Introduction
In the realm of startups, moving from an idea to product-market fit is a complex journey. Many startups tend to dive into paid marketing to find their early adopters, burning resources in the process.
This problem has been front of mind for Zywa, the go-to financial services provider for Gen Z in the region. Having “crossed the chasm” themselves, the co-founders of Zywa, Alok Kumar, and Nuha Hashem, attribute their growth path to organic marketing instead of paid marketing.
In this blog post, we share insights from Alok and Nuha about how startups can implement organic initiatives to help them in their early quest for product-market fit.
But First, Why is Product-Market Fit Important?
Product-market fit is a quintessential moment in a startup’s journey where the company realizes users actually want to buy the offering. It’s usually a point where enough users become customers — ideally, recurring, loyal customers.
Note, though — it’s not a revenue milestone as much as a customer base achievement. Achieving this is important as it is at that point that a founder knows there is enough demand for their product to go after — that the effort they’ll be putting into the business could see a path to profitability, that it would be worthwhile pursuing an ultimate exit.
What Does it Take to Achieve Product-Market Fit?
To reach this goal post, entrepreneurs typically go down two paths. The first is the path of creating value that solves a significant pain point better than the other options in the market. Meanwhile, the second path provides enough incentive for customers to switch over to using your product instead of whatever else they’re used to. Now, these two paths are not mutually exclusive — they can even comprise two parallel lanes you can hop between quite easily (or better yet, tread down the middle with precise balance).
A commonly used booster card by many founders who’ve raised venture funding is to accelerate their journey using turbo-charged paid ads. While the path to product-market fit may be more about the destination than the journey for startups that are very scarce on resources and can’t afford a leisurely journey, the risk of the company crashing and burning is quite high, as Alok and Nuha caution.
Paid Ads: Proceed With Caution
Alok and Nuha share that paid ads, used in a startup’s early days, give them a hazy view of reaching product-market fit. Seemingly, founders may think they’re at their destination when in fact the goalpost is still far out, barely visible in the distance amidst the fog. Paying for customer attention instead of giving them a product or service they willingly want can lead to the kind of customers you don’t want. That’s the kind that has high churn and low lifetime value, meaning they’re only there for the moment, not the long haul.
The reason this is “bad” is because it leads to you having to continue spending more and more marketing dollars without your customer acquisition costs necessarily leveling down as you build your company. After all, getting customers in your early days is hard — there’s no brand equity that customers are bought into, one that they can trust. The assumption is that as you grow your company, you build your brand simultaneously so that eventually, you’d need to spend less on paid marketing — your brand value should be covering some of that marketing spend to help grow your business.
Enter Organic Marketing.
Zywa’s Philosophy on Taking Early-stage Startups to Market
Zywa emphasizes the role of the value proposition in getting to product-market fit. Their motto was to build a business such that its product and user experience would provide such value to their target audience that switching to them would be a no-brainer. In the process, they emphasize always looking out for user behavior and getting continuous customer feedback, and continue to refine the product repeatedly to make it even more “organically” appealing to a wider audience base.
Alok and Nuha suggest aiming for a 70% customer retention rate as a key indicator of product-market fit. Next, they suggest refraining from spending on paid marketing until you’ve crossed the million-dollar revenue mark. Once you hit that, you can assume that the market you’re going after is big and sticky enough. Only after that should you consider stepping over to the paid marketing lane, beyond the product-market fit route onto the next destination — growth.
Zywa’s Approach to Finding Their Tribe
With Zywa’s primary demographic being Gen Z, Alok and Nuha went about their marketing plan with the target audience in mind. You guessed it — they leveraged TikTok big time! In fact, they decided to market to them directly after they first tried to raise awareness about Zywa through universities. Sure, a certain credibility comes with associating yourself with an academic institution, but that doesn’t really sell “cool” as a value proposition, does it? It matters if that’s part of the brand you’re trying to build, which was certainly true for Zywa.
And so, Alok and Nuha suggest founders identify exactly the customer demographic they are targeting as customers. Specifically, they suggest that you understand their pain points so deeply, as well as how they’re currently solving for them, so you can create an offer they truly can’t resist. One that you don’t need to make look more attractive with dressing. Something that they organically share with their friends and family.
Next, Alok and Nuha suggest that founders research on how their customers consume information. This allows them to know exactly where, when, and how to position their offer to them.
Product and Experience Go Hand-in-hand
Once you can convince a customer that your product solves their problems, you need to deliver (through your product) and nurture that relationship (through a stellar customer experience). While we’ve already explained the importance of selling value as a product, let’s shift gears to customer experience for a moment.
Part of Zywa’s work culture is that all team members perform all types of roles and functions — with handling customer queries being one of them. That way, everyone will get a sense of what their customers actually want. And then they deliver that. On top of that, Zywa makes sure that they provide customer support 24/7. One of the reasons they believe it’s so important to provide this round-the-clock experience is so that they can continuously iterate their product in real-time, no matter the time!
Conclusion
In conclusion, Zywa’s journey from startup to success offers valuable insights into the organic versus paid marketing debate for aspiring entrepreneurs. Alok and Nuha’s emphasis on building a strong value proposition, understanding customer demographics and pain points, and delivering exceptional customer experiences have proven effective strategies in achieving product-market fit.
Their caution against premature reliance on paid advertising echoes the importance of nurturing a loyal customer base before investing heavily in marketing. By balancing organic initiatives and incentives, startups can navigate the growth path more effectively, ultimately setting themselves up for long-term success in the ever-competitive business landscape.
If you are a founder passionate about building innovative solutions in the Future of Finance or Future Economies industries and meet our investment thesis, we invite you to apply for consideration for direct investment. You can also learn more about our Direct Investments deal lifecycle process here.