How to find and keep users in the digital era

While the hurdles for a new business are many (with 90 per cent of tech startups ending in failure, according to a recent analysis by Allmand Law), one of the biggest is finding users, or more specifically, finding them in a way that’s financially sustainable.

Take apps, for example. The average cost to acquire a loyal user (defined as someone who opens an app at least three times) now stands at $2.80, near an all-time high. With millions of apps competing for attention on Apple’s App Store and the Google Play Store, startups are forced to pour ever greater sums into marketing efforts.

But more money isn’t always the answer. In Hootsuite’s first three years, we grew our user base from zero to five million. During that time, our marketing budget was pretty much non-existent. We turned instead to a pair of complementary, lowcost approaches to find and keep customers. It may well have made a difference.

Freemium economics One fundamental decision made shortly after launching in 2009 was to make our social media tool a freemium service. The majority of our users — and we very quickly reached the million mark — paid nothing. They could (and still can) log in for free to view their social media accounts from one dashboard, schedule messages and see analytics. Companies that wanted beefed-up functionality and extra support paid a monthly fee, ranging from $9 to $1,000 and up for enterprises with lots of employees.

Why invest so many resources and so much bandwidth catering to millions of free users? For starters, freemium dramatically reduces the need for traditional marketing and sales. Our free users — in steady, predictable numbers — became paid users. Rather than selling them on the merits of our product with expensive ads, we let them see for themselves. On average, more than half our paying customers, including large clients, start out as free users.

Meanwhile, our free user base kept us honest. Free users are fickle; they’re not locked in by a contract. They can, at any moment, pick up and take their “business” elsewhere. So to maintain and grow our free user base, we had to continually update our product, rolling out new features to stay ahead of the pack.

These same features helped us win and keep paying customers. While other corporate tools were years behind the social media curve, our efforts to satisfy free users meant we could offer big enterprise customers the latest technology.

Seeing value in commun

ity The freemium approach wouldn’t have been as effective were it not for another strategy: investing in a fully functional community department. In many startups, the community team, if there is one, is treated as an extension of marketing or customer support. While their ostensible role may be “building a community” of users, they spend a lot of time pitching products and fielding help calls.

Our community department, by contrast, didn’t have direct sales or support responsibilities. Their mandate was to help people who already knew our product connect with one another. In the early days, they set up social media accounts in a half-dozen languages, sharing updates with users globally.

At the same time, they led a crowdsourced translation effort that saw our tool translated into more than a dozen local languages, from German and Italian to Thai and Chinese. (Translations were volunteer-driven — motivated by love of the technology and a liberal helping of swag, like stickers, T-shirts and cuddly stuffed animals inspired by our owl logo.)

Online efforts were supplemented by old-fashioned face-to-face events. In emerging markets, the community team helped users organize hundreds of free meetups (branded as “HootUps”), where people could get together and trade product tips. Ultimately, a network of hundreds of volunteer “ambassadors” around the world took shape, enthusiastic users who agreed to spread the word in their countries. Many were bloggers, consultants and marketers whose own agenda of developing a large online following aligned well with ours.

Cumulatively, these projects gave us entry into new markets, initiating the viral chain of adoption in other countries and spreading our product beyond its original user base.

Today, we have more than 11 million users. Our marketing budget has definitely grown from the early days, but freemium pricing and a strong community team remain critical engines of growth. This tool kit obviously won’t work in every context. Freemium, for instance, makes most sense for cloud companies with low per-user costs. But for startups unwilling (or unable) to dump millions into ad campaigns, these tools can be a viable, low-cost pipeline for getting customers in the door.

Free users are fickle; they’re not locked in