Coined by Marc Andreesen in 2007, Product-market fit means “being in a good market with a product that can satisfy that market.”
It is an important concept for startups and mature businesses alike. Whether you want to launch a product off the ground or to determine the viability of an existing feature, reaching product-market can help you scale growth by creating something that your customers love.
What is product-market fit?
In his book Breakthrough Advertising, Eugene Schwarz describes how mass desire can only be exploited, not created. Mass desire is what drives sales, and the entrepreneur “dies when he tries to run against it.”
If demand must come before creating the product, then market fit is all about determining if, and to what extent, your offering solves an existing problem.
A clear product-market fit should:
- Confirm demand for products within your market
- Show your product can solve a problem better than the competition
- Begin to shape your value proposition and growth strategy
An example of a business successfully reaching product market fit is the ride share app, Uber. By modernizing the experience of taking cabs, Uber was able to revolutionize a popular service and dominate the market. A small but psychologically powerful detail gave the app a huge pull: customers could now see where their ride was in real time on their digital map.
Whilst prices were more competitive, the service itself wasn’t necessarily better. What customers loved was a convenient alternative to the chore of calling a taxi line, and waiting for it to arrive.
If you want a deep dive into product-market fit, here are some books to get started:
- The Lean Product Playbook by Dan Olsen
- Crossing The Chasm by Geoffrey A. Moore
- Trajectory Startup by Dave Parker
- Product-Market Fit Analysis: A Bootstrap Marketing Guide by Matt Brocchin
Why is product-market fit important?
Product-market fit helps businesses determine whether or not your offering is providing a solution that enough people value.
The results of a murky product-market fit can be fatal. Energy, investments, cash and all kinds of resources could be doing nothing besides circling the drain if misdirected.
Trying to scale without product-market fit is one of the most common downfalls of startups. Expensive hires and investment into marketing when your focus is incorrect will kill a new venture.
Facebook VP and investment advisor Alex Schultz warns of the danger that founders often find themselves in when they believe they think they’ve found product market fit, only to later discover they’ve jumped the gun. Every strategic move that drives a business forward hinges on your product being a good match for your customers.
Once you know the answers to these questions, you can begin carving out a customer persona, find out which factors work and why, then expand on them.
Best practices when looking for your product-market fit
Product-market fit is an evolving process. Incumbents become obsolete. Behaviors shift over time. Your main product might have reached product-market fit, but some of your features might still need a bit of tinkering to become something your customers love.
Here are some things to take into account when assessing the market viability of your product and/or features:
- Ask the right questions on user acquisition and engagement. Is the product gaining momentum on various marketing channels? Are people sticking around? Keep these questions in the back of your mind when determining product-market fit.
- Talk to your (potential) customers. Set up calls, ask for feedback, and make sure that you take into account how people use your product. Directly interacting with your target customers may seem intimidating, but it helps you figure out how to create a product they’ll love.
- Examine your analytics. Use metrics to get insights into your most popular features, revenue growth, user engagement, and so on. Tools like Google Analytics, Stripe, and June help you automatically track various product and business analytics.
- Don’t be complacent. Just because people are excited to see your product being built does not necessarily mean they’ll become regular customers. Constantly evaluate market demands through analytics and customer interactions to make sure that you’re reaching product-market fit.
Different methods for finding product-market fit
Below, we show several ways of investigating product-market fit.
The product-market fit pyramid
In the Lean Product Playbook, Dan Olsen uses the above pyramid to breaks down the process into a step-by-step guide:
- Identify your target customer
- Identify underserved customer needs
- Define your value proposition
- Specify your Minimum Viable Product (MVP) feature set
- Create your MVP prototype
- Test your MVP with customers
You can find detailed breakdowns of each part over at Lean Startup Co.
Summarily, the process is about ideating, testing, and reiterating your minimal viable product (MVP) until you’re assured it’s a good fit.
In 2018, email client startup Superhuman paved a unique road for finding product-market fit, which became a conversation piece in the growth space. Their 5-step product-market fit engine provides another solid foundation:
- Set up your survey,
- Segment your audience,
- Analyze feedback,
- Roadmap your improvements and
- Track your metrics.
The results and lessons are illustrated for your benefit over at Coda, where the detailed guide walks you through the process.
The product market canvas
Another way to explore compatibility is with a product market fit canvas.
The table divides into two segments: product and customer. The large, printable template provided by Business Model Analyst can help you begin to visualize how your product fits the market.
Find your product-market fit with Growth Mentor
When analyzing product market fit, your business needs to be ready to pivot, in case a better opportunity presents itself.
Guidance in the early stages of finding your groove can make or break a startup. You can begin confidently tackling your own product-market fit today with Growth Mentor. Our pool of industry experts are perfectly positioned to guide you through the process, and give your startup the foothold it needs out the gate.