SMALL BUSINESS GROWTH   |   10 minute read

4 Customer acquisition fundamentals that every successful SME knows

The following is a guest post by Visa from ReferralCandy, which builds customizable customer referral programs for SMEs. Business consulting legend Peter Drucker famously said:

“Because the purpose of business is to create a customer, the business enterprise has two–and only two–basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”

So how do you do marketing? What do successful businesses know and do that others don't? How do you create and acquire customers?

Let's go through the essentials.

1. Start with a 'hero product' that solves a real need in the marketplace.

This is the single most important thing every business needs to do, yet it's also the most criminally under-discussed. A lot of entrepreneurs and SMEs think they need better business skills- how to build a network, how to blog, how to run a mailing list, etc. And it's true, they do.

But what's even more critical is having the deep domain expertise you'd need to be able to solve a problem better than anybody else.

Example 1: Bonobos started with a great pair of pants.


Fred R. Conrad/The New York Times: Andy Dunn, a co-founder of Bonobos Fred R. Conrad/The New York Times: Andy Dunn, a co-founder of Bonobos

In 'Want to build a brand? Make one great product', Bonobos founder Andy Dunn describes how his business was built around a really good pair of pants that took his partner years to develop. They then sold their product directly, in person.

By making what people wanted, Dunn and team were able to get lots of word-of-mouth and unsolicited PR, which in turn helped them sell more pants, get investments and hire high-caliber individuals to reinforce the company.

Example 2: Mellow 'built a better mouse trap' with their smart kitchen robot.


Screen Shot 2014-10-16 at 1.15.53 pm Mellow is a robot that syncs with your phone to cook for you even when you're away.

We interviewed the people behind Mellow, who raised over $200,000 in preorders within a month of launching. According to the founder, Ze Pinto Ferreira, "building a better mouse trap is the path to acquiring more customers: If you significantly improve quality of life in a basic area of our lives, people will happily sign up."

He goes on to say "the success we’ve had has been driven by the generosity of our friends and the dumb luck of making something people connect with." Ze is selling himself short here. Luck may have been involved, but it's hardly dumb- Ze spent years developing the expertise and focus that he did.

Example 3: People who saw the Opena Case prototype wanted to pay for it, on the spot.


Opena Case is a simple yet elegant and effective bottle-opener in a phone case. Opena Case is a simple yet elegant and effective bottle-opener in a phone case.

In an interview with Entrepreneur Journeys, Founder Chris Peters described how some of his friends offered him hundreds of dollars to buy his not-for-sale prototype of his product when they saw him open a bottle with his phone.

To Do:

  • Just starting out? Make sure you develop a deep expertise in the field you want to work in. What's your unique selling point? Who exactly is your customer? Who are your competitors, and how are you better than them? Seek feedback from friends, and look for exceptional reactions- people who offer you money, who make referrals for you. That's a good sign.
  • Already running a business? You should still set aside time to innovate your offering. How can you better solve the problem that you're solving? How can you get better at what you do?

2. See the 'big picture' - put together a framework that aggregates all of your customer acquisition efforts.

Having a good product is just the first step. Next, you need to get your product in front of potential customers. (This is harder than it sounds.)

Tricks and tactics are never enough by themselves. While it's good to experiment with various tactics, the more important thing is that any tactic used falls within a broader framework.

One of the most popular frameworks is Dave McClure's Pirate Metrics:


Pirate Metrics, courtesy of Dave McClure Pirate Metrics, courtesy of Dave McClure

Pirate Metrics, courtesy of Dave McClure

Pirate Metrics were designed primarily for thinking about user acquisition in tech startups, but Ze from Mellow uses it to think about selling his hardware products, too. The metrics are highly adaptable.

There are 5 broad parts to Pirate Metrics:

  1. Acquisition is when your customers first encounter your store. Perhaps they've just learnt about you or your product.
  2. Activation is when they enter your funnel, perhaps signing up for your newsletter. They need to have a good experience.
  3. Retention is when they visit your site again.
  4. Referral is when they like your brand, your product and the experience so much that they tell their friends about it.
  5. Revenue is when they make a purchase.

None of these are set in stone. You need to establish your own criteria for what each stage means for your business, and you need to decide what you want to measure.

Here is an example of what such a framework might look like in spreadsheet form:


Courtesy of Dave McClure Courtesy of Dave McClure

Still courtesy of Dave McClure.

To Do:

  • If you're just starting out: Plot out the journey of your customer. How will she find out about your product? When will she visit your site? Why will she buy it? How will she decide to buy it? Deconstruct this as thoroughly as possible so that you can evaluate each touchpoint independently.
  • If you're already running a business: You have more to work with! Do you have an existing framework for thinking about customer acquisition? If you do, start stress-testing it. Which parts are useful, which parts aren't? If you had to reduce the number of things you were measuring, what would you prioritize?

