Acquiring users is part of the startup journey. After all, if you don't have users, what's the use of having your product?
In a recent panel called "Need for Speed: Fueling Your Startup Growth," hosted at the RocketSpace technology campus in San Francisco, three startup veterans with advanced experience in startup growth discussed the ins and outs of how their organizations approach user acquisition. These marketplace experts included:
- Lynn Perkins, Founder and CEO, UrbanSitter
- Brian Han, Head of User Acquisition, HotelTonight
- Rob Willey, VP Marketing, TaskRabbit
The talk lasted just under an hour and was full of highly potent marketing and growth advice. Here are five key takeaways that any founder can benefit from:
1. Aim for profitable growth
Kicking off the panel, Han points out that venture capitalists, after seeing the public markets tank in 2015, are taking a more conservative approach to investments and want potential investments to showcase more profit-focused strategies. He says 2016 has surfaced a shift in startup growth mentality towards "attaining profitable growth" rather than "growth at any cost."
HotelTonight, he says, has shifted towards learning how to best acquire new users and retain their existing users, rather than simply burning cash every month.
2. Understand that great user acquisition is about arbitrage
In the hotel business, HotelTonight's biggest competitors are Priceline and Expedia, which own most of the recognizable online travel agencies, such as Kayak and Hotwire, Han says. "We are competing against these companies that have market caps in the very healthy billions," he says."We cannot outspend these people, but we can definitely outsmart them."
Han says that's where arbitrage comes in. HotelTonight focuses solely on the "limited booking window" market and tries to win at search, specifically. With the app, customers can only book a hotel room seven days in advance and up to five nights at a time. He says they've become good at messaging their pricing advantage for the limited booking window market and have built custom systems for automated search keyword bidding, so that they can win in that space. Understand and go after arbitrage opportunities, Han suggests.
3. Don't sleep on referrals
There are many channels for acquiring new users, but all three panelists agree that referrals are potentially the most valuable if push comes to shove. Willey called referrals "one of the best, easiest, cheapest acquisition tools" in the business, and Han says that the "inherent credibility" that comes with one user referring another results, for HotelTonight, in a much higher lifetime value for users acquired in that manner. For UrbanSitters, too, Perkins says that users who come in through a referral code are "worth twice as much" as users who come in by other methods. Willey adds that if you're offering a good service, your referrals should be a healthy indicator that you're on the right track.
4. Focus on organic growth until you have product/market fit
It can be tempting to want to rush out to try your hand at AdWords, Facebook Ads, and all of the other paid acquisition options out there, to see if you can acquire engaged users. Once you hear the stories of marketers like Han, Willey, and Perkins, it can seem like you're downright immature if you're not implementing these highly technical, very data-driven processes. The panelists warn, though, that putting big funds behind user acquisition will be for naught if you don't have product/market fit.
Willey puts it bluntly: "The only focus of any early business should be driving organic traffic. That means you have some product/market fit. If you can't do that, then you should be focusing on product, not acquisition." Meanwhile, also understand retention, he says — make sure the users you've organically acquired are staying around and taking more actions within your product. Then and only then are you ready for more sophisticated acquisition work.
For more insights into fueling your startup's growth, watch the entirety of the "Need for Speed" panel below: