A good friend of mine (who is an amazing entrepreneur) called me last night and was excited to tell me that he got a huge burst in traffic and acquired 10,000 new users in the last 2 months for his website. The reason for the burst was he was investing in social media advertising, running contests, SEO, referrals, etc.
This is really great! Acquiring 10,000 new users is a major accomplishment, especially in such a short time period. Also – free users can help you build and test your product. It also helps you validate the market.
BUT, here is the problem:
I asked him what is his goal was. It was to acquire paying customers for his product. In my opinion most of these 10,000 new users will never ever convert to paid customers. The problem with focusing on free users out of the gate is this is the wrong type of customer – you know, the customers that never pay you.
Once you have a product try charging as soon as possible. Have a very generous free plan but also have a paid plan. You don’t really have customers until you have someone paying you. This will also help you optimize your web business towards bringing more money in the door.
Are we just getting better at getting free customers?
I’ve run into this issue as well. For my side product, Digioh – we have several hundred users that we acquired through Google Adwords on specific keywords. We got really excited for about a week until we realized that we still only have a handful a paying customers. We asked ourselves: Are we just getting better acquiring free customers because we want to get better at building a business where people pay for our services.
Since we have a premium paid plan in place, we are focusing on ways to optimize our site to get people to pay us. This includes changing our landing pages, re-writing our ad copy, and really understanding what features customers will pay for.
I’d take a step further: optimizing for the right goal.
What goal is your friend optimizing for: monthly revenue or monthly active users? Depending on the goal, all of his decisions change.
When people are searching for a job, are they optimizing for getting an interview or getting a job? Both are the right goals at the right times, but put in place a number of different strategies.
Picking (and periodically revisiting) goals is essential. 6 months ago I set a goal of earning $500/month through secondary income. I hit that after 2 months, but never broke past that. Because I had set a specific goal, I wasn’t trying to break through it. So I revised the goal to $1,000/month in October and hit it in that month. And in the first two days of November.
Now? $1,500/month. Each time I hit the goal I increase it. In the gym. In entrepreneurship. Everywhere.
What’s your goal?
Awesome comment Kai – Pretty sweet that you are breaking through your goals and constantly setting the bar higher.
My goal was to get new users using the product and uploading files. We hit that goal. Now my goal is to get 50 paying customers.
Trying to figure out what the right goal is for any given situation is sometimes the hardest thing to figure out because their is no one size fits all answer. If you’re a typical startup where money is tight for example, do you try and focus on growth or profitability? Both are reasonable goals and can feed the other, but in a survival situation you might be unduly influenced to go for cash when you really need actual users. There’s also a trend amongst businesses to use social media ads and the entire ecosystem (many businesses on http://www.buyfacebookfansreviews.com for example) to get traction on Facebook and other sites but then when they get users, they don’t know to align them with their goals and then get them to convert. This is as you point out the missing ingredient in a lot of businesses today and what can often separate a winner from somebody the market dumps. That being said, getting 10,000 users in a short time period is a very quality result and if you can find a way to fit them into your goals this mutually benefits everybody.
Hi David – I totally agree with you finding the right goal is probably the hardest part.
Some companies focus to heavily on making money and end up sacrificing the long term vision (ie turning into a consulting service or a niche product fit for only one company).
Other companies focus to heavily on getting users. The problem is after 6-9 months when money starts getting tight the founders try to all of a sudden make money. The problem is that is hard to do, you can’t just flip a switch. Your free users aren’t going to start magically paying you. You have to work on what features people will actually for and perfecting your sales copy.