“Product” can be a physical object, software, a service, or a combination of these. “Market” can refer to target audience segments, ideal customer profiles, personas, or a combination. The “fit” is the magic.
“Product-market fit means being in a good market with a product that can satisfy that market.”
-Marc Andreessen, co-author of Mosaic, co-founder of Netscape; co-founder and general partner of Silicon Valley Venture, World Wide Web Hall of Famer, and who is often credited with developing the concept of “product-market fit”.
Achieving product-market fit is key to a successful business. It means that there’s market demand for what you’re selling, and people are willing to pay for it because it’s better than the alternatives.
Product-market fit is the result of a deep understanding of who your customers are and their opinions of your brand and product. To know if you’ve achieved PMF, ask yourself whether you’ve met these criteria:
- Is the product creating organic growth?
- Are people spreading the word about your product on their own?
- Do people think it is worthwhile to spend money to get your product?
Long before you’re ready to scale up your production, you must find out whether your product can serve as a solution to your target audience. If your minimum value proposition (MVP) fulfills a need, then you are on your way to product-market fit.
Why is Product-Market fit Important
Venture capitalists often require evidence of product-market fit before they’re willing to invest. Unless you have a product that enough customers will buy for a sustainable profit, your company can’t grow. You need to be sure that you have a PMF before you move on to strategic plans to grow your business and scale up the production of your product.
Benefits of achieving PMF include:
- Acquiring customers at a low cost. Companies with product-market fit receive organic and non-paid growth.
- Keeping customers loyal and happy. Retain customers by knowing who is happy with your product and why. Satisfy your customers and entice them to buy by determining what product features are most valued.
- Ability to scale easily when needed: By clearly understanding what you provide to your customers, your company will experience less growing pains and be able to build upon its already well-oiled system.
- Strengthening customer-product relationship: to achieve product-market fit, do user research to understand the psychology behind the customer’s specific needs—and how your product can help solve them. Designing a product with this in mind should strengthen the customer’s relationship with the final product.
- Growth in the customer base: achieving product-market fit means your product is in a unique position to fulfill a need—and delight customers—which will naturally contribute to a growth in sales.
- Recognition in the market: one of the biggest indicators of product-market fit is that people are talking about your product and referring it to friends, family, and colleagues. This word-of-mouth promotion enhances your brand’s presence in the market and helps establish you as a leader in your industry.
How to Achieve Product-Market Fit
There are many ways to achieve your product-market fit. You can adapt your core product to new markets, identify a strong market demand, repurpose or reorganize old ideas, go to where the market is, or even create an entirely new service.
It’s important to remember that fit is not binary. Product-market fit doesn’t look the same from business to business, customer retention curves are also different. However, there are some established processes you can follow to help you achieve it while developing a minimum viable product prototype.
Dan Olsen, The Lean Product Playbook, offers six steps for a lean product process:
- Determine your target customer. The key to building a product your customers will love is to know who your customers are. Who do you think will buy your offering? How will it meet their needs? You might not know exactly who your target customer is at first, but you can find out through market research. Once you have a basic understanding of who your customers are, define your buyer persona—a semi-fictional profile of your ideal customer based on psychographics, demographics, buying capacities, interests, and purchase history.
- Identify underserved customer needs. To build a product your target audience will love and want to buy, you need to go beyond who they are and identify their most significant needs. It’s not viable to create a product for an existing solution in the market. Identify your ideal customer’s pain points and build a solution to fill the gap in the market. You can begin understanding consumer needs by learning from your customers: conduct customer interviews, perform product research, place on-site surveys on your website, and study behavior analytics.
- Define your value proposition. Your value proposition, or unique selling point, separates you from the competition and gives customers a significant reason to buy from you. How will your product meet your customer’s needs better than any of the alternatives currently available? Will it offer better quality? A more affordable price? More exciting packaging? New services? Create a Empathy Map to understand your unique value prop in context of your target customer.
- Specify your Minimum Viable Product (MVP) feature set. Identify the minimum features you want to include on your first product rollout. Keep it simple and doable. Use your product research, buyer persona knowledge, and value proposition to build a version of your product with only the basic functionality. This minimum viable product (MVP) can help you:
- Move faster in the product development journey by testing core features sooner
- Prioritize features effectively by understanding which resonate with customers
- Base your product decisions on customer feedback rather than assumptions
- Create your MVP prototype. Don’t worry about actually creating your full concept… instead, just create a bare-bones product. You can iterate on that after you get customer feedback.
- Test your MVP with customers. Testing your MVP will help you gather authentic customer insights and opinions about the product to understand which features you need to prioritize and the changes you need to introduce to achieve product-market fit. Show your product to a select group of your potential customers. Get feedback from customers. Let them learn about it and try it out for themselves. Ask them what they like about it and what they don’t. What would they prefer to see instead? Stay open and flexible to feedback so you can revise your idea to accurately fit your customers’ wants and needs.
Applying Product-Market Fit to Your Roadmap
Apply what you learned from your MVP to your product roadmap. Break it down into “user stories” as you develop a backlog to help you prioritize the workflow to maximize time, energy, and resources.
Establishing a roadmap boosts continuous discovery. Continuously gather information about your customers to validate and refine your product ideas. Here’s how you can do this:
- Build a discovery team that includes a product manager to focus on business needs and goals such as increasing revenue or product adoption. Include a designer for prioritizing experience design, and a technical lead to offer feasibility ideas.
- Ensure your team is consistently looking for new ways to refine their product ideas by being connected to the product vision.
- Encourage your team to dig deeper and identify the why behind each customer’s needs instead of taking your understanding of customer feedback at face value. This helps you increase customer satisfaction levels and create a product your users love and can’t live without.
- Finally: check in with other teams and stakeholders (not just the product team) throughout this six-step framework to ensure everyone understands what they’re working towards and why and can bridge the gap between where your product is and where your customer wants it to be.
Product-market fit means being in a good market with a product that can satisfy that market. Achieving product-market fit is key to a successful business. It means that there’s market demand for what you’re selling, and people are willing to pay for it because it’s better than the alternatives. Product-market fit is the result of a deep understanding of who your customers are and their opinions of your brand and product.
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What Is Product‑Market Fit? Intuit MailChimp. https://mailchimp.com/resources/product-market-fit/
Product-Market Fit. ProductPlan. https://www.productplan.com/glossary/product-market-fit/
Product-market Fit: What it is and How to Find it. Hotjar. https://www.hotjar.com/product-management-glossary/product-market-fit/