This Customer Acquisition Mistake Can Kill your Growth

Brazil flagTambém disponível em Português por Mathias Luz

This Customer Acquisition Mistake Can Kill your GrowthCan the customers you’re actively going after actually achieve success with your product or through their interactions with your company as things are today? If not, that’s a problem.

The reasons they might not achieve success range from their readiness (they don’t have the necessary data or internal processes to support our tool internally), technology requirements (we’re built on top of Salesforce and they don’t use Salesforce), or it could be that your product simply doesn’t have everything the customer would need to be successful.

This came up recently when I was talking with the founder and CEO of a SaaS startup on Clarity about their customer acquisition strategy and he said “agencies are our Ideal Customer.”

Then he told me that they currently lack the ability for an agency to do roll-up reporting across all their customer accounts, which, as he put it, is “a critical piece of functionality for agencies.”

I almost passed out at this point… but I gained my composure – and some oxygen – and was able to help him. The following is based on that conversation and I know it will help you, too…

Your Growth is tied to Their Success Potential

If you care about the customer actually being successful with your product or at least the things that go along with that success like:

  • Keeping them as a customer
  • Getting them to stay longer
  • Having them pay you more over time
  • Activating them as an advocate for you

…then don’t actively try to acquire customers that don’t have Success Potential.

Put a different way, customers that aren’t achieving their Desired Outcome through their interactions with your company tend to not stay around a long time, pay you more over time by buying add-ons or increasing consumption, and they certainly don’t advocate for you.

One of the most critical inputs into your Ideal Customer Profile is the Success Potential of the customer.

So if you just want to acquire new customers and don’t care if they’ll be successful – I’m not sure why you’d ever want to do that – then you can ignore this everything I say here.

But that seems like a bad idea… knowingly and actively seeking to acquire wrong-fit customers is just a way to burn through your total addressable market and create a bunch of negative sentiment while you’re at it. Makes zero sense.

Which means you need to….

Be Realistic about Your Capabilities

You have to be realistic about your capabilities today both as a company and within your product. You also have to know what those capabilities will (or should) be in the future. Only then can you know who is and is not a good fit today and who will be a good fit in the future from a Success Potential standpoint.

Customers that require a certain level of high-touch support will not be successful if you don’t have the resources to provide support congruent with their requirements.

Other things that might keep a customer from being a good fit right now are sales cycle length, their procurement processes, stringent data storage/privacy requirements, SLAs, in-depth consulting, etc.

At the product level, customers that require – require being the keyword here – features, functions, integrations, etc. that you don’t have simply can’t be successful with your product as it is right now. That doesn’t mean that in the future – perhaps the near future – things won’t change and they’ll be able to achieve their Desired Outcome with your product; but not right now.

I often get pushback on this from CEOs who ask “if we want to really grow, shouldn’t we stretch beyond what we can support today?” The answer is it depends on 1) whether the REQUIRED features/functions/etc. are there to ensure the customer can at least achieve their Required Outcome and 2) whether or not you’re at a place as a company where you can support customers for whom your product is not “there yet.”

Which brings us to…

The Evolution of Appropriate Experience

It’s critical to understand that features and functions aren’t the only consideration when deciding if a customer is good fit today.

You may have the features and functions that allow their Required Outcome to be met (but so do a lot of things, from Excel to a commercial competitor), but do you offer the Appropriate Experience for that customer today?

If you’re selling to innovators (in Crossing the Chasm parlance), maybe having just an API will help the customer meet both the Required Outcome and do so with an Appropriate Experience; but as you move from innovators to early adopters to early majority, the Appropriate Experience for those new customer types will evolve.

You’ll maybe have to have a dashboard to manage API consumption, tools for testing, and SDKs for easy integration by developers as you move from innovators to early adopters. And when you move beyond early adopters, you may have to build a rich UI and eventually a slick, refined UX. You’ll have to have highly visible and complete help systems, training programs, etc.

You have to know where you and your customers are on that continuum and be realistic.

Situational Awareness is Critical

One of the things people miss when implementing the Ideal Customer Framework – even though I try to be very clear about this in the instructions (I may need to refactor) – is that it’s situational.

Before you start coming up with your Ideal Customer Profile, you have to define your situation: set a timeframe, set a goal, and be realistic about what you can and can’t support in that timeframe.

So I asked the CEO of that company I was talking to how long it’ll be until this critical-but-missing feature is ready for commercial use…. he said 3 months.

Okay, so I said that in 3 months their Ideal Customer could be agencies, awesome.

But not right now.

Then I asked if for the next 90-days there was another customer type that is a better Ideal Customer for what they have available today and he said independent and in-house designers; but that while not critical, the reporting piece would be great for independent designers.

Next I asked if in-house designers are the ones that have the most Success Potential right now with their product the way it is and he said yes.

Okay, cool, but then I wanted to know if the in-house designers know they have the problem his product solves, that they’re ready to take action, they have the financial resources to take action, are they easy to find and get in front of (marketing/sales channel), and can the sales cycle be completed within the next 90 days.

He said yes to all of that – though obviously this was high-level; more in-depth work through the Ideal Customer Profile Framework is needed – but we were on the right track.

So we said that for the next 90 days they would set a goal (number of customers, amount of revenue, etc.) and focus their resources on acquiring in-house designers as their Ideal Customers, giving the product team time to create the agency-level functionality required.

Success Drives Advocacy

Only customers that are successful with your product – and through their interactions with your company – will become advocates for you; at least in a repeatable, scalable way.

Customers that are not achieving their Desired Outcome may talk about you, but not in a good way; so we want customers that are successful as they’re more likely to become advocates for you and help spread the word.

There aren’t any guarantees that a successful customer will become an advocate for you – some can’t be advocates for you, at least publicly – so if you’re looking to increase the number of advocates as your Ideal Customer situational goal, don’t try to acquire, say, government contractors who might not even be able to admit they exist, let alone than they’re doing business with you!

But for the SaaS CEO I was talking to, there is big Advocacy Potential (another input into your Ideal Customer Profile) at play in this scenario; in-house designers often know and work with designers in agencies; so success with in-house designers could be a jumping-off point into agencies.

Create Demand with your Next Ideal Customer

I told this SaaS CEO that once they were 30 days into this Ideal Customer cohort – while they’re still actively going after in-house designers and assuming everything is on track with the agency features in the product – they should start building an audience of agencies (webinars, content, retargeting, etc.) so when the feature is ready to launch, they have an engaged audience to release it to.

Remember this: just because they aren’t the Ideal Customer today, doesn’t mean you shouldn’t start preparing for when they are the Ideal Customer in the very near future.

But because they aren’t an Ideal Customer yet, don’t actively pursue them as a customer today or you’ll churn ’em and burn ’em and when you are ready for them… they won’t come back.

About Lincoln Murphy

I am a Customer Success Consultant focused on Customer Success-driven Growth. I wrote the Customer Success book which you can buy at Amazon. If you need help applying Customer Success-driven Growth principles in your company or would like me to speak at your event, please contact me. Also, connect with me on LinkedIn or follow me on Twitter or Facebook.

Comments

  1. Awesome article. I LOVE the emphasis of supporting the current customer today, while keeping an eye out for your customer tomorrow (or in 90 days more likely). It’s an important exercise to remember whose problems you solve now and get them using the software and (ideally) advocating. Thanks!!

Trackbacks

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