The less trodden path to product-market fit
As an early-stage startup, embarking upon the long and windy path to product-market fit (PMF) is a key focus of ours. There’s a bunch of great stuff out there that talks about PMF, but as we lift our heads for air on this tumultuous journey, we wanted to share our thoughts. In particular,, we wanted to discuss the market side of the PMF equation, because, as we’ve read around the topic, we’ve found it’s the less loved part of this puzzle.
To us, PMF is when your product is so desirable to a specific segment of your target market, that they’re willing to switch from alternatives to use it. The real cherry on top is when they encourage their friends to make the switch too.
Why PMF is important
Not having PMF fit is equivalent to operating with a leaky sales funnel. You’re investing time and money to get people into the top of your funnel. However, the further away you are from PMF, the more people who lose as they engage with different parts of your product. As an early-stage startup with relatively limited funds and resources, the more efficient we can be when it comes to acquiring customers, the better.
Three ways we measure PMF fit
Firstly, we ask our customers: “How would you feel if Pluto no longer existed?” The aim is for 40% of people to say they’d feel “very disappointed”.That’s when you can feel pretty confident you’re at PMF. This is one of the most common methods of measuring PMF, with lots of great literature on it, so we won’t be taking credit or lingering on it.
Secondly, we monitor our conversion rate. That’s the number of people who buy Pluto cover, divided by the number of people that visit our website. If people are parting with their cash, that’s pretty good evidence that our offering is desirable. We set targets each month, refining our product to grow this.
Thirdly, we look at our referral rate. That’s how many of our customers have bought Pluto as a result of a recommendation from a friend. This really is the cherry on top; the privileged position where not only are customers finding our offer desirable but they love it enough to tell their friends about it. (And let’s face it, if you’re going to tell a friend about travel insurance, it’s got to be good).
Navigating the path to PMF
There are two equally important parts of moving towards PMF fit:
- The product you’re offering
- The market you’re serving
A lot of the stuff you read around PMF fit tends to be focused on the product side of PMF fit. However, we believe the market side is equally as important. We spend a lot of time understanding the market so we can figure out the right part to target and how to position ourselves as we pursue PMF fit. We think about the market into three categories:
- The people we’re serving
- Our competitors - both direct, experiential and perceptual
- External forces - social, economic and technological factors
We frequently run in-depth customer interviews with members of our target audience to get a really deep understanding of their attitude towards travel insurance, as well as their broader attitude and behaviours relating to travel and their lives. This enables us to really understand the goals of our audience and how we can position Pluto to help them achieve those goals. At the end of the day, nobody wakes up in the morning excited about travel insurance, but they do wake up in the morning eager to make the most of their upcoming holidays. If we can position Pluto as a vehicle to help them move towards that goal, then we’re in a good place.
Having a good understanding of the competitive landscape within our industry, but also further afield is key. Yes, we need to know who else is operating within the travel insurance space, but this is not the end of it. There are a couple of other key areas that we explore too.
Firstly, there are the brands outside of our industry that are shaping our audiences’ expectations of what they want from the brands, products and services they interact with. For example, our audience now expects banking to be as simple and convenient as the likes of Monzo, Starling and N26 have made it. So although they may not be a direct competitor as ours, we need to compete with the quality of the experience they’re offering if we’re to capture the hearts and minds of our audience.
The second key area is the substitutes for travel insurance. From talking to customers, this ranges from relying on parents to take care of them if something goes wrong to being extra careful whilst they’re abroad. Although these aren’t competitors in the direct sense of the word, they are substitutes for using travel insurance. So when we’re positioning Pluto, we have to be mindful about how we encourage people to switch from these alternatives.
External factors cover a whole host of areas, but a big focus area for us is really understanding the cultural forces that are impacting the way our audience chooses the brands they interact with, and the value they place on travel. From a brand point of view, we’re seeing people support more brands who are authentic, stand for something pertinent and are often challenging the status quo of an industry. Fortunately, Pluto falls into that camp, so dialling that up in our positioning is key. We also know that our target audience places more importance on experiences over products. Particularly travel. When talking to customers, it’s clear that travel is a hugely important part of their lives.
All of these factors play into choosing the right segment of the market that we should focus on. Based on how well our product and brand meets the needs, and desires of these people. With this understanding, we can fine-tune how we position the Pluto brand and talk about the Pluto offering.
Hopefully, you’ve found these reflections useful for your own journey. No doubt navigating this path will be ongoing, so we’ll look to share our thoughts on the product side of PMF sometime soon as well.