keep it. This includes the product… but also, marketing, sales, distribution, return process, support, and so on.

A good example of this is Zappos, they don’t just sell shoes, but they provide you with the best shoe shopping experience out there. They will randomly upgrade your shipping to next day air for free. Or if you aren’t happy with your shoes, even if you have worn them for 6 months, they’ll let you return them without any questions asked.

So how do you keep your promise like Zappos? You need to address the pain or passion, but don’t focus on the features. Concentrate on how you need to make them feel and plan to build only what provides that.

Appfog, did this by only building what was absolutely required to keep those 2000 survey applicants happy. He built 3 or 4 features on the frontend and a backend to support it. This didn’t manufacture passionate customers, but it did manufacture customers to continue to learn from.

When building your product, keep in mind that simple is better. Being all things to all people is a recipe for failure. Big companies become big companies by growing into multiple product lines and multiple models that deliver simple value propositions. Not by crating complex products that solves problems for the entire world.

What promise will you make that will positively impact the lives of your customers? What is the minimum functionality you need to provide to fulfill your promise? Figure those questions out and then run in by your customer advisory board to make sure you are on track.

What’s your secret sauce?

If you want to manufacture satisfied customers, they must realize that the promise has been made to them, but if you want passionate customers they must feel something extraordinary has been made. It might be joy, relief, or even flattery. You have to change their life in some meaningful way. Customers are passionate when they feel special,and that’s when they share their experiences.

To achieve high growth you have to evoke this passion. You can fake passion for a while by inducing a desired behavior, but it’s not sustainable. A social media program offering a steep discount or an award for sharing might get people to “like” your Facebook page, or tell all of their friends, but the moment the program goes away so does the buzz.

Think about the products you use and the ones you love. What’s different about your behavior with products you love? What is it about the product or company that puts you over the top?

Here are some ways businesses go about creating passionate behavior:

  • Donating money to charity or adopting a social cause –Toms does this by donating a pair of shoes for every one that is bought.
  • Providing extraordinary customer service – Zappos and Nordstrom are two companies known for providing excellent customer service. For example, Nordstrom has a lifetime return policy.
  • Create usable products – people love Basecamp not because it has the most features, but because it’s really easy to use.
  • Appeal to beliefs – American Apparel only sells made in American clothing as some people feel that wearing clothing made in other countries is hurting the American economy.
  • Going above and beyond the call of duty; in other words, something works or the experience was better than all expectations

Creating passion doesn’t have to be a direct relation of your product or service. At KISSmetrics and Crazy Egg, we create evoke passion through our blog. That’s our secret sauce. People love our content so much because we educate our ideal customer, even if that means telling them about our competitor’s product.

Brian Clark of Copyblogger calls this creating your minimum viable audience.

You have a minimal viable audience when:

  • You’re receiving enough feedback from comments, emails, social networks, and social media news sites in order to adapt and evolve your content to better serve the audience.
  • You’re growing your audience organically thanks to social media sharing by existing audience members and earned media.
  • You’re gaining enough insight into what the audience needs to solve their problems or satisfy their desires beyond the free education you’re providing.

Building an audience first is like creating your very own market segment.

You’re creating a group of similar people drawn together by your compelling and value-driven content. Over time, you develop a deep understanding of these people, and from that knowledge, will very likely gain insights into products they desire.

You should also use your secret sauce with your customer advisory board. If they are passionate about it, it’s likely that others will as well.

Conclusion

There is nothing wrong with trying to acquire customers, but when you are starting out you should focus on manufacturing them. It’s too expensive and risky for a new company to focus on buying customers when you could be manufacturing them for pennies on the dollar.

Plus, I’ve found it to be the best way to compete with the big guys. You’ll never have more money than Google or Microsoft, but if you take lean entrepreneur principles and apply them to your business, it will give you a leg up on the competition.

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