Hi! My name is Shubham, and I have spent many years helping startup founders and entrepreneurs understand how to find product-market fit for their products.
So, you have a product that you believe will solve a problem that plagued the market for years. You’ve pulled dozens of all-nighters and brought your idea to life in the shape of a Minimum Viable Product.
Your product is ready, ripe for the taking. You’ve told friends, family and co-workers to check out your new baby. Everyone loves your product and gives you excellent feedback, but no one seems to use it. If this sounds like you, you’re at the right place.
As an entrepreneur, it is essential to know whether your target customers need your product or if they would eagerly pay for it. So, if your product is flying off the shelf and you are clamouring to meet this demand, you have attained a product-market fit.
What does product-market fit mean?
In 2007, Marc Andreessen—the co-founder of influential Silicon Valley venture capital firm Andreessen Horowitz wrote a blog post where he coined the term “product-market fit”. He described this as “being in a good market with a product that can satisfy that market.” Simply put, a product-market fit is a stage for a startup where they have successfully identified target customers and can serve them with the right product. When you attain this stage, you have found a product-market fit.
How to measure product-market fit?
Although there are no set rules or metrics that can help you find out when you’ve attained a product-market fit, you can tell when you’re going in the right direction, thanks to inputs from Andrew Chen—a venture capitalist. Andrew suggests using a mix of both qualitative and quantitative metrics to gauge success and to know how to find product-market fit. Here are some qualitative and quantitative metrics to help you get started.
Metrics for measuring product-market fit
- NPS: NPS or Net Promoter Score measures the willingness of customers to recommend your startup’s product or service to others. NPS is used as an indication of your customers’ overall satisfaction with your product or service and is a good way to understand if customers love your product enough to recommend it or not.
- Churn rates: Customer Churn is the percentage of customers that cancel their subscriptions or stop using a product in a given time period. If the number of users moving on from your product is higher than the number of users coming in, you’ve got a problem on your hands.
- Growth rates: The growth rate is a factor measured in percentage that determines the acquisition of a customer base over a given time range. Your growth rate must always increase to indicate a product-market fit.
- Market share: The percentage of the market that your product commands are your market share.
- Word of mouth
- Increased media outreach and coverage
What is a product-market fit pyramid?
Dan Olsen—the author of the book The Lean Product Playbook, created the product-market fit pyramid—an actionable model that uses five key components to define the product-market fit for your product.
This is a hierarchical model in which each pyramid layer relates to those above and below it. When you are building a successful product, you form a plausible hypothesis for each of these pyramid components. You then validate your key hypotheses against the Lean Product Process to improve your product-market fit.
What is the lean-product process?
Defined by Dan in The Lean Product Playbook, the lean product process guides you through each layer of the pyramid from the bottom to the very top. The process is iterative and easy to follow.
The six steps of the lean-product process will help you to find a product-market fit effectively. Here’s what you need to do:
Determine your target customer:
Before you start the lean product process, ensure that you perform market segmentation to understand your target customer clearly. Market segmentation involves dividing the market into segments that consist of potential customers who have similar needs and behaviours.
Your target customer will decide how well your product meets his or her needs. Define your target customer as well as possible so that everyone in your product development team knows who the product is for. You can do this well by creating user personas that describe your customer. You can start with a high-level hypothesis of the potential customer you have in mind and revise it as you tweak the features of your product while you iterate.
Identify underserved customer needs:
Once you’ve created a customer persona, you now define their underserved needs. Identify the needs that may have a good market opportunity. You can start by addressing these inadequately met needs, and create additional value for your customers.
Define your value proposition:
A value proposition is a plan that will drive product development to meet customer needs better than your product’s alternatives. In short, your value proposition is the essence of your product development strategy and will help you figure out features that will delight your customers and outperform the competition.
Specify your minimum viable product (MVP) prototype:
Your value proposition will also help you to specify and include this functionality in your MVP. This means that you will create a minimalistic product that your customers validate by accepting its viability. Hence, you build only what is needed to create adequate value for your target customers.
Creating your minimum viable product prototype:
Show your potential customers an early version of your product so you can use their feedback to iterate and improve the final product. You can use tools such as InVision to simulate user experience with interactivity. Tools like InVision will also help you obtain critical customer feedback.
Testing your minimum viable product with customers:
You can use a short survey or a screener to solicit feedback from your customers. A screener will ensure that your research participants have the target customer attributes. Here’s what you can do:
- Schedule one-on-one meetings with potential customers to test and then gather feedback.
- Ask questions during the test process to gather feedback, deep insights, and value.
- Avoid asking questions with a yes or no answer.
Once your tests are complete, interpret the feedback to identify similar patterns. This will help you to prioritize high-value customer concerns so that you can address them quickly. Once this process is complete, you can then refine the prototype to incorporate the required changes. Implementing this process at the outset will help product development teams use resources efficiently, and you can launch your product confidently—knowing that your customers will find your product valuable.
Remember, lean startups follow the build-measure-learn loop to create effective MVPs and implementing the lean product process will help you create a leaner, more customer-oriented MVP faster. If your startup is struggling with how to find a product-market fit, we can help. At Volumetree, we’ve built 100+ products across 17+ industries for startups and entrepreneurs.
We can help you find the right product-market fit, just like many of our clients, who have successfully transformed their MVPs into enterprise-grade products used by thousands of users every day.