Today you’re going to learn 4 different customer acquisition strategies and mindsets to capture valuable market share.
You’ll learn how the best entrepreneurs and marketers think differently about customer acquisition.
Customer Acquisition Video Training:
Customer Acquisition Strategy #1
When I first got started in business, I thought that I needed to turn a profit on every single transaction.
You take the customer to an offer, a sales page, introduce them to upsells, and close a profitable sale on day 1.
I did this and I definitely grew a customer base this way.
But something kind of bad happened as I was approaching customer acquisition with that level 1 mentality.
I ran into a very hard ceiling.
We eventually weren’t able to acquire a significant number of new customers.
Only a small percentage of the marketplace is willing to pay higher prices on the very first transaction.
So let’s give an example.
Let’s say it costs you $50 to acquire a new customer.
And that’s after your ad costs, cost of goods sold, delivery, etc. It takes $50 to break even.
If you bring in $100 on every new transaction, that’s 2-for-1 on your money.
But what percentage of the marketplace is willing to spend $100 at a time?
Not a lot of them.
There’s always going to be a cap at that point if you follow this approach.
So if you’re struggling to acquire new customers, the profit-first mentality may be your first customer acquisition problem.
Level 2 Customer Acquisition Mindset: Break Even
The next approach is when you just try to break even on the very first transaction with each customer.
In our example, the cost to acquire a customer is $50.
Instead of going for the $100 sale, you get $50 and break even on the first transaction.
You get a $0 profit.
Now, this is a fascinating strategy.
Because you’re actually going to acquire a significantly higher number of customers.
Now, if there’s no profit on the first transaction, where is the profit made?
Well, the profit is all made on the back end.
How To Make This Approach Profitable
You offer them more products and services through your email marketing, through your retargeting, etc.
And remember that a customer who already pulled out their wallet for you is much more likely to buy again than a cold lead.
In my business, when I stopped trying to make a profit on the first transaction, we grew our business by 400%.
Sounds kind of contradictory?
- We built trust
- We delivered on that 1st transaction,
- It was a lower barrier of entry
- Then we made all our profit in the back end
This level 2 mindset is when you are not thinking about profit.
You don’t have to take a lot of risk.
It’s simply about breaking even on the front end.
And acquiring more customers this way.
Because you can acquire more customers this is a much easier way to scale a business.
#3 Losing Money On The 1st Sale
Level 3 thinking of customer acquisition is going in the red on the very first transaction with a new customer.
This is so much more powerful than even level 2.
Now why is this so powerful?
Why is going in the red a great scaling strategy?
You need your back end dialed in.
In our example, the cost of acquiring a customer is $50.
We were just trying to make $50 on our very first transaction to get $0 profit or loss.
It’s better than level 1 but you’re still going to run into a ceiling at a certain point in terms of customer acquisition.
If you only sell the product for $10 on the very first transaction, what percentage of the market can you acquire?
For $10, the barrier to entry for entering your brand is extremely low.
The friction point to become a customer is minimal.
This is a massive customer acquisition strategy.
The Goal Is To Acquire More Customers
This is how you pick up a massive percentage of the marketplace because you’re building these relationships.
$10 is nothing for the vast majority of consumers out there.
You make the profit on the back end through additional products, services, and offers that you make.
So again, you’re not trying to make the profit on the first transaction.
You make it on having a high lifetime value of each customer.
The profits come: 30, 60, 90, or even 180 days later.
So the best direct response marketers are going in the red on the very first transaction.
They don’t worry about that profit in the very beginning.
There is such a low barrier to entry to acquire new customers in the very beginning.
Once you know your numbers and dial in your back-end…
Customers will buy more products from you on their 2nd and 3rd transactions.
Watch your business truly transform through level 3 aggression.
Level #4 – Never Get Profitable
So a level 4 customer acquisition strategy is truly fascinating.
And this is a strategy a lot of startups use.
As a matter of fact, Instagram used this level-4 strategy before they were acquired by Facebook.
You’ll see a lot of SaaS companies use this approach.
So with a level 4 mindset, you’re still focusing on aggressive customer growth and user acquisition.
But interestingly enough, you’re not so worried about this whole breakeven or turn a profit thing.
As a matter of fact, you might not ever think about it.
All you’re focusing on is user growth.
Now, what if we’re not making a profit?
How does this work?
You actually build a business that’s made to be acquired by a larger company.
Why is this so powerful?
Build Your Userbase To Get Acquired
When somebody invests in a unicorn type company, they’re going for 10x – 30x on their investment.
Now, if you could get a 10x or 30x on all your basic customer acquisitions, you’d turn an amazing profit after the company is sold.
It’s definitely possible to make a 2x or 7x with the right profits on the back end.
But in terms of just building to get acquired…
Those multiples are so much larger than what you would get with a basic paid media acquisition strategy.
It’s a larger mindset and a bigger play that you’re making in terms of building to sell to another company.
Of course with this mindset, you’re going to use some form of business leverage to grow.
You will probably be funded.
- Angel funded
- VC funded
- Some sort of outside investment.
That funding is the reason why you’re not really worried about making a profit.
You only care about that user growth.
You’re attractive to the larger company that wants to come in and acquire your business.
Those larger multiples are where massive profitability can come into play.
It’s riskier, but this is where the big boys play.
This is where the billion-dollar companies are hanging out in terms asset growth and things like that.
4 Different Customer Acquisition Mindsets
And those are the 4 different mindsets for customer acquisition:
- Profit on the 1st sale
- Break even
- Go into the red
- Never profit & sell the business
So these different mindsets can lead to different levels of wealth.
Each level you go up is playing a bigger game.
You have much more potential in terms of making generational wealth and truly impacting the marketplace as well.
So think about that as you’re going through your business and as you acquire customers going forward.
My name is Steve Nixon. Thank you for reading this article.
If you enjoyed it, check out our Strategy YouTube channel with more business education and investment topics.
In particular, we have an article on Facebook ads as 1 customer acquisition strategy.
Have a great day.