When creating a product for your target market audience, you want to create something that resonates with your target user base. To ensure that, your product needs to fit the market you’re selling it to. And that’s what product market fit decides.
Today, we’ll be discussing what it is and how you can achieve it the right way. So, let’s get started with the definition and work our way through the entire process, shall we?
Definitions of Product Market Fit
Product market fit is a scenario where potential customers are using your product to such an extent that there’s a sustainable profit margin and growth you can achieve with your business plan. It comes with the ability of the product to satisfy the market base.
For any business to survive, there must be enough demand for what the business is selling. The best way to ensure a supply to back up the demand is to create a supply based on the market’s demand.
Why Is Product Market Fit Important?
The biggest problem with most companies and startups is that they don’t have product market fit, even when they think they do. And it’s also why many startups fail before they even start properly.
It’s not about having an idea of what you want to sell to the public; it’s about if there’s enough demand for the actual product that you’re selling.
Until you’ve made sure that you’re offering something that the current market will buy, you don’t have the means to focus on other objectives like scaling your product strategy or upselling your current user base. After all, how can you upsell a customer base that doesn’t exist yet?
Here are three ways to support your company’s growth hypothesis by achieving product-market fit:
Getting New Users/ Customers At Lower Cost
When you create a consumer product that helps users by doing exactly what it was supposed to do, customer satisfaction enables the product to have organic growth that is completely non-paid. If you create something good, it will sell itself by serving the users the right way.
Creating Retaining, Loyal Customers
You validate their choices and opinions when providing the right features and benefits and proper customer service. That way, you gain retaining customers who will always come back for what you have to offer.
Creating Potential Room For Future Scalability
The growth of your company will rely on the product you’re offering. When you’ve achieved product-market fit, you will have a better development strategy in no time while you focus on evolving your product further.
How To Achieve Product Market Fit With 6 Easy Steps
Now that you know how important product market fit is, let’s take a look at the measures of product market fit achievement:
- Step #1: Determine Target Audience
- Step #2: Identify The Core Pain Point Of The Audience
- Step #3: Define Your UVP
- Step #4: Specify The Features Of Your MVP
- Step #5: Design And Create Your MVP
- Step #6: Test Your MVP With Your Target Audience
Step #1: Determine Target Audience
Ask yourself a few questions before you start doing anything at all. The answers to these questions should reveal who your target audience is:
- Who will buy what you are offering?
- How will your product meet their needs?
- Is there a demand for what you’re selling?
At first, it may seem like you are stuck in a puzzle you can’t solve. But that’s nothing detailed market research can’t solve. When you research your target market, you can identify different user personas. The collection of all these customer profiles is your target audience.
Step #2: Identify The Core Pain Point Of The Audience
Now that you have an audience in mind, it’s time to figure out one core pain point of the audience. Even if you start with one, you will find others as you go along. And then you’ll find that others in the market are already selling the same solution to the same problem.
Step #3: Define Your UVP
It can be tough to solve problems in a market where many are doing the same thing. The trick here is to find a unique way to solve the core pain points of the customers, along with presenting in a unique way that stands out from the crowd. That’s what your UVP (Unique Value Proposition) is.
When you offer something that no one else is or offer it in a way that no one else has yet to do, you are sure to get enough eyes on your product and increase your chances of business success.
Step #4: Specify The Features Of Your MVP
Now that you have decided on all of the above, it’s time to set up the features of your product or your Minimum Viable Product (MVP). Remember, it’s supposed to be a minimal product that performs the required operations flawlessly.
So keep enough features in there that will help the customer base the way you want it to, but at the same time, don’t put in so many features that your startup team is stuck in development hell.
Step #5: Design And Create Your MVP
Congratulations! You’ve decided on your features. Now, it’s time to design and create your MVP. Of course, remember to follow all the best development practices to build your MVP.
Entrepreneurs often refine their proof of concept before maxing out on MVP. Do check out this POC article if you want to know more about it.
Step #6: Test Your MVP With Your Target Audience
When the development is complete, it’s time to test your MVP with your target audience. Consider every single customer feedback, and improve your product in every way possible to ensure that all your customers feel validated and heard.
Necessary Metrics To Measure Product Market Fit
While testing the MVP with your target audience, you will need to keep an eye on some important metrics that can help you measure product market fit. We’ll highlight the most important ones to make the process easier.
The rule is pretty simple. Inquire and discover how many customers would be disappointed if your product stopped existing on the market. If the positive response rate is above 40%, that makes your product market fit.
If otherwise, it means your product requires immediate attention and improvement.
