1. Customer Acquisition Strategy - Growth Pillars for Scaling a Business

Welcome to the customer acquisition strategy class, where we'll delve into foundational growth pillars for scaling a business. I’m Thiago Rocha, an engineer by training, passionate about marketing. I transitioned from operations to marketing, have experience as a Growth Manager, and have specialized in programs from institutions like Reforge, Harvard Business School, and Wharton. I also mentor startups.

Throughout this class, we’ll explore theoretical frameworks alongside real-world examples of companies implementing sales-led, marketing-led, and product-led growth strategies.

Understanding Consumer Behavior Shifts in Acquisition Strategy

The first important point is that all companies aim to grow, especially in tech, where growth isn’t optional; it’s essential. As studies from McKinsey show, low growth rates can make a company unattractive to investors and slow down everything from product development to hiring.

McKinsey's Grow Fast or Die Slow report indicates that software companies growing at only 20% annually have a 92% chance of failing. This reinforces why a well-defined growth strategy is essential to ensure a predictable, sustainable, and competitive future.

Strategic Growth Approaches: Choosing the Right Model

Companies must align their strategy with their product, service offerings, and current business stage. Growth models aren’t one-size-fits-all. It’s crucial to select an approach that best fits your company’s maturity level and market.

While many tech entrepreneurs aim to “conquer the world,” real growth comes step by step—starting from small wins (or “castles”) and building upon them, eventually scaling up sustainably.

The Foundation of Growth: Product-Market Fit

Growth doesn’t solely rely on acquisition; sustainable growth requires a solid foundation, starting with Product-Market Fit (PMF). PMF means having a product that addresses a clear pain point in the market and is easy for users to understand and adopt.

Achieving PMF may take time, with initial hypotheses about target audiences and product features evolving through testing and user feedback. A well-refined PMF is essential before a company focuses on broader scaling efforts.

Three Key Pillars for Scalable Growth

With PMF in place, three other pillars drive growth at scale:

1. Market-Model Fit: The relationship between market size and pricing structure. For instance, a smaller market may require a higher average revenue per user (ARPU) to be sustainable, whereas a large market could support lower ARPU products with mass adoption.

2. Model-Channel Fit: The complexity of your product should guide your choice of sales and distribution channels. High-touch sales (with more complex offerings) require sales representatives and potentially higher costs, while simpler, self-service products can scale efficiently through viral marketing or user-generated content.

3. Channel-Product Fit: Your product’s attributes influence which channels will be effective. Viral growth, for instance, thrives on products that users naturally want to share. UGC platforms like TripAdvisor grow through user content. Each product type can lend itself to specific, effective channels based on its inherent features.

Leveraging Key Growth Channels

With an understanding of these pillars, let’s look at growth models and channels that suit various products and markets.

Viral Growth

For viral growth, products need clear, immediate benefits when shared among a user’s social circle. For example:

• WhatsApp: Value increases with each new user as friends, family, and colleagues join.
• Dropbox: Grew significantly by offering users more storage for each friend they invited, creating viral, incentive-driven growth.

User-Generated Content (UGC)

UGC-driven growth, as seen in:

• TripAdvisor: Restaurants and travel businesses post content, attracting users interested in exploring options.
• Glassdoor: Employees leave reviews and share salaries, drawing in users researching potential employers.

SEO-Driven Growth

For companies reliant on organic traffic, SEO is a major channel:

• Canva: Gains high traffic from people searching for templates, such as resumes or cards.
• Zapier: Leverages SEO by creating content around specific integrations, attracting users who need to connect their tech tools.

Platform Integration and Partnerships

Growth can also come from integrating with existing platforms, like:

• YouTube: Embedded videos on websites drive traffic back to the platform.
• Spotify: Originally integrated with Facebook, making it easy for users to share music.

Choosing the Right Channel for Sustainable Growth

Understanding these pillars and channels is essential for aligning a company’s growth strategy with its product type and market:

1. Size and Complexity of Market: Knowing the market size helps determine ARPU and the need for sales teams or self-service models.
2. Acquisition Cost vs. Pricing: High ARPU products may justify high acquisition costs; smaller-ticket items need scalable, low-cost acquisition strategies.
3. Product Characteristics: Aligning product features with channels (like viral or UGC) makes the growth model more efficient.

Successful growth strategies often involve multiple channels but lean heavily on one or two primary channels for scalable acquisition and retention. With a strong understanding of these growth pillars, you’ll be better prepared to make strategic decisions, choose effective channels, and drive sustainable growth.