Obvious, but forgotten: the best way to lower customer acquisition costs

From How Customer Success Meaningfully Reduces Cost Of Customer Acquisition by Tomasz Tunguz:

When discussing customer success for SaaS startups, the conversation focuses mostly on retaining customers and reducing churn. These are two fantastic benefits with meaningful return-on-investment. But great customer success organizations can meaningfully impact another critical part of the customer lifecycle, customer acquisition, by catalyzing evangelists to refer new customers.

This growth effect compounds over time if the customer success team can continue to find and cultivate evangelists. The swelling ranks of promoters will become an increasingly meaningful and cost-effective growth engine for the business.

The challenge with this idea lies in accounting for referral properly. There are no water-tight mechanisms for attributing the source of a particular customer. Some companies ask evangelists to use links or codes to track referrals. Customer signup surveys asking new customers how they heard about the product is another effective mechanism. But these mechanisms won’t capture the entirety of referrals. Additionally, the rewards from such an effort may take a while to materialize. As a result, patience is important when building and managing a CS team.

Notes:
(1) Tomasz focuses on customer success. However, customer satisfaction may be more the result of a great core product than the actions of your customer success team. How could you measure that?
(2) Perhaps, at the end of the day, everything comes down to product-market fit. With it, customer churn and customer acquisition costs will be low. Without it, everything is uphill.
(3) Cf. Marc Andreessen on How you know when you’ve hit product-market fit, Albert Wenger on Customer reactions tell you when there’s product-market fit, and Mariya Yao on Is your product liked or loved? Here’s how to tell.

One thought on “Obvious, but forgotten: the best way to lower customer acquisition costs

  1. Pingback: What to focus on to build a great subscription business | A Founder's Notebook

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