Are You Making Customer Acquisition Harder for Your Startup by Targeting the Wrong Buyers?
Too many entrepreneurs waste time selling to people who are never going to buy.
Humans are creatures of habit. This is true even if those habits aren’t the most efficient ways of doing things. For example, I go to the grocery store every week even though I know ordering groceries online would be quicker and more efficient. But I’ve been going to the grocery store weekly for 20+ years. It’s so ingrained in my routine that the mental energy to change my habit feels more expensive than the time-cost of simply going to the store (even though it obviously isn’t).
While being creatures of habit tends to make life easier for most people (albeit less efficient), it also creates an enormous problem for entrepreneurs. Specifically, people’s tendency to do what they’ve always done makes acquiring customers very difficult for startups, particularly in the earliest days of building a company. Simply put, people don’t like changing their behaviors, so if they’re already comfortable using a competitor’s product, convincing them to change will be very difficult.
If you want to get customers for your new startup, you need to understand the best strategy for overcoming this type of consumer inertia.
A founder and his new CRM
I recently encountered an interesting example of a founder struggling with consumer inertia while meeting with an entrepreneur building a new CRM product.
“I don’t understand why our strategy isn’t working better,” the founder groaned as we began our meeting. “We can’t get anyone to switch.”
“What do you mean by getting people to switch?” I asked. “Who are you trying to sell to?”
“We bought a list of 100,000 targeted contacts at companies using Salesforce,” he explained. “They’re our ideal customers because they clearly already understand the importance of having a CRM. But Salesforce is so old and clunky that at least some of them should want to upgrade. And even though we’ve been emailing that list and getting some conversations, we can’t get anyone to switch away from Salesforce. It doesn’t make sense because we’re so much better than Salesforce. And cheaper, too! Salesforce is like an ultra-expensive dinosaur.”
“Salesforce is definitely an expensive dinosaur,” I agreed with a laugh. “But you’re missing the point. Salesforce may be old and pricey, but it’s well-established, which means getting companies to switch isn’t as easy as showing them a better CRM. The cost of switching a CRM is enormous. How are you going to convince potential customers that switching to your product is worth the huge amounts of time, effort, and mental energy it’ll require?”
“But we have a process to help them migrate all their data from Salesforce,” the founder insisted. “We can even set up replacement integrations for their favorite services using our API. They literally don’t have to do anything different to switch but log into our website instead of the Salesforce website.”
I shook my head. This entrepreneur didn’t get it. “Switching costs aren’t about porting data or creating new integrations,” I told him. “More than anything, switching costs are about comfort. Getting people to switch to a new product when they’re already using something requires changing people’s behaviors, and behaviors are incredibly hard to change.”
“Then how do I make sales?” the founder asked. “How do I get customers?”
“You’re targeting the wrong people,” I told him. “Rather than focus on getting people to switch, start by finding people who aren’t already committed to one choice or another.”
“And how do I find those people?” he asked.
“Simple,” I replied. “Look for people actively changing their behaviors.”
Mixing up UPS and Amazon
To explain what type of person this founder needed to be looking for, I began telling the story of my daughter’s recent response to an Amazon delivery. I was sitting in my office at the back of our house when my 8-year-old daughter called out, “Daddy! UPS is here!”
“UPS is here?” I said to myself. “That’s strange. I don’t remember ordering anything that would be delivered by UPS.”
Curious to know what kind of package we’d received, I went to the front door where I found my daughter already holding a box containing Amazon’s instantly recognizable smile logo.
“That’s not a UPS package,” I said. “That’s from Amazon.”
“Same thing,” my daughter replied.
“It is not the same thing,” I thought as I opened the box. But I was fascinated by her confusion. From her perspective, as someone who’s never lived in a world without Amazon packages being delivered every week but who never chooses what’s in them, Amazon and UPS probably do look very similar.
Mixing up FedEx and UPS
A few hours later, I was talking with my mom. Because it was still on my mind, I shared the story of my daughter confusing Amazon and UPS. But rather than laugh at the cute story, my mom shook her head with a knowing sense of understanding.
“I remember something similar happening with you,” she chuckled. “When you were younger, I remember FedEx delivering a package and you called it UPS. It was so strange to me because UPS had been around forever, and, in my mind, FedEX was just a young, upstart company that was completely different. Strange how perceptions change over time.”
My mom was exactly right. It is strange how perceptions change over time. But it’s also a critical phenomenon to understand if you want to get good at customer acquisition for startups.
Finding trainable customers
When I’d finished telling the founder this same story about confusing Amazon, UPS, and FedEx, I asked if he understood the key lesson.
He shrugged. “Is it that all package delivery looks similar to consumers?” he asked. “So all CRMs look similar, too?”
“Not quite,” I said, hoping to prod his insight a little harder. “It’s not that package delivery services look the same to all consumers. It’s that package delivery looks the same to a very small subset of consumers. Who are those people?”
The founder thought for a moment. “It was your daughter in the first story,” he said. “And then it was you as a kid in the second story. So I guess… children? But I’m not trying to sell my CRM to children.”
I laughed. “No, of course not,” I agreed. ““But different types of companies need CRMs: established companies and new companies. Now ask yourself this question: What types of companies are on that list of 100,000 contacts you bought and have been marketing to?”
“Old people!” the founder said with a smile as he began to grasp the lesson I was trying to teach. “We’ve been targeting established companies thinking we know they have the need. But established companies are like the adults in your story. They already have fixed beliefs about what companies are the best CRMs. We need to be targeting new companies. New companies are the ones who don’t already have fixed beliefs.”
“Exactly,” I said. ”Remember that successful entrepreneurship is less about the brute force of persuasion and more about the art of finding resonance. While your product might be great for companies using a competitor’s product, it won’t resonate with them because they’ve already got fixed habits and feel like their problem is solved. So ignore them. Instead, in the early days of your startup, focus on potential customers who are new to the space and don’t have preferences. Build your foundation from there and expand once you’ve got more traction and brand recognition.”
