In 2007, Marc Andreessen invented the phrase "product/market fit," which he defined as "being in a good market with a product that can fulfil that market." Since then, a slew of new perspectives have emerged. You've found product/market fit, according to Paul Graham of Y Combinator, when you've created something people desire, whereas Sam Altman, also of Y Combinator, thinks it's when consumers spontaneously recommend others to use your product. Another common phrase that has been heard from a variety of places is simply: you can feel it.
This might be the case for certain companies. Customers asking for more, stock or server capacity running short, and feverishly recruiting to meet up with demand are all stories you hear about companies.
This isn't the case for all businesses. Some businesses seek funding in order to buy more time to establish their product/market fit. Other businesses, such as Prosple, achieved product/market fit over time by learning, iterating, and making small tweaks along the way.
The fundamental issue with many of these product/market fit criteria is that they aren't quantitative. They aren't actionable if they aren't quantifiable. And that's not enough for my inner geek.
We remember someone telling us back in the early days of Prosple that product/market fit is when you have ten entirely unrelated paying customers; individuals who aren't your family or other friends, but actual consumers. Yes, getting our first ten clients was difficult — the original version of Prosple was a wobbly MVP at best, and each sale was a tedious, painful process of onboarding a new customer to a platform that was, to be honest, nowhere near finished. But we made it!
Then we realised that it was all a hoax, concocted to inspire young entrepreneurs to establish realistic targets and keep going. But, in retrospect, gaining those first ten clients was a lot simpler than I had anticipated, definitely easier than what was to follow.
What we've learned is that product/market fit requires much more than ten consumers. With ten clients, you can safely argue that we've achieved issue/solution fit and that we've shown that we can build a product to address a problem. But we were still a long way from establishing that there was a market for it.
For us, product/market fit was probably closer to 1000 customers. As you'll see, reaching a well defined mark or milestone isn't always easy, and it's a continual fight to come closer and closer.
Product/market fit is an ever-changing aim. It isn't a predetermined aim or a singularity. As the market develops, it's more of a window that moves away from you. Your rivals raise the stakes, new technologies emerge and shift expectations, and your target market develops and changes, so what you thought was a goal a few years ago may no longer be relevant by the time you arrive.
It's critical to keep in mind that you are not your market. Likewise, your first consumers are not your target market. Users who are early adopters are a unique breed. They are more tolerant of half-baked beta goods, and their wants and tolerances are inherently different from those of 'normal' individuals.
Similarly, Beta testers and those who join up as a result of ProductHunt marketing are not your target market. The issue with using Beta testers for testing is that they are competent at evaluating beta products. However, they aren't very good at behaving like actual users who get angry when things aren't obvious or broken, and they aren't representative of how the rest of the market would use your product.
It's uncommon that you'll achieve product/market fit in a single day. Begin by conversing with others. Constantly converse with your consumers. Speak with the folks that come to your website. Also, speak with those who have tried your product but concluded it isn't for them. Those may be the most eye-opening of them all! What annoys you the most about our product is one of my favourite things to ask. If they're a fan, they'll tell you if there's anything bothering them that you can address. If the individual isn't a fan, they'll go off on you, and you'll come away with a lot of useful information.
Discuss your long-term goals.
There's no use in constructing if you don't know where you're heading. Make sure you and your team are on the same page when it comes to your product vision (use this product vision template to get started). Make a public version of your roadmap so you can double-check your assumptions.
Keep in mind that your roadmap isn't supposed to be a list of features and release dates. It's a strategic communication document that lays out your assumptions about the issues you'll be dealing with. It's more of a prototype for your plan in this sense.
When necessary, test and adjust.
Many of us are hesitant to test components outside of the code and interface. You must spend time evaluating your value proposition, price, packaging, and other aspects of how your product is viewed in the market if you want to discover product/market fit. Changing these may have an equal, if not greater, influence on your product/market fit.
Because the window for product/market fit is continually closing, you must always be on the move. This is why having a consistent release cycle and an agile tempo is beneficial to a company's bottom line. Maintain a constant pace with the advancing target.
When it comes to product/market fit, you must be willing to ask yourself some difficult questions (and be ready for some tough answers). Sometimes, product/market fit just doesn't happen, and you have to put your ego aside. Ask yourself and your team this question every now and then: Would we still create our product if it didn't exist right now? This question requires you to consider if you're growing on a foundation of sunk expenses or whether you have something really unique and worth fighting for.
Sean Ellis created a well-crafted survey style in 2009 that is one of the better tools I've seen for determining product/market fit. He recently made it accessible as a template at PMFSurvey.com, or you may use Typeform to make your own.
It asks questions like: What drew you to [our product] in the first place? This information may be used to figure out what issue the user was seeking to address when they came upon your product.
The key question is this: How would you feel if you couldn't utilise [our product] any longer? with the following options: very disappointed, moderately disappointed, and not at all dissatisfied. According to the hypothesis, if 40% or more of respondents indicate they'd be very dissatisfied, the product/market fit is achieved. However, it isn't the end of the tale; the poll goes on to ask some more crucial questions.
It asks: If [our product] was no longer available, what would you most likely use as a substitute? The beauty of this question is that it asks about options rather than rivals. This is the time to check out whether people are still using whiteboards and sticky notes.
Segmentation is the subject of the last series of questions. Inquire about their job title or other demographics, and utilise this information to narrow down your responses. You may discover that your product-market fit is perfect for one market segment but not for another.
Finally, you're adjusting as a result of all of your surveying, segmenting, testing, checking, measuring, and moving quickly. Adaptable and lean businesses are those that achieve and sustain product/market fit.
Every company's path to product/market fit is likely to be unique. While it isn't a crucial metric that you can check off and declare you've achieved, it is something you can track and adjust over time. The trick is to be aware of your own perceptions of product/market fit. Don't start scaling too soon and risk burning up your resources.
Originally published on Prosple India