This is the final excerpt from The Startup Owner's Manual, a recently published step-by-step guide for building companies.
Every startup needs to get, keep and grow customers. We outlined customer acquisition in "How to 'Get' Customers" and how to retain them in "How a Lean Startup Can Keep Customers." Now, we look at how a startup can expand its customer base.
There are two ways to grow existing customers : Get current customers to spend more money, or encourage them to send more customers to the company. Both are detailed below.
1. Get Current Customers to Spend More
To start, make sure your customers are satisfied with the product, performance and price. Then you try to sell them more product, upgrade their service or extend their contracts. These activities are important for the long-term, so test at least a few during customer validation. Some of the basic approaches to grow customers include:
- Cross-selling programs. Encourage buyers of a product to buy adjacent products. Get buyers of toner cartridges, for example, to buy paper, pencils and other office products.
- Up-selling programs. Promote the purchase of higher-end products. For example, persuade customers to buy cases of toner rather than single cartridges, or copiers, fax machines and other office machines along with the toner.
- Next-selling programs. These concentrate on the next order: Can you encourage the customer to sign a long-term toner contract? Or can you sell him or her envelopes to put the copies in? Can you become the primary office-products supplier? These basic customer growth strategies work in consumer goods as well as business-to-business.
- Unbundling. If a product is complex or multi-featured, split it into several products, each sold separately, which sometimes grows revenue. This works well in many tech, software, and industrial product areas.
Beyond these basic approaches, you'll also want to develop a hypothesis about how your company will grow its customers, and test those ideas with--who else?--customers.
Some simple "grow" techniques to consider for your web or mobile startup:
- On every "thank you" or confirmation page, suggest multiple items the customer may also find interesting, and ideally provide an incentive for purchasing.
- Prominently feature new items, special offers and discounts for increasing the order size. Integrate with the checkout process for high visibility.
- If you're an e-commerce company, include "recommendation" engines: "If you bought X, you’ll love Y." Also include special offers and discounts in each shipment.
- Email customers to introduce new and different products or "add-on" features to buy.
- Promote special sales or offers on new products or services the customer hasn’t bought.
2. Get Customers to Send More Customers to the Company
Customer referrals are the most honest source of new business. There are lots of different viral marketing tools and tactics that can help you get customers to refer other customers to your company.
Viral marketing stimulates referrals of customers from other happy customers. Here are the six most powerful viral marketing techniques to consider:
- Encourage customers to "like" the product on Facebook.
- Offer customers discounts or free trial offers to share with friends.
- Enable customers to email their friends using their address books to create mailing lists.
- Create contests and incentives to encourage Tweeting, "liking" and other viral activities.
- Highlight social-networking action buttons on the site to make viral efforts easy.
- Encourage bloggers to write about the product, and reward them for doing so.
Published March 1, The Startup Owner's Manual is in its third printing. The book will be available later this year in an interactive version and multiple languages. Steve Blank also maintains a blog at steveblank.com.