Do you really have product-market fit?
I’ve heard from too many founders who mistakenly believe they’ve found product/market fit when it turns out they haven’t. This is a huge problem for all sorts of reasons, but mainly because it prevents them from getting the needed advice and feedback that will help guide their decision-making process.
What is Product/Market Fit?
This is the point in the business where you have a product that solves a problem for an underserved market. There are quite a few ways to know if you've found your Product/Market Fit.
Basically, your metrics will show that people have been using your product (and are willing to pay for it) and have been satisfied with it. You should see steady growth, as well as increases in revenue and customer retention. The concept of product/market fit is simple in theory, but in practice, the search can be difficult. Many companies don't realize they're on the wrong track until it's too late. The best time to stop and take stock of your progress is when you're having trouble generating traction or securing funding. You might need to pivot your business model, pursue a different market, or even abandon your idea altogether. Product/Market fit means that a startup has found the right product to meet the needs of its market. Early startups often create products and services based on customer feedback and their own assumptions, which may not be in line with what the market actually needs (or wants.) However, once entrepreneurs find product/market fit, then they have a strong foundation upon which to build their business.
– Mark Andreessen
Signs of Product/Market Fit
- Product/market fit is achieved when you can’t keep up with demand
- You’ve captured the attention of early adopters
- You’re doubling your customer base in a short time period
- Sales are increasing faster than your ability to manage them
- Your beta customers are reporting that they would recommend the product to their friends
- Your customers will continue to re-purchase your products at a high rate
- You find yourself spending all your time on your product and not your other responsibilities
When to Know You've Found Product/Market Fit
It may seem appealing to think the product you are building is great, but you need to make sure it’s actually solving a customer problem BEFORE you start building. If you are not solving a real problem for your customers, then the odds of finding product/market fit are slim. You should also be prepared to change directions if it becomes clear that what you are developing isn't solving the right problem. At this point, you should validate your product idea before building it. Validation is important because it allows you to see if people are interested in your product before you spend hundreds of hours and thousands of dollars to build it. If the validation process discovers that your idea isn't something consumers want, then you can stop before building out the entire thing. There are many ways to do this, but the most common way is to use landing pages to find out if people are willing to sign up for a beta or purchase your product.
How to Find Product/Market Fit
Product/market fit is the holy grail of startups. It means you’ve found a pain point (i.e. an unmet need), and you’ve created a product that provides an elegant solution. You can also think of it as finding your target customer or user persona, and building something they really want. As mentioned earlier, the concept of product/market fit is simple in theory, but in practice, the search can be difficult. But there are some ways to help find it scientifically. One of the most efficient ways is having customer feedback loops.
Customer feedback loops
Customer feedback loops are a great way to test a product. A feedback loop is an iterative process that relies on testing one variable at a time. With each test, the company learns more about the customers' preferences and what changes could increase or decrease their satisfaction.
The feedback loop should include three steps;
- Gathering customer data
- Analyzing that data, and then
- Implementing the suggested changes
It is important to use this process for every product because it can identify any weak points in the product's design before going into mass production.
What Happens After Finding Product/Market Fit
After you find product/market fit, it's time to scale your business. To do so, you'll need to build a sustainable revenue model. You can do this by increasing conversion rates or increasing customer lifetime value.