According to a Harvard Business School study, approximately 75 percent of startups with venture funding will eventually fail. The same study found that a similar percentage of small businesses will fail within the first ten years of existence.
Of course, the primary reason for most business failures is an inability to profitably attract and retain customers. While there are many different types of business models out there, from software as a service, to marketplaces, to ecommerce businesses (and many others), there are a few common mistakes that business leaders make when trying to attract customers.
Here are ten of the most common, but often overlooked, reasons why your startup isn't able to attract enough customers to become successful.
As Eric Ries described in The Lean Startup, an effective way of testing product-market fit is by building an MVP (minimum viable product) that you then share with the target audience. By listening to customer feedback, you and your team will be able to find product-market fit over time.
For example, Pinterest and Quora were able to grow their products quickly by harnessing the power of organic search. That channel fit well with the products offered by the respective companies, and with the desire of the target audience to quickly discover fascinating new content.
On the other hand, organic search might be a poor performing channel for an ecommerce business. The reason is that it can be difficult for a business to rank well organically in a world where giant ecommerce companies and review-oriented media outlets rank highly for most relevant keywords.
Instead, an effective channel might be social media ads, like those offered by Facebook and Instagram, which employ machine-learning algorithms to find and engage ideal customers.
After all, it's the sales team that will represent the company each and every day to members of its target audience. If salespeople don't understand the market, or how the product is positioned within the market, it will be incredibly difficult to acquire new customers.
You should benchmark your sales-team performance compared to your industry. Are salespeople performing at or above this benchmark? If not, it's possible that the sales team is a weak link within your organization.
If there is misalignment within the organization about the ICP, or worse, if your organization does not have an ICP, it will be challenging to craft a customer experience that appeals to prospects.
Make sure that your pricing strategy makes sense to your ICP and to the economic buyer. Otherwise, it will be difficult for prospective customers to see the value of your product, relative to the price.
Take a page out of the marketing playbooks of pharmaceutical or biotech companies. These organizations are constantly developing category-defining products that did not exist before. The first thing these organizations do is educate doctors about the problem and offer their solution.
They do the same with the general public through a mix of traditional and digital advertising. Once the market is educated, buyers are more receptive to the solution prescribed by the doctor.
The criteria for the lead scoring system should constantly be reviewed to ensure that the right leads are sent, while leads that are not a fit are kept for nurturing.
Ecommerce businesses that send out a regular newsletter can engage customers that might otherwise forget about the brand; and B2B businesses that send well-timed automated emails can engage prospects just in the nick of time.
In fact, a study by McKinsey & Co. found that marketing email is the second most effective way to acquire new customers, second only to organic search, and well ahead of social media. Ensure that your business has a healthy lead-nurturing system in place to generate customers consistently over the long run.
Poor customer service may also be preventing your organization from attracting new customers through word-of-mouth referrals. The same American Express study found that the average person shares a positive customer service story with nine other people.
Conclusion
There are a number of plausible reasons why your business is unable to attract enough customers. Some of these reasons may be unique to your industry, but many plausible explanations are shared among businesses of all kinds.
Before looking for less-obvious answers, be sure to review the 10 reasons listed here to see if any of the common mistakes outlined are causing your business serious challenges.
