3 Unique Lessons on Customer Acquisition for Start-Ups

by Dora Wang on Nov 3, 2016 8:00:00 AM

customer acquisitionStart-ups are already facing an uphill climb to compete with the bigger and badder companies in their industries. Many don’t have the finances, staff, or connections to beat out successful existing companies in their target area and lose customers to respected brands that have been on the market much longer. The sad truth is that start-ups are almost fated to fail.

According to Fortune:

  • 9 out of 10, or 90%, of start-ups fail

  • The number one reason for start-up failure, cited by 42% of start-ups polled in a survey, was the lack of a market need for their product

  • 19% of start-ups said failure was due to superior competition

  • 17% cited a lack of an effective business model

These are pretty grim statistics, but there is hope between the lines of the numbers. Many SMBs and even large existing businesses have seen the issue with competition and the lack of a market need and have decided to take the road less travelled. Rather than try to outcompete other companies, some businesses have decided to define their own new, untapped market space. Competition is lessened or even becomes irrelevant as companies find new, innovative ways to find customers in a new avenue. Start-ups should follow suit if they want to avoid the most common pitfalls.

 

Where to Find New Customers and Market Share

One of the first major things a start-up should do is to precisely define their customer. You can’t just chase any customer that may or may not be willing to throw you money. Instead, find a need in the market where there are customers waiting to be helped.

A famous business idea called the Blue Ocean Strategy says that these areas come from the boundaries of the competitors. Meaning, take a look at the competitors and what they’re offering: is there a niche on the border of those products or services that has yet to be met, that is untapped? Think about expanding the potential clientele, scope of service, or even industry of what’s already available. This is where you’ll find a new market share, where you can make the rules, and where you can find success.

It’s helpful to take a look at existing companies that have created their own market space, where they found it, and how they did it.

 

Nike: Not Just Your Athletes’ Athletic Wear

Back when Nike started, it was an apparel company marketed exclusively to marathon runners and other serious athletes. Many other competitors in the athletic wear market were doing the same thing — and, if you are talking about Reebok, doing it more profitably.

To beat out the competition, Nike looked toward an entirely new market and customer base, one that was underserved by existing athletic companies. Rather than sell only to the “serious” athletes, Nike started its famous “Just Do It” campaign in the 1980s to cater to everyday people who wanted to or needed to exercise. By doing so, they found massive success, jumping from $800 million in sales to $9.2 billion and being the face of what to wear for people who can run a marathon, sure, but more importantly, the people who want to try to run a mile or two just to stay healthy.

It became fashion-forward and aspirational, as people wore the swoosh and slogan to motivate themselves regardless of their fitness levels.  

 

Nintendo: Imagining the New Video Gamer

Nintendo was already a force in the video game market, but it was facing overwhelming competition from console companies like X-Box and PlayStation. Rather than try to compete with bigger, better products by adding features and technologies, Nintendo looked to the fringes of the market to find an entirely new customer base for video games with the Wii and most recently the Switch.

The innovative control system attracted people that had been lost by traditional video game consoles and controls, such as the elderly and young kids. They ditched the idea that a true video gamer was a teenage boy sitting alone on a couch and made video games a fun, lively group activity for young adults who grew up playing classic games like Mario Kart.

 

Cirque du Soleil: Reinventing Who Goes to the Circus

Back when Cirque du Soleil began in 1984, the market potential for the traditional Barnum & Bailey’s– and Ringling Brothersstyle circus was waning. Rather than struggle to try to capture this existing market on the downfall, a group of street performers started up a company that would reinvent the market space for circus goers.

Rather than kids and lions and elephants, Cirque du Soleil took the circus idea and made it more upscale, attracting corporate clients and wealthy adults who were willing to pay several times more the standard price of a circus ticket to see something new and sophisticated.

The results are unprecedented. Cirque du Soleil has seen profits in 20 years reaching higher than it took traditional circuses to see in more than 100 years.

 

Miller Lite: Creating the “Manly” Light Beer Customer

MillerCoors, formerly the Miller Brewing Company, created and effectively dominated the light beer market with its “Great Taste, Less Filling” campaign for Miller Lite. There was little to no market share for a light beer at the time because it was deemed not masculine and poor tasting.

However, this didn’t stop MillerCoors from building its own market for its new product. By putting the manliest men on its advertising campaign and using a slogan that denied the rumors of a bad taste, the brewer was able to pull together a customer base for a product that had previously never existed. And all you have to do is take one look at a beer cooler to see just how well that worked for light beer.

Start-ups can take a lot of lessons from these four companies that created their own customer base. The lack of competition and a hungry market of consumers can help save start-ups from the scary rates of failure.

 

Editor’s Note: This post was originally published in August 2015 and has been updated for freshness, accuracy, and comprehensiveness. 

 

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This post was written by Dora Wang

Dora is an employee engagement researcher for TINYpulse and managing editor of TINYinstitute. Having grown up in Texas, she is now firmly settled in Seattle, where she spends her free time reading comic books, wrangling her three cats, and (of course) rooting for the Seahawks.

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