Product-market fit could also be in love–when you recognize you’ve found it, you simply feel it. However, product-market fit can look slightly different and unique for every company, evolves over time, and takes plenty of engineering and time. The comparison to love doesn’t seem too far away now, does it?
Product market fit, often mentioned as ‘product/market’ or ‘product-market’ fit, describes the stage of a startup company where they have successfully identified a target customer and serve them with the right product. After achieving product/market fit, the next step would be to scale by finding more customers within the target market through interviews, user research and feedback.
Achieving product-market fit is widely seen as a crucial a neighborhood of a technology company’s growth trajectory, but the “how” may be a smaller amount straightforward. Before we probe some best practices for locating and measuring product-market fit, let’s start with the basics: why is it so important?
Why does product-market fit matter?
There can be many ways to define product-market fir, but the features that stand out are when the customers start using those and customers become your sales and marketing people. Slack, as an example, placed an early specialize in delightful user interactions and being highly conscious of product issues. Therefore, customers are delighted and which act as a word-of-mouth marketing force, helping to drive adoption (and an explosion of growth).
In principle, you’ll measure product/market fit with surveys that identify what percentage of your users think your new product could also be a ‘must-have’. But more often than not, product/market fit may be a smaller amount about hypothetical numbers and percentages, and more about an in-depth and tangible understanding of who your customers are, and therefore the way they feel about you and your product. Is it creating organic and valuable growth, where customers spread the word on their own to user the product? Are people willing to shop for your product to gain the experience? If they’re, you’ve product/market fit. The road to product/market fit is typically driven by finding customers via word-of-mouth, before you build a marketing engine to scale user acquisition.
As a startup or early-stage company, your product/service will probably satisfy a little segment of the market (hopefully an honest market!). As you grow, so will your understanding of the matter you’re solving; and with this understanding, your customer profile might evolve.
Product-market fit is all about showing how your product can solve a selected problem, which is significant since an outsized potential market is worthless unless it gets realized. Many venture capitalists won’t invest during a corporation without evidence of product-market fit, because it’s such a key springboard for scaling and growth. Believe it: How are you ready to justify putting resources toward innovation or strategic initiatives if you can’t first prove that your product has enough of a possible market to sustain itself and, ideally, generate profit?
product-market fit five best practices in mind:
1. Product-market fit isn’t one point in time
If there’s one thing you remember about product-market fit, let it’s this: achieving product-market fit isn’t one moment in time that you simply check you to undertake to do list. In fact, you’ll even lose product-market fit, and you’ll likely need to reassess it throughout your company’s growth. Take Netflix as an example. It began as a DVD subscription business by mail, and had to vary its product because the market need changed so on lookout of fit and become the streaming platform it’s today. Although we often mention the moment of achieving product-market fit, remember that it’s an ongoing process.
2. What goes into finding product-market fit
Just as there are many different ways to define product-market fit, there are also plenty of things that enter finding it. This includes iterating on product features and functionality, adjusting pricing, and maybe even pivoting the merchandise and its value proposition. Most importantly, you need to always be getting feedback from your customers to inform these decisions. Achieving product-market fit is additionally a company-wide effort–not just the responsibility of those building the merchandise itself. Your prospect and customer-facing teams are within the simplest position to gather valuable feedback, so it’s important that everyone at the company feels empowered to make an impact here.
3. Product-market fit can manifest in several ways
While it’s true that product-market fit is typically something that founders and merchandise leaders feel, there are some signs to look out here. These include:
Usage is growing (customers are buying) as fast as you’ll add more servers (make the product)
Customers are your marketing (i.e. through referrals)
You have a high volume of out of doors inquiries (investors, press, etc.)
Your product grows exponentially without marketing
It’s best to think about these more as signals to recollect of, versus requirements to ascertain off. Similarly, just because you’ve one or more of the above doesn’t necessarily mean you’ve product-market fit.
4. Measurement requires quantitative and qualitative metrics
When it comes to analyzing the product-market fit, quantitative and qualitative metrics are both valuable. For quantitative, track things like acquisition, activation, retention/churn, and revenue. Also, some out of the qualitative metrics like customer feedback, NPS, and referrals and reviews. It’s also useful to ask customers (e.g. through an in-app survey) how they could feel if they could not use your product. This might assist you assess whether or not you’re truly solving a haul for them, or if your product is just a nice-to-have.
5. Customer feedback is totally crucial
Something that came up multiple times during analysis of product-market fit was knowing the importance of customer feedback during the road to product-market fit. You’d wish to know who your customers are, their pain points, and therefore the way they’re using your product. Also confine mind various factors that affect the price of this feedback, as an example usage frequency (if someone who rarely logs into the merchandise provides feedback, it’d not add up to prioritize their request) or whether a customer is using the free or paid version of your product.