How Pact acquired its first 10k customers without any digital marketing
I recently sat down with Richard King, Pact Coffee's first head of growth, to discuss their early growth journey and the benefits of avoiding digital marketing for as long as possible.
Back in 2014, I joined my first startup job in Pact Coffee’s growth team. The London startup scene hadn’t yet become the de facto place that smart people went to work, but it was starting to buzz.
The team I joined would look different to every startup I’ve seen since.
2013-2014 were formative years for Pact, and importantly for its growth journey, it was before paid social made it into the mainstream.
The result was a unique environment and one that I think every modern consumer startup could learn a lot from.
I recently sat down with Pact Coffee’s first head of growth, and my former boss, Richard King to discuss those first couple of years.
The first few hundred customers
When Richard joined Pact, the startup was less than a year old. Founder Stephen Rapoport led the early stage efforts to get the first signs of product market fit.
“Proof of concept had been proven,” Richard told me, “there was a lot of friends, family, network going on in those early sales but also maybe 3-400 unknown punters who had signed up as well.”
Speciality coffee is far more common today than it was in 2013. And while there were places you could buy coffee online, Pact really emphasised the freshness of coffee and flexibility in purchase. “I think at that time, we were the only business doing ‘ship it fresh the day you order it.”
Those first few hundred customers proved vital to the journey. They quickly launched a scrappy referral scheme, simply asking customers to tell their friends.
“While it was good for growth, it was also a good test of ‘do these customers actually love you? Will they tell their friends and family and neighbours and colleagues?’”
Even in later days, referral was a strong hook for Pact, responsible for 10-20% of new customers every month for years to come.
“Our first preference was free promotion”
Quite quickly, referral has diminishing returns. And so Richard and the team turned to finding new customers.
“We were trying to scale spending nothing if we could, and as little as possible if we couldn’t,” Richard tells me.
“The preference was: first, free promotion; second, pay per acquisition promotion; and third, upfront spend – but we really didn’t want to do any of that.”
This frugality was something I remember as one of the defining cornerstones to my time at Pact. And it’s one of the things I think’s missing from many modern startups.
But how do you find your customer segments?
Cyclists, foodies, and hipsters
“We’d been hosting customer events where ten or so people might turn up. But we’d chat to them, learn who they were. Quite quickly a few segments started to emerge that really underpinned our growth for the next six months.”
The first community that they found was cyclists.
“We’d meet people at the even who turned up on a fixed gear bike or started telling us they were really into cycling.”
“What we realised was: the people – who were happy to spend £1,000 on a beautiful road bike, and would sit in places like Look mum no hands!1 – were the same types of people who loved fresh coffee.”
Getting CPA deals
Playing in to the first free, then CPA model, Richard struck up a partnership with the founder of London Fixed Gear and Single Speed (LFGSS).
“A lot of these communities aren’t run for big profits, they’re run by two or three enthusiasts who want to keep the lights on. So we managed to get free or CPA deals with a lot of them.”
“When we first did LFGSS, it was so successful, we thought the results couldn’t be correct. It absolutely took off, we got hundreds of new customers very quickly.”
Outside of cycling, foodies were another early community that worked well. “BBC Good Food, which was one of Stephen’s deals, was a really strong one for us.”
But the other big community was the emerging 20 something, hipster market living or working in Shoreditch.
“We almost had to stop taking new orders”
“One of the first times we did a pay for promotion was for The Nudge, which [we did to] target this community. That was the first time we did a pay for promotion.”
And soon after, they were glad they did.
“It was the day before bank holiday weekend in August. The email went out at nine in the morning. By ten in the morning, the whole of the Pact team – about seven at that point – stopped work just to go and pack coffee.”
“At one point, we discussed if we would have to stop taking new orders because we didn’t think we could handle it.”
“It was good fun that day. It was boiling hot, we were all rushing for the 4pm Royal Mail deadline, and every time we refreshed the admin site, another 50 orders had come in.”
Get community owners to write the posts
“One of the things that both LFGSS and The Nudge both insisted on was no third party copy. And I think both of these, having the audience owner talk in their own language, added a huge amount of credibility and trust.”
Generating ideas
One of the big blockers for many teams is coming up with ideas. But the early Pact team seemed to have them in abundance.
During my time at Pact, one idea emerged from the packing warehouse of calling up new customers to see how they were getting on.
"The Welcome Wagon,” as Richard retells, “launched welcome calls as a way to reduce first bag churn. At the time, everyone in the team had to call 10-20 customers a week to say thanks for buying, and low and behold, it had a big impact on retention.”
There’s something I’ve found in many startups since that people almost seem allergic to phoning their customers, but the Pact data spoke for itself.
“We also had such limited budget, so there was never the option to ‘just put another ten grand into Facebook’, that just didn’t exist for us, so we had to be creative.”
Growth competitions
They held an acquisition competition between teams once. Each team had 5,000 flyers with different discount codes on it, and the winners were those who got the most acquisitions.
“One team blagged their way into a fancy block of flats, and put them in letterboxes. Another put them through the spokes of bikes on Brick Lane. Another went to bike shops.”
