Two years ago, my company, XipWire, created a mobile payment service that allows users to securely send each other money via text messages from prepaid accounts. XipWire users can also use their phones to make purchases from participating merchants. In order to grow our user base quickly, we've launched XipWire as a free service, though we plan to start charging commercial and nonprofit businesses for transactions in the coming year.
Even as a free service, we faced a catch-22 in growing our commercial and private user bases. To convince merchants to sign up, we needed a dramatically bigger user base. But users wouldn't sign up unless the bars, restaurants, and other local establishments they frequented were already on XipWire. We solved our problem by targeting a niche market -- students -- and using creative marketing strategies designed just for them.
Finding our target market
We're located near "University City," a collection of seven college campuses in one neighborhood including Drexel University, University of Pennsylvania and Temple University, so we immediately targeted college students as our primary market. Once we'd gained a user base, we'd be able to get broader traction among merchants and improve our revenues.
We first tried to attract students by putting up flyers around campus and placing ads in the campus newspapers, but we got zero responses. Traditional marketing techniques were not going to work on this demographic. We needed to use guerilla tactics: low-cost, creative strategies that actively engage consumers through incentives, giveaways, and promotional stunts.
Get the students to spread the word
The first step was to get word-of-mouth referrals to gain traction with students, so we came up with a way to artificially kick-start that process: We work with university career centers to find students who are outgoing and entrepreneurial, and offer them financial incentives for signing up other students and hitting marketing milestones. It's cheaper and more direct than hiring salespeople.
Call it bribery if you like, but this affiliate program is incredibly effective. Students use their own social networks on Facebook and Myspace to tell their friends about the program. We would never have gotten access to those networks otherwise.
The program took a few months to grow, but once enough student ambassadors were on board, the process took on a life of its own. Students started coming up with ways to use the service that we hadn't even considered. For example, 100 members of a sorority signed up for XipWire in a single day, and used the service to pay their membership dues.
Lure them in with free samples and giveaways
We've also allied ourselves with bars and restaurants near university campuses. Students are rewarded with free food or drinks for starting a XipWire account. We offer free shots or beers to college students of drinking age who sign up for our service at university bars. One local ice cream shop offers a free gelato, and a coffee shop gives XipWire members a dollar off their coffee. On one hot summer day, our gelato promotion got over 200 people to sign up in under an hour. The place was packed.
While XipWire pays for some of these promotions, many businesses are happy to chip in because they'd like their consumers to use our service: When we introduce fees, we'll only charge businesses 1.5% per transaction, which is less than most credit card companies charge. Beyond the financial incentive for using our service, there's the coolness factor. University merchants don't want to be perceived as behind the times because the competition accepts mobile payments and they don't.
Broke students love to take advantage of these small offers, whereas an older demographic might not be so cheaply wooed. Giveaway contests have also given our business a boost: A recent iPad raffle attracted over 1,000 new users.
Reaching critical mass
Once we meet a threshold of merchants and users on one campus, XipWire becomes the de facto way for students to pay each other back for last night's dinner or drinks, or for roommates to pay for rent. It also generates student loyalty towards merchants who use XipWire, which in turn makes our service more attractive to other merchants.
Our tactics seem to be working. In the six months since we started our university guerilla marketing campaign, we've grown to service over 10,000 users -- the vast majority of which are students -- and two dozen businesses, which will form the base of our first revenues.
-- As told to Harper Willis
Prior to founding XipWire, Sharif Alexandre spent 15 years in the IT sector working for a variety of companies, from start-up firms to Fortune 100 global organizations.