3: Whatever gets measured gets managed - use tools that quantify the effects of your marketing efforts.

In the beginning, you might keep track of everything in your head, or on the back of a napkin. This is generally a bad idea. The sooner you properly externalize all of this data the better.

Having the numbers in front of you allows you to properly examine what's working and what isn't, so that you can make better decisions about your marketing efforts.


Google Analytics - the most popular analytics service on Earth Google Analytics - the most popular analytics service on Earth

Customer acquisition tools can be broadly divided into 4 categories:

  1. Search Engine Optimization
  2. Conversion Rate Optimization (CRO)
  3. Email Marketing
  4. Analytics

(What about social media tools? While you can use social media tools to do customer acquisition, we're leaving them out of this list because they're not nearly as specialized as the above. You can definitely acquire customers through social media, but it depends tremendously on the nature of your business.)

Here are some of our favorite customer acquisition tools:

1: Google Analytics is the most widely used website statistics service in the world, by a dramatic margin. It's a simple, easy and straightforward way to see how much traffic you get over time, where your traffic is coming from, see your bounce rates (how many people are leaving), see how long visitors are spending on site..

2: MailChimp is a great way to send out email newsletters regularly to your customers. This might seem stodgy in the age of social media, but email marketing has time and time again proven itself to be highly effective at encouraging sales. The campaigns are easy to run, and it's free until you cross certain use-case thresholds (number of subscribers, etc).

3: MozBar is a SEO tool by Moz that allows you to access important SEO metrics at a glance as you surf the web. It highlights keywords and links, and it can be switched on or off with a single click. Paying attention to these metrics will help you improve your search rankings and drive up your traffic.

4: ReferralCandy (disclosure: that's us!) allows you to run and manage customer referral campaigns for your business. The ReferralCandy app sends out referral campaign emails on your behalf, with customized branding and incentives as you see fit. All the data you need is presented on the dashboard, allowing you to measure the effectiveness of your referral programs.

5: Unbounce helps you build, publish and A/B test landing pages without IT. It's a simple, elegant and efficient tool for improving the conversion rates of your landing pages without having to go through endless developmental cycles.

For a more comprehensive list of customer acquisition tools, check out 20 Customer Acquisition Tools To Power Up Your Business.

To Do:

  • Collect some data in all the Customer Acquisition Channels (CAC) that make sense for you. You definitely want to measure your site traffic and blog traffic, and you should almost definitely be running email campaigns. If you're not sure how to choose your initial conditions, I recommend reading CoElevate's 5 Steps To Choose Your Customer Acquisition Channel first.
  • Use the data to reprioritize your marketing efforts. As an SME, you have limited resources. This means that you won't be able to do everything perfectly- instead, you're going to have to do some things really well at the expense of other things. You may find that your product is really popular on Pinterest, but not so much on Tumblr. You may find that your customers on Facebook are really happy, but nobody really talks about you on Twitter. Allow the data to influence your decisions about what to focus on.

4: Execute projects with clear objectives, actionables, target metrics, and deadlines.

It's easy to fall in love with all the numbers that the tools from #3 generate, and spend all your time putting them into spreadsheets.

The difficult and important thing to do, however, is to use that data (and you'll never have enough of it!) to make reasonable projections about what you ought to do next.

Asana is a popular and effective tool for project management.

To Do:

  • Pick a project management tool. Don't spend too long on this one. I recommend using Asana or Trello to keep track of your work tasks, especially if you have a team or are planning on growing one.
  • Set clear objectives, actionables, target metrics and deadlines for your projects. What exactly do you want to achieve, and why? Do you want more pageviews? More Twitter followers? How exactly does all of it translate into sales for your business? (Remember to set a deadline for the task of "setting deadlines for your project", otherwise you'll spend all your time thinking about how to run your business instead of actually running your business!)
  • Carefully report what you've learnt from every project. What worked, what didn't? What were you right about, what were you wrong about? Each project should help you better understand your customers and how you ought to approach them.

Ultimately, customer acquisition is all about…the customer.

It's conceptually a simple idea, but it's notoriously hard to execute. That's because it requires us to get out of our own heads as marketers, and focusing entirely on the experience of the customer.

All the frameworks, all the tools, all the projects are simply ways to help you better address your customers' needs:

  1. You build great products to solve your customers' problems better.
  2. You use frameworks to think more systematically about the customer journey.
  3. You use tools to help you better serve the customer.
  4. You plan projects to help you do bigger, better things for the customer that wouldn't happen by chance.

Once you've done all the reading, and you have some semblance of all of those elements in place, a great heuristic to return to over and over again is: How can I help the customer?

See also:

5 website personalization tools to help you generate more sales

3 lessons startups can learn from Alibaba

5 avenues to source products for your business