What’s the best way to bring in new customers? That question is posed by almost everyone at one point or another, no matter what product or service they’re offering. The common way to attack this problem is to go out and advertise…to redirect attention to your offering and convince people that yours is better than what else is out there.
But in an age of empowered consumers with tools to share their opinion at every turn, the best way to bring in new customers might not be to advertise, but to reward your current customers instead.
A great example of this is Dropbox, an online backup service that automatically keeps files synced between computers and devices. Dropbox did what lots of other startups do…they paid for traffic. They used Google adwords to drive traffic to their site…purchasing advertisement placement on the keywords associated with their product.
Dropbox quickly discovered, however, that the cost of this strategy was very expensive. They needed to run $300 worth of ads to get one single person through to become a paying customer. And given that Dropbox could expect the lifetime value of each customer to be around $100, they were actually losing $200 each time that happened.
So instead Dropbox tried a completely different approach: they offered a double-sided incentive in which existing users could refer the service to their friends and colleagues. The new users, when they signed up for the service, would get additional storage space for free. What makes this a double-sided incentive was that the person who referred the newcomer would also get additional space for free, permanently. In this way Dropbox was attempting to drive new business not by figuring out the right keywords that work, but by rewarding the most passionate people who already use their product. And, as a result, Dropbox doesn’t need to advertise anymore. They built a mechanism that encourages their customers to advertise for them.
The usage lifecycle comes into play here: it takes time and energy to get someone up to speed with your software or service. Nobody can become passionate users instantly and advertising can only get people to the doorstep. But in order to become really passionate, people need to pass through the other stages first: interested person, first-time user, regular user. You can’t just turn someone into a passionate customer unless they’ve had a really great experience with your product or service and have used it a few times.
So the lesson of Dropbox is this: your existing, passionate customers (the people who have gone through the usage lifecycle) are the most powerful asset you have. They know why your product is great and they can communicate that to their social network better than you can. They can sell it better because they’re experiencing it every day and they’re not biased in the way you are. In short: they tend to be much more influential than you.
So the next time you ask the question: “What’s the best way to bring in new customers?”, also ask yourself whether you can take advantage of the most important asset you have: your existing, passionate customers.