Red Rocket has studied over 200 businesses to potentially acquire in the last couple years, and we have seen a lot of questionable marketing tactics being used by a few of these companies, sometimes bordering on outright fraud. Or, at a minimum, abusing their relationship with their customers, with overly aggressive marketing efforts. I am going to share a few of these examples with you, so you don’t repeat these mistakes with your businesses. It is hard enough to acquire customers in the first place, yet alone to scare them away long term with tactics like the below, that could ultimately end up killing your business.
A CASE STUDY
We were looking at a dropshipping ecommerce business that was marketing a “get a free product if you pay for shipping” offer. That by itself was fine. But when I learned that once the customer was in their shopping cart funnel, buried in the fine print . . . very fine print . . . was a small footnote that said by accepting this offer, they were also signing up for their $39.99 per month subscription model.
We didn’t pick up on the problem until we saw that their churn rate of lost customers, was off the charts. Their average life of a customer subscription was only two months (not 6-10 months, like most good subscription offerings). This was because customers were getting pissed by seeing $39.99 charges showing up on their credit card, for something they had no idea they had signed up for. And to make matters worse, the company made it very difficult to contact customer service to call and cancel the subscription. Which lead customers to the customer review websites to publicly incinerate this business. And, once the bad reviews are out there in mass, it is almost always too late to recover.
When we asked the business broker if he was aware of this situation, I found his answer humorous: “yes, the founder is aware that he is using ‘aggressive marketing’ tactics”. That was an understatement. He would have been a lot closer by saying “suicidal marketing” tactics!!
Here are a few more examples of overly aggressive marketing tactics we have seen:
- Adding Better Business Bureau and eTrust certificates to their website, when in fact, they were not approved or highly rated by those services. Flat out lying.
- Keeping the hundreds of positive customer reviews published on their website, and curating out the thousands of negative customer reviews. Dude, time to stop the presses and figure out why you are getting so many bad reviews in the first place.
- Having their friends manipulate customer reviews on third party websites. On a Monday, they had 50 only negative reviews published, and when we brought it to their attention, by Tuesday, there were 300 positive “fake” reviews added on the same site.
- Not disclosing to their customers, pre-order, that products were being shipped from overseas, and that could result in 30-40 day delivery times. Resulting in thousands of disgruntled customers trying to track down what they thought were lost shipments (many of which being missing gifts during Xmas season).
- Selling a completely “snake oil” type of product, claiming certain benefits of the product that were not scientifically supported, and using fictitious before and after photos to enable the sale.
- Firing away emails to their 500,000 person list, when the tactics used to build the list resulted in a very poor quality list only converting 0.01% of such customers into sales (1/100 of what it should be), and pissing off 500,000 people each week with unwanted emails in the process.
- Selling prescriptions of certain hormone drugs to be used in off-label types of ways (e.g., weight loss in men), when the hormone was originally designed for other purposes (e.g., fertility in women).
- Saying they were featured in major publications in their industry, when in fact, they simply bought advertising space in those magazines and did not have a featured editorial article.
- Having a shopping cart funnel flow that tried to upsell customers additional products at seven different times during the purchase process. Not illegal, but certainly ill-advised and abusive to the user experience.
Any of these tactics sound familiar in your own businesses?? If so, time to stop using strategies like these. And, time to start building your business in more credible and customer-first ways.
WHY “AGGRESSIVE MARKETING” WILL KILL YOU LONG TERM
I know how hard it is to drive initial customers for your business. But if you need to resort to “suicidal marketing” tactics like the above, yes you are helping your short term sales, but you are slicing your long term throat in the process. Once bad customer reviews are out there, it will be near impossible to attract new customers. Once investors learn these questionable tactics are being used by you, you will lose credibility in their minds, and they won’t want to invest in your business. And once your customer funnel and access to capital dry up, there goes your business, right down the drain.
As I have said in the past, with startups, perception often outshines reality, with many entrepreneurs doing the “smoke and mirrors” dance trying to get the attention of potential customers. But there is a very fine line between “stretching the truth”, and flat out lying, or being overly aggressive with your marketing efforts. So, if you are thinking about doing it, don’t!! As it will eventually come back to bite you in the butt. A snake oil you certainly don’t want coursing through your veins.
George Deeb is a Partner at Red Rocket Ventures and author of 101 Startup Lessons-An Entrepreneur’s Handbook.