Net Promoter Score (NPS)
Net promoter score is the number of people who would happily recommend your product to others because they are satisfied with what you are offering. These users can bring in new users while becoming retaining customers.
Customer Lifetime Value
This number indicates each customer’s financial value for the time they have been purchasing your services. A higher number means a better product market fit.
This metric can be complex since not all returning visitors will become retaining customers. Returning visitors metric can be found on your website, and it can often be people who recommended your product from multiple sources and decided to check it out.
But a higher returning visitor rate indicates that people are considering purchasing your product and services and are pondering their final decision before committing to it.
This is another metric that ties into how good your product is. Are reputable websites covering your product with blog posts/ video content? Then you can rest assured that your MVP has reached the product market fit status.
When your product is so good that others are talking about it for length, you get free marketing, and the additional credibility helps your user base grow without additional marketing strategies.
This is the rate at which your customers are adopting your product. Of course, you want higher acquisition rates, which means that more and more people are using your services daily.
Customer Retention Rate
Your duties don’t just end on getting new customers; you also have to keep them interested in your product continuously. The customer retention rate is the rate of current customers who choose to stay because they are satisfied.
This indicates the number of customers using your product regularly and getting a return on their investment with a great user experience.
This metric indicates the number of people satisfied with your product’s services and the interactions they make with your company as a whole. Customer satisfaction can be measured by your product’s positive reviews on different digital outlets.
As it says on the tin, it’s the total amount of money your product made from sales. Suppose the amount of total revenue reaches or surpasses your company’s target margin. In that case, there’s no denying that your product is market fit.
This metric indicates the number of customers successfully referring your product to other people who are becoming your new users or customers. It can be measured by referrals that lead people to your website.
5 Examples Of Product Market Fit
Here are a bunch of examples of products that reached the product market fit status and are still going strong.
Everyone was getting too tired of constantly paying for DVD rental stores and the commute. Netflix made it easier: “We’ll mail it home to you. You can keep it as much as you want if you pay the rent”.
The best part about Netflix is they never let themselves go into obscurity by keeping up with the market trends. When DVD players were obscure, they opted for the next best thing. And continued to do so until they evolved into the streaming empire they are today.
It’s a great example of how constantly maintaining product market fit in a changing market can only get you more and more success.
Google struggled a lot during its earlier days to stay relevant among other competitor search engines. But the idea of offering ad spaces and the invention of AdSense gave them the competitive edge to make them fit for the market.
They knew anyone would pay for their company to be visible on an ad on the internet, so they created ad spaces for other websites, and AdSense ensured that it would show relevant web pages.
Google Is still going strong as the most powerful search engine. How do we know? Do you think of any other search engines when you need to search for something? If no, there’s your answer.
Slack is the most mainstream platform for workplace communication nowadays. But they started as a completely different business idea. The developers were building a video game, and they quickly put a chat app together to maintain inter-team communication.
Later they realized that there were many other games for the genre they were working on. Still, there wasn’t anything like their communication tool. So they ditched the game idea altogether and started developing Slack further.
They proved that focusing on a better product-market fit can benefit you enough to bring back the costs of your previous losses.
Superhuman is an email client whose primary focus is to provide the fastest email service possible.
Superhuman chose the 40% rule to determine their product-market fit and ran surveys and customer interviews. When the initial result was 22%, they asked for feedback from users to improve their services till the survey reached a result of 58%. With this result, Superhuman did not doubt that they had reached PMF.
The segment is another example of focusing on an entirely different product to achieve product market fit. They first built a B2B product (analytics tool) that didn’t see any customers. They then decided to create a B2B business over their open-source data library.
Soon enough, they found an interesting market and decided to build the right product for them. Soon after their customers started getting return value for purchasing services, Segment achieved PMF, and the status of their company took 180 overnight.
To Wrap It All Up
Though Product Market Fit isn’t the only thing you need to achieve ultimate success, it is one of the core requirements that can help you determine the overall sustainability of your business.
Want a product in your hands that will achieve product-market fit right away? Impala Intech can help you build one!
Product market fit allows you to find out if what you’re selling actually has a demand in the market. If you’re trying to sell something without a demand, your business will suffer losses.
When the product has had a successful launch with a satisfactory amount of users, it is safe to say the concept has achieved a product-market fit.
There are several metrics to measure product market fit. A few of them include total revenue, customer advocacy, customer retention rate, customer satisfaction, etc.
User research allows you to understand what they are trying to achieve by using a certain product. When you design the product to deliver the demands of the target audience, you can achieve product-market fit much faster.
Not everyone will want to pay the same amount of money for the same resources. It’s up to you to find a middle ground for the pricing of the services of your product that is fair.