Reaching product market fit is the key to a positive business. This means there is a market demand for what you are selling, and people are willing to pay for it because it is better than the alternatives.
But how do you know if your product or idea has a market fit?
Determining Product Market Fit
Graphics: Don’t hesitate to deviate from your unique idea once you see a better chance.
“Product-market fit,” writes startup coach and saver Marc Andreessen, “means being in a respectable market with a product that can fulfil that market.” When an entrepreneur identifies a market need and develops a solution that clients want to buy, that is product-market fit.
This concept may seem obvious, but ensuring enough people want what your business offers and define your value proposition accordingly is vital. Product-market fit may be more critical to the future of your business than creative ideas, great teams, or any other factor, and it is essential to consider when developing a product. For any business to survive, there must be people who will purchase what it sells.
Product-market fit results from deeply understanding your customers’ thoughts about your brand and product. To know if you have achieved product-market fit, ask yourself if you meet these criteria:
- Does the product provide organic growth?
- Do people share information about your product among themselves?
- Do people think it’s worth spending money to get your product?
You’ve heard the expression, “It’s not about achieving the goal, but the journey you take to get there.” Product-market fit is achieved by attracting customers through word-of-mouth promotion. Before you’re ready to expand your production, you need to know whether your product can serve as a solution for your target audience. If your minimum value proposition (MVP) satisfies a need, you’re heading to product-market fit.
The idea is to find a product-market fit so you can take the initial adoption and scale it up. To do this, you must constantly change with your customers and periodically reassess their needs. As you gain more knowledge and experience in solving customer needs and building relationships with clients, you will also better understand how you can help them.
Why is product-market fit important?
Why is product-market fit important? Venture capitalists often require a mark of product-market fit before they are willing to invest.
It’s straightforward. If you don’t have a product that enough customers will buy at a sustainable profit, your company won’t be able to grow. Before moving forward with strategic plans to grow your business and increase product production, you must ensure your product-market fit. The benefits of achieving product-market fit include:
- Grow your company at a fast pace.
- We are attracting consumers at a low price—companies with product market fit experience organic and unpaid growth.
- You are maintaining customer loyalty and happiness. Retain customers by knowing who is happy with your product and why. Delight your customers and motivate them to buy by identifying the most important product features.
- Possibility of easy scaling if necessary. By clearly understanding what you offer to consumers, your company will experience fewer growing pains and be able to build a well-functioning system.
Examples Of Product Market Fit
Some companies have done a commendable job of creating a product market fit that their successes can serve as models before your product launch as part of your product development process or customer development efforts.
Netflix
The entertainment media company first gained popularity in the early 2000s. Moviegoers are getting tired of paying late fees at brick-and-mortar DVD rental shops. So Netflix mailed them DVDs as part of a subscription service, allowing people to keep the disc for as long as they wanted.
However, if Netflix continued to sell DVDs by mail, it would disappear along with DVD players. Instead, Netflix is positioning itself as a simpler, cheaper alternative to whatever currently dominates the performing market: regular movie rentals, DVDs, or traditional television. Netflix changes its products whenever the market changes, keeping them relevant.
Netflix’s success is a good reminder to remain flexible in changing markets and watch the future.
Initially, Google competed with many other search engines for market share. Like other players, they make money by offering advertising space next to search results. However, in 2003, they beat the competition by introducing a new concept called AdSense.
Google executives realized that companies would pay to display their ads outside the search page and developed AdSense to meet this need. AdSense used new technology to crawl web pages and automatically display relevant ads. For example, if you have a business selling suitcases, you can pay for AdSense to display your ads on travel websites automatically.
As of 2017, 11 million AdSense users pay Google $95 billion annually. Google identified a need that no other search engine was filling, and then it filled it.
You can also apply the Google AdSense approach to your business. To stand out from the competition, take the time to find what your competitors aren’t doing and adapt to unmet needs.
Slack
Slack, an instant messaging platform regularly used for workplace messages, started as a completely different business idea. The founders were developing a role-playing video game and quickly used Slack as an internal communication tool for the team.
The team soon realized many games were on the market, but nothing beat Slack. So, they avoided making a game. Today, the product is used by 10 million people.
Slack’s quick turnaround proves that shifting your focus to better product-market fit can be worth your time. Don’t be afraid to abandon your original idea when you see a better opportunity.
Graphics: Don’t hesitate to deviate from your original idea when you see a better opportunity.
How to Achieve Product Market Fit
You can achieve product-market fit in many ways. You can adjust your core product to new markets, identify a pressing market need, reuse or retool old ideas, go where the market is, or even create an entirely new service.
It is important to note that the match is not binary. Product-market fit varies from company to company, and customer retention curves also vary. However, you can follow some established processes to help you achieve this when creating the least feasible product model.
Dan Olsen, Lean Startup Advisor and Author Of The Slim Product Playbook Suggests Six Steps To The Lean Process:
Graphic: 6 Steps to Achieve Product Market Fit: Identify your target customer; Identify underserved customer needs; Define your value proposition; Define a least feasible product (MVP) eye set; Create your MVP prototype; and test your MVP with clients
- Identify your target customer. Who do you think will buy your offer? How will this meet their needs? At first, you may not know exactly who your target customer is, but you can find out through market research. Using this research to create customer personas and fictional versions of these real people, you can find your target customers and develop things for them.
