Customer Acquisition and Retention

Acquiring paying customers is a challenge for most companies and especially for early-stage companies. The brand isn’t well known, and resources don’t allow them do marketing the way they want. Customers that early companies do acquire are precious.

A few weeks ago, I chatted with two smart founders who have an interesting software product. Their platform helps consumers resolve a particular issue efficiently. The issue is something most people will experience only once in their lifetime, if ever. The downside to not resolving the issue is high, so the software creates value for consumers. Once the issue is resolved for a customer, though, they become an ex-customer and no longer contribute to revenue. This creates a challenge: the founders must constantly attract new customers. Their high marketing spend reflects this. This company will likely be successful, but it will be harder to scale than, say, a company that attracts and retains customers who pay monthly for many years.

Acquisition and retention of customers are important issues for founders to think about. Not all business models support ongoing customer payments for years, and that’s okay. Whatever business model a founder chooses, though, they should have a strategy to acquire customers in a cost-effective way and, if possible with that model, retain them.