A customer that chooses your product will be more satisfied than one that is acquired through spend

Former private equity exec and now Microsoft employee Tren Griffin has a great post up: A dozen things I’ve learned about business. The full list is great, containing many themes and points that have been discussed here over the years. It’s pretty short and well worth a read. I’m going to highlight just one here, and narrowly beating Bezos’ “Your margin is my opportunity” which I love for it’s brazenness is the following from Bill Gurley which I chose because it is less widely trailed than many of the others:

10.  “A customer that ‘chooses’ your firm’s services will be much more satisfied than one that is persuaded to buy your product through spend.” Bill Gurley. http://www.forbes.com/sites/bruceupbin/2012/08/30/the-dangerous-seduction-of-the-lifetime-value-ltv-formula/2/ Big firms have these huge marketing budgets and forget that the essence of business is being able to cost-effectively acquire a customer. Fred Wilson talks about that problem at one point in this recent interview:  http://pandodaily.com/2013/06/17/pandomonthly-new-york-with-union-square-ventures-fred-wilson-the-full-interview/ Spending on customer acquisition should be tracked on a per customer basis. People who want to spend, for example, “$100 million” on marketing without breaking it down and working it out on a per customer basis are due for a fall.

Many large and successful businesses have been built through paid marketing, of course, but this is a reminder that the more difficult trick of acquiring customers for free generally creates more enduring value.