Finding a product/market fit is hard.
Finding a product/market fit for your product or services is not easy. Sometimes it is like trying to fit a square peg in a round hole. It might sound as simple as connecting your service or product with the right target market. With a new product or service, this might be more complex. For example:
- You might have the right target market and the wrong product or vice versa
- A subset of the product might fulfil their needs or a bigger solution might be required.
- The product might have indirect competition that is upheld by ideological constructs.
There could be an array of things that could be wrong and discovering what the issue with the fit is could take quite a few iterations.
Testing for a product/market fit
Eric Ries famously defined a startup as ