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Why Most Startups FAIL
at acquiring new customers
(and how you can succeed)
Saar Gur
Stanford Graduate School of Business
...
Me
Saar Gur
saar@crv.com
Twitter: @saarsaar
Current: General Partner at CRV
Past: VP of Customer Acquisition for one of th...
Why Most Startups FAIL at Acquiring New Customers

#1 Reason: BAD PRODUCT
#2 Reason: Don’t really understand
who the customer is and their needs
#3 Reason: Clueless on the amount of
effort it takes to acquire new customers

Expectations

Reality

Example: A sophistic...
#4: Make Bad Spending Decisions
#5: Investing Time/Money in Sub-Optimal Channels
Topics for Today
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Developing a great product
Understanding your customer
Expectation setting
Making good...
How much can you spend to acquire
a new customer?
Customer Lifetime Value (CLV or LTV) analysis helps
set an upper bound on what you can spend to acquire
new customers prof...
Why does LTV set an upper bound on CA?

IMPORTANT
Drill This Into Your Head

When the cost to acquire customers is greater...
Even startups with limited or
no customer data should still
think about LTV before making
marketing and sales decisions
Lifetime Value of a Customer (LTV) =
net present value of the profit stream of a
customer
Key things to think about:
- Ave...
LTV is about profitability (not revenue!) per customer
Advertising as a business model is hard
without scale, & LTVs tend ...
Customer Life: Often much longer than expected
Vendors at
tourist
attractions

Dentist

Average Job in US=4.6 Yrs

Custome...
Why does this matter?
Every Penny Counts in LTV because:
(1) If your LTV is “low” it is hard to invest
in paid acquisition...
Many Channels Don’t Scale Linearly
This is the front page of Yahoo. 392 Million Visitors/Month. Note the banner.
Many Channels Don’t Scale Linearly
Example: Y! front page 300X250 banner ad has a minimum commitment of
$250,000/day at a ...
CAC Payback: Not All LTVs are Equal
Example: Two customers generating $150 in revenues
YEAR:
Customer A
Customer B
Margin ...
Last Thoughts on LTV
- LTV is about Gross Profit per customer, not Revenue per
customer: Many websites out there are wrong...
Setting a Sales/Marketing Strategy
(pre-channel work)
Need some understanding of:
• The Customer Profile
–
–

•

The Decis...
A Single CA Channel Can Work!
Easier when:
- Low price point.
- Consumer has intent.
- Brand is not important.
- An impuls...
Considered Purchases
Example: Buying the search term “best electric car” on Google won’t
work to sell a new startup vehicl...
Overview of Channels
• Every customer acquisition channel has positive and negative attributes.
• Most channels eventually...
Overview of Channels
• LTV and CAC will differ by channel and often within a channel.
– Example: Buyers for “Diamond Ring”...
Channel Attributes
Attribute

Example

Ability to Target
(Intent? Females over 30? U.S. only?)

Are you spear fishing or c...
Channel Attributes Continued
Attribute

Example

Measurability (tracking)

TV, Radio, Print are hard to
measure

Scalabili...
A Few Channels to Acquire Customers
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Radio
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Television
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Print
•
Billboards and Out-Of-Ho...
Some Channels Won’t Work. Period.
Social/Viral:
- People don’t want to talk
about or share certain things
with friends (e....
Channel Example: Google PPC
Channel Example: Google PPC
Merits:
• Highly targeted: Great LTV performance since you are finding
intenders (know they ha...
Pay Per Install
Pay Per Install
Merits:
• If your product is a mobile app, this can be a fantastic and highly scalable
channel
• Great tar...
Channel Example: Social Media
Channel Example: Social Media
Merits:
• Low cost, high impact when it works
• Potential to go non-linear and become a phen...
PR

Twitter co-founder's startup:
Accept credit cards with your
iPhone
By Rachel Metz
Associated Press
POSTED: 01/01/2010S...
PR
Merits:
• Can get very targeted and/or very broad exposure for zero or little cost.

Considerations:
• Stories often do...
Channel Example: Incentivized WOM
Channel Example: Incentivized WOM
Merits:
• Trusted referrals from friends have extraordinarily high conversion rates
• Be...
Channel Example: Sales
Can you afford to hire salespeople?

Inside Sales
LTV>$2,250
Assumptions:
- Sales person will cost ...
Channel Example: Sales
Merits:
• Very effective IF your unit economics support it
Considerations:
• Many consumer product ...
For another day… 
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Radio
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Television
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Print
•
Billboards and Out-Of-Home
•
Direct Mail/...
Some Channels Won’t Work. Period.
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Some Channels Won’t Work. Period.
Social/Viral:
- People don’t want to talk
about or share certain things
with friends (e.g., being in
debt)

Search:
- Can’t buy keywords if there is
no intent (e.g., selling a new
service that has no existing
demand and does not fit a
category)

But you can market to them in plenty of other channels
Target a Demographic Directly in Print

Use Infomercials for Demand Generation

Published in: Technology, Business
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  • Very Interesting
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  • Nice !! Download 100 % Free Ebooks, PPts, Study Notes, Novels, etc @ https://www.ThesisScientist.com
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  • Nice tutorial! I should also check that one https://www.cleveroad.com/blog/how-to-improve-user-engagement-and-acquisition-in-2017 It was published by Cleveroad Inc. in 2017
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  • Kati Herranen , Business Intelligence/Market Research Manager at University of London Massive thumbs up. And this information is not just for start ups, any company should (know and) consider this stuff. However, I would say about customer profiling that this is more complicated than just listing socio-economic or similar info (and there is big difference depending on what is being sold!).
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