Startups: Retention vs. Acquisition
Retention is required early and often, acquisition needs to happen when you’ve figured out what works
Recently, I’ve been thinking a lot about the one of the main issues that startups face: getting people to care. These days, everyone’s inundated with attempts to get their attention that it’s extremely tough for a new product or service offering to compete. At Apteo, we’re working on addressing this issue with our first product, Milton, in a few ways, including content generation, outreach and awareness on social platforms, video (soon), and through a variety of other channels and strategies.
As we expend more effort in building awareness, we’ve had to identify how we track what’s working. In order to do that, we have to identify what we actually care about from the perspective of key metrics and key performance indicators (KPIs). As a startup, we’re hungry for lots of users who use our product all day, every day. But we don’t get that for free. We need to put in the time and effort that it takes for people to trust us and get value from what we’re doing.
That means that we need to make the right decisions when it comes to what problems we solve, what we build, and how and where we market it. As we make these decisions, the question of whether we should focus on getting new users or engaging our existing users frequently arises.
As I’ve spoken with investors, entrepreneurs, and our own team, the answer to this is crystal clear: focus on retention. Said differently, it’s undeniably clear that we need to ensure that the users we’ve already reached keep coming back to our site before we start spending a lot of effort in building out a system to get new users.
This, of course, makes complete sense. If we try to acquire users before we’ve done a good job of creating something that they want (or we fail to effectively show them that the thing we’ve built is something that they do indeed want), then every user that sees our site will essentially be a lost user. They’ll be likely to churn very quickly, and it’ll be extremely difficult to get them back, even if we do build something that they want.
Ensuring that we engage users that we’ve already seen means that when we do turn on the acquisition machine, new users that come to our site (or app, or service, or whatever it may be down the line), will continue to use our products, which will increase the likelihood that they’ll convert into paid customers (or, if we go a different route, that they’ll become active and engaged users that can be monetized down the line).
Given this fairly obvious, yet important insight, our job now becomes figuring out how to engage users as actively as we can. Clearly there are some ways to do this that will actually hurt, instead of help, in the long run (things like spam and gimmicks to trick a user to come back to our site). What we actually want to do is figure out the right thing to build that solves a major pain in a user’s workflow such that they can’t live without our solution. And we need to figure out how to communicate that to them effectively, such that they know what they’re getting when they use our site.
With respect to Milton, we’re doing this in a couple of different ways. First, we’re trying to talk to as many users as we can so that we can learn as much as we can about our users. Knowing how they think, feel, work, and handle their financial lives will help us build something that they really can benefit from. And we’re focusing on doing this as quickly as possible. Speed has been one of our biggest advantages. We believe in pushing out new products or features that may not be fully polished, but that are testable and have some value, all in the shortest amount of time possible.
There are other things we do to figure out what may keep users engaged. First off, the most obvious thing to do is to look at what has worked for others in the past and attempt to replicate their methods and techniques within our own ecosystem. Secondly, we can be observant with services that attempt to reach out to us, and attempt to understand what works well and what doesn’t, what emails we click on and what we mark as spam, what videos we watch for a minute and what we skip over. Taking a look at how we’re marketed to in our own lives has been a tactic we’ve used to understand what may work for our own startup. Finally, we’ve embraced the mindset of “let’s push it out there and see what works.” It’s very easy for founders to start taking philosophical approaches about what they think will work and what they think won’t, but it’s rare to be right about something ahead of time, and users’ response to new approaches can often be illuminating and surprising. So we push things out there and let the data tell us how to proceed.
Startups aren’t easy, and creating an engaged and growing user base is one of the largest challenges that direct-to-consumer startups will ever face. In fact, you could certainly make the case that it’s the most important challenge for these types of startups to overcome. You could even extend this to all businesses — figuring out how to grow your customer base is one of the main hurdles to success. It’s important to realize that early on and to work towards solving it.