Acquisition First: Your product is not as important as you think
Your product is not that important. Get over it!
At least not in the early stages of your business anyway. For the vast majority of startups the plan of grinding out months, sometimes years, to make the perfect product that’s 10x of what everyone is offering and expecting it to succeed on its own, is fundamentally flawed. Sure, there are exceptions, but of course it’s the exceptions that prove the rule.
This is not another post on why the “build it and they will come” strategy will fail, but I do hope to get you to think about something else much earlier than most people do: acquisition.
What do you mean by ‘acquisition first’ and why does my product not matter ?
Due to the ever increasing simplicity of creating a new software product, I try not to spend too much time thinking about the intricacies of the actual product in the ideation stage of a new venture.
What is the basic premise of the problem I’m trying to solve with my product ? Is it technically feasible given today’s technology, and given the resources/people/experience that I have access to ? If yes, that’s great, now shelve that. What’s just as important, or perhaps even more so, at this stage is understanding how you are going to acquire your customers, and whether you can get these customers fast enough to gain the traction you need to grow before your money, patience or both run out. Many first time founders don’t even consider acquisition strategies until after the product is built, instead of building the product with an acquisition hypothesis in mind from the get go.
Whether you can get these customers fast enough to gain the traction you need to grow before your money, patience or both run out
I’ve had competitors gain significant market share over me in a short period of time, not because their product solved the problem better than my product, which they didn’t, and not because they launched earlier, which they also did not, but because they were better, faster and more efficient at acquiring users.
Spending at least as much time, if not more, on getting your acquisition right as you do on your product before you start building is crucial to getting the initial traction needed for you to build a viable business. After all, what’s a business without customers?
Building acquisition into the core of your product
One of the reasons why spending time on building out an acquisition strategy even before writing your first lines of code is because it’s bloody difficult to re-engineer your product after you’ve launched it, to retrofit it into a hole that it was never designed for. Slapping on free trials and freemium models, or re-designing your architecture to allow for easy generation and indexing of UGC/CGC (User Generated Content or Company Generated Content) can be done, but it’s difficult, messy, and will waste a lot of time in the long run.
Let’s take SEO as an acquisition channel example. Assuming this is a channel that you think will work for you, you’ll need content. Ideally your users create content while they are using your product that they are happy to share with the world (think Pinterest, Quora). Or if your users are not doing the content generation, is this something your company could do at scale? (think G2 with their company profile pages and their vs/alternative to pages, or Doordash with their localized restaurant pages). For SEO to work at scale, all of this content needs to be organised in a way that fits your customers search intent, and done so without the need for manual intervention. If these strategies and growth loops are planned out initially and baked into the product from the beginning, your footing will be a lot more secure, and you’ve just increased the chances of your startup surviving.
Freemium and free trial acquisition models are other features that should really be considered during the initial stages of your product design phase, as bolting these on later can be painful (see my post on my experience with this here).
Acquisition influencing initial choice of target market
Focusing on acquisition early on can also help to define aspects of what market/customer makes sense for you to go after. Let’s assume that your product solves a problem that’s common to companies of all sizes. Which ones do you go after? Your acquisition hypothesis will probably guide the answer to this question.
Are people searching for the problem/solution you’re working on? Is scalable UGC/CGC creation an option for you? What about free trials? If you’ve answered yes to these questions, then going after the low end of the market (low price, high volume) could be a good option for you.
If your target market isn’t searching for a solution to their problem online, or don’t know that their lives with your product could be so much easier, then a content marketing + SEO strategy will be complicated, as you would need to tap into traffic from adjacent markets and educate visitors before seeing returns from this channel.
On the other hand, if the low end of the market does not make sense for you ( i.e. you’ve answered no to all those questions, or the lower end of the market is very crowded, or you think you’d make a bigger impact in the SMB/enterprise space, or a million other reasons), then you’ve got a different equation. You need to consider if you’ve got the resources to make acquisition work at the scale required to reach that size of client. Do you have the resources/experience to build an outbound sales team that can close medium sized or enterprise accounts from the get-go? Or can you generate enough volume in the SMB space to offset the higher churn usually attributed to this segment ?
You need to consider if you’ve got the resources to make acquisition work at the scale required to reach that size of client.
Once you’ve got your head around that, you’re back to tweaking your product roadmap to ensure the feature list for your MVP is tailored to the size of your customer. Your product might be solving problem X, but exactly how it’s going to do that will depend on the size of your client and their requirements: an enterprise client might not be able to approve the purchasing of your product if it doesn’t have support for SSO, user permissions and an audit log feature. Whereas an SMB client might not care about any of that, or the fancy analytics feature you thought was absolutely crucial, as they’d be happy with a quick Google Analytics integration.
Everything really depends on where and how you intend to acquire users, or at least your initial hypothesis of where works for you given the market you are in, the resources and experience you have available, and how your target customer likes to buy solutions.
Lastly, all of this leads directly into the pricing of your product, and how that fits in with the acquisition channels that make sense for you. If you’ve determined that targeting the small business market is your best ticket, then you’re looking at a low price, high volume game, and an acquisition channel that works under those conditions. On the flip side, if enterprise clients are your primary target, then effort spent on anything other than equipping your outbound sales team with whatever they need to close those deals is probably just a distraction, and will ultimately slow your growth in those crucial early days.
Edit: Found this quote by Marc Andreesen that fits this post perfectly "Many entrepreneurs who build great products simply don’t have a good distribution strategy. Even worse is when they insist that they don’t need one, or call no distribution strategy a ‘viral marketing strategy"