Let’s look at this as two separated dilemma’s
- “Should we use marketing tactics to determine PMF?”
- “What metrics do we analyze to determine PMF?”
Let’s look #2 first as it is far easier to approach. You mentioned you are a marketplace, so you will have a more complex interpretation of the metrics used to determine PMF then say a SaaS company. You will need to look at the following metrics to better understand the outlook for your marketplace (taken from one of my favorite marketplace resources at):
- Monthly Active Users (MAU)
- Provider-to-customer ratio.
- Repeat purchase or project/job post ratio.
- Gross Merchandise Volume (GMV).
- Customer Acquisition Cost (CAC).
Another metric I would keep a close eye on is your attrition rate and/or your activity per user during their first 30 days. Depending on how your marketplace is setup, you may not have attrition in the form of cancellation or deleted accounts, but you will be able to see user activity falling off at a certain time period, which is the same thing. This is an indication of value / stickiness, and should be one of your leading indicators of PMF.
To answer #1, I answered a similar question last week with a strategy I have used for pre-launch startups who need to determine PMF inexpensively and quickly.
But in short, as you progress through your PMF determination phase, the questions you need to get answered are:
- Who are my first 20 customers and what will it cost/take to acquire them? For your purposes, PMF can be determined quickly by implementing test “hooks” to discover what those first 20 buyers will buy into. Make them happy, and you have PMF. The important thing to remember here is, some (not all) of the strategies/tactics/funnels/value-prop’s you used to hook those first 20 will be what hook your next million. Take AirBnB for example, they struggled until they found that one hook that gave their sellers and buyers something they both needed to continue using the platform – professional photographs of the units. This wasn’t scalable, but what it allowed AirBnB to do was quickly discover the presentation of the rentals was everything. So they doubled-down on optimizing the profiles of rentals. Think about how this thought process can related to your marketplace dilemma.
- Will online audiences signup after clicking on my ads? And which platforms allow this direct-response funnel to work? If you are not certain you have PMF, and you do not have the budget to go down long roads of determining that the expensive way (i.e. grass roots strategies, hiring a sales team, content marketing…), then you need to look to direct response to determine if you have a valuable-enough proposition to convert cold traffic using ads. – how to determine PMF as quickly and inexpensively as possible using the traffic channels available to us today. Your goal should never be to force a square peg into a round hole. As in, use a variety of self-serving ad channels and test copy/creatives on a number of audiences with low budgets to figure out if you have something they want. When you see traction on any of those campaigns, assuming you’re not flat-out lying in your ad copy, this is a good indication you have something of value and then you can turn your attention towards stickiness and mid-funnel optimization/retention strategies.
- Can I swallow the unit economics for the above ad channels? After running those campaigns, look at the ones that works, and add up all of the costs associated with creating it – time, design, copywriting, and ad spend. Then divide that by total registered users and multiply that by the expected total value per user (you probably will not have a good estimate for LTV yet, but this exercise will at least allow you to compare the unit economics of direct response to other acquisition channels.
I’d also recommend reviewing Ash Maurya’s steps to determining PMF in this video:
If you have a need for specific advice on PMF,
I hope this was helpful!