- Identify underserved customer needs. It’s challenging to sell a product or service in a market with many existing solutions that people are happy with. The best option is to find something they don’t like. What disease does your target client have? How can you help them solve this problem?
- Define your value proposition. How will your product better meet your customer’s needs than any currently available alternatives? Will it offer better quality? More affordable price? More interesting packaging? New services?
- Define a minimum viable product (MVP) feature set. Determine the minimum features you want to include in your initial product launch. Could you keep it simple and doable?
- Create an MVP prototype. Don’t worry about creating the whole concept – create a simple product instead. You can repeat this after you get customer feedback.
- Test your MVP with clients. Showcase your product to a select group of potential customers. Get feedback from clients. Let them find out about it and try it themselves. Ask them what they like and don’t like about it. What would they rather see instead? Be open and flexible to feedback so you can change your idea to fit precisely what your customers want and need.
After completing these steps, you should know how the market will respond to your product. Be sure to consider all vital customer reviews before launching. You might want to change some features of your MVP, consider a new mark market, or even redefine your value plan.
How to measure product market fit
Measuring product market fit isn’t a careful science, but here are ways to check whether you’re on the right track or not:
- How quickly do customers make purchasing decisions?
- Are critics mentioning your product to family, friends or acquaintances on social media?
- What is your customer retention rate?
- Are customers involved in your marketing efforts?
- How many customers have unsubscribed or still using your product?
These are all useful, data-driven indicators of how well your product will market. You can use this information to improve, tailor and sell your products.
Whether you’ve achieved product-market fit or found that you need to consider your current offerings, ongoing inquiry is necessary. As your business grows and changes, be sure to continue to monitor what the market demands so you can make the right choices.
Product-market fit can be elusive. One of the reasons why measuring product-market fit can look different depends on the product itself, your industry, and the type of business you’re in. Products that appeal to your target consumer may not offer the same success for another company.
To make long-term profits, companies must understand what their consumers want and constantly improve and offer them their products.
What Happens After Product Market Fit?
Once your company achieves product market fit, it’s time to look at your marketing analytics and customer feedback. This data can tell your marketing strategy and increase sales and profits.
Marketing Analytics to Study
Customer Retention
You aim to grow your buyer base and retain existing customers by cheering repeat purchases or upgrades.
Customers who consistently value your product are likelier to recommend it to their friends. Word of mouth is one of the most effective marketing methods because trust is built into both parties’ relationships.
Additionally, consistently satisfying existing customers makes them happy with their consumption. A good brand-customer relationship can help your business in many ways, including quickly receiving reliable feedback on improving your product for future development.
Rates of Growth
Once you’ve achieved product-market fit, it’s time to scale your sales. This doesn’t happen in a vacuum. It is essential to ensure that your company remains profitable and that profits, dividends and sales grow. Maintaining a product’s position in the market over a long period will give you a basis for further development. To stay on track, periodically track your income and profits.
Market share
As you increase your production, marketing, and sales, you must also consider the market part. What percentage of the market does your business occupy? What market share do your competitors have?
Market share is a tricky metric because you likely won’t be able to get data from your competitors. However, it can be assessed using your periodic reports and market research of your competitors. This will help you evaluate your overall performance over the last period compared to the rest of the market.
Feedback and interaction with customers
A big part of achieving product-market fit is customer interaction and feedback. Before a product goes to market, you should focus on quality feedback that will help you improve the product. Once you achieve product-market fit, the focus of your interactions should change. Throughout this process, measuring your success should be based on data. Your data will let you know if you consistently engage with your target audience as you scale.
It can be challenging to focus on interacting with customers. As your customer base grows, your teams will strive to meet increasing demands and increase production levels by looking for ways to improve products. This leaves little time to collect detailed feedback from users.
To solve this problem, customer service inboxes and product analytics are often used to assess how well a product is performing and where customers would like to see improvements. It is essential to continue receiving quality feedback to add depth to the tracked analytics. Quality feedback can also help prioritize development tasks and motivate and engage teams. Key metrics to monitor are new user adoption and active usage.
Transition from Early Adopters To The Rest Of The Market
It’s important to remember that your original customers who led you to your product-market fit were early adopters. These are the people who are always the first to try new things. However, most people need more reasons to try your product. Then, your marketing strategies should include content that gives potential clients an aim to try your product.
Frequently Asked Questions About Product Market Fit:
How long does it take to realize product market fit? There is no set quantity of time to achieve product-market fit. It depends on how quickly you can complete your market research and provide value to your target market to achieve long-term profits. Most business experts recommend a maximum of two years to achieve product market fit.
What Is Product Market Fit?
Product-market fits is finding the right product partnership and value proposition to satisfy your target customer base. Before you start, you must know what products you can sell to the target audience most likely to buy them.
Who Is Responsible for Product Market Fit?
Responsibility for product-market fits lies with the team interacting with the product or service and the customer. This includes product development, marketing, manufacturing, testing and sales, all contributing to creating and delivering the customer value proposition.
Final Note
Product market fits is a process that combines business goals to increase sales with target audience engagement and feedback to help the business improve the product. Achieving product market fits requires a team of dedicated people working together throughout the process.