“These early initiatives connected a lot of the people in the team, who didn’t work in growth, to growth. Our designer thought it was hilarious that she had to go and do it.”
Connecting the entire team to growth is something I see as vitally important, and Richard agrees. “It made people more aware of who are customers are. I believe everybody in the company is growth basically.”
And how did people come up with these ideas?
“One thing was we had genuinely creative, very, very smart, creative, really passionate people working who gave a shit. There’s something in that – if you’re the first 10, 15 or 20 people, you’re more tied to the mission, and believe you’ll run through walls to make it work.”
Enjoying the fun stuff
“I also think, you spend a lot of time agonising over growth, worrying about things, stressing about stuff. There’s absolutely something in that early team, just doing the fun things that people enjoy.”
“It makes them more energised, more committed. Getting the team out of the office? Out of the chair? I’m a fan of that stuff.”
How do you hire a Richard?
One of the biggest challenges for any early-stage startup is getting your growth team right. The opportunity cost of a bad hire has the potential to kill a business, and anecdotally I see more people fired in growth roles than any other function.
So if you’re reading this, you might be wondering ‘how do I hire a Richard?’
I asked how his background prepared him for his growth role at Pact.
“One thing was I’d worked in a few places where there was never any budget. Where we had to fight for every penny to do anything. And if I’d come from a Unilever or a P&G, or even a later stage startup, you always default to the millions of budget.”
“These are the times you’ve got to hustle and make do with what you can. That’s why we did so much for free or very cheap.”
The other thing was he’d “selling into media companies before. So I knew how to talk to publishers.”
Negotiating killer CPA deals with the Metro
From my time, I remember Richard negotiating CPA deals with the Metro – something that is probably difficult if not impossible to do today. I asked Richard how he went about those.
“People genuinely loved our story and care about us being successful. You can’t fake that with smoke and mirrors."
“They really loved the story, the mission, and Stephen was a hugely charismatic founder that people bought into.”
“The most important thing I learned was this. If you can find someone who is a coffee drinker in the office, and say ‘if you help us out, we’ll send you free coffee’ then it worked very well. There was never any talk of money, just human connection.”
This reminds me of my post a fortnight ago on Social Norms. Money turns conversations into market ones, rather than social, which worked well here.
“The other thing was to just use your networks. We asked everyone if they had links to people at these publishers.”
Customer service as a growth tool
“Stephen’s attitude to replacement bags was great. It was, in effect, if it doens’t arrive, no quibbles, just immediately send a replacement,” Richard tells me. This focus on customer service permeated the entire company.
“Great idea, super simple and it set a great tone for the team. Put the customers first, don’t mess around with a load of questions, just send a replacement.”
“That was coupled with very fast fulfilment. The ‘next day’ was a key message from the off and so the Royal Mail cutoff meant a lot to us. Again, Stephen’s urgency and customer-first mentality drove and and permeated down to everyone.”
Your early team is vital
“I do think that a very, very smart, very, very committed team goes above and beyond. That’s not just with growth people but across the entire company: whether it’s a developer or someone who works in fulfilment.”
“The commitment and the belief those people have makes such a difference. The sum really is greater than the parts.”
It’s only in that right team structure, that certain other things make sense. “Things like growth competitions [with the right team], everyone’s chomping at the bit to do it, even if it’s not their job.
“It’s just great times at work as well. Those are the days when you think ‘I don’t want to go home tonight because it’s so great. And I want to get in early tomorrow because, it’s a brilliant place. That’s a brilliant feeling.”
Learnings from Pact’s experience
I’ve seen inside dozens if not hundreds of startups since Pact, and none have that focus on lean, scrappy, ‘don’t spend any money’ acquisition. In part, this will be a sign of the times. In 2013, paid social was in its infancy. DTC was about to enter it’s second big wave. Today, it’s commonplace and the desire for instant scale is hard to resist.
But looking back there is a lot to be said for this approach. All of this builds into a far deeper understanding of the customer, a far closer connection across colleagues, and more commitment to the mission. If I was a super early-stage DTC founder today while it would be impossible to ignore paid marketing, I’d ensure this stuff was central to how I grew as well.
My top 5 takeaways from Pact’s early growth story
Free, then CPA, then upfront cost – paying upfront for some marketing should be the last resort, not the first.
Follow your customers – where do your customers live? Follow them there – find the equivalent of the bike spokes or cycling forums.
Enjoy the fun stuff – one of my reflections when I closed Wine List was we didn’t do enough of this. Doing the stuff together as team is brilliant and bonding, and creates structures that will long outlast bumpy months.
Minimal budgets breeds creativity – setting limits on spend but with high expectations of growth creates a culture of creativity.
Give the product away – too often, founders are precious about giving away product to potential community members. Don’t give them a discount, don’t ask them to sign up with a free voucher code, just send the product for free. This works because of Social Norms.
The weekly bite
If you’re creating UGC, then you’ll want to check the latest FTC guidelines. The tl;dr? You need to say very clearly throughout that this is a partnership between creator and advertiser.
Former Old Street institution.
