There are different acquisition channels; however, only a few of them are scalable. Scalable meaning that they have the potential to build a sizable business. Scalable channels have two critical things in common, high volume and compounding/looping effect.
High Volume: A lot of people can be reached through scalable channels and for a very long time.
Compounding/looping Effect: Scalable channels have a self-fueling mechanism that allows you to repeatedly reinvest the outputs of the channel, be it new users or revenue, right back into it to produce more growth.
If a channel does not have these two characteristics, it is referred to as an unscalable channel. Examples of unscalable acquisition channels are podcasting and organic social media posts. Examples of scalable acquisition channels are paid ads, referral marketing and product virality.
The diagram below by Kevin Indig illustrates this perfectly.
Examples of Scalable and Unscalable Acquisition Channels (Image by Kevin Indig: https://www.kevin-indig.com/the-4-only-scalable-customer-acquisition-channels/)
While unscalable channels alone won't be enough to build a huge business, they can help gain traction, particularly in the early stages. Early-stage companies need to acquire customers and also get people using their product or service as soon as possible. This is an important stage for startups to go through to assess their product-market fit before scaling their growth.
So whether you need to focus on finding a scalable channel depends on the stage of your startup journey you are in!
Let’s explore the four growth stages of a startup and how they influence the growth channels to focus on.
Launch: When you are just starting out, the focus should be on acquiring the first of customers to use your product, to begin the process of assessing product-market fit. Unscalable channels work here. Customer engagement helps to build your product to a traction stage.
Traction: At this stage, you have some customers; although they are coming from unscalable channels which are low-volume, inconsistent and most times unpredictable. This is the stage to start testing different scalable channels. Please check out our previous newsletter titled “Customise Your Customer Acquisition”
Growth: At this stage, your startup is starting to show real growth and the focus is on acquiring customers through a scalable channel. Testing of different acquisition channels should have been completed and startups should double down on the single scalable channel that’s working best to acquire customers.
Scale: Startups are pretty much mature at this stage and a plateau in number of customers being acquired though that scalable channel becomes noticeable. The focus at this stage is on the fine optimisations or exploring another scalable acquisition channel to continue growing significantly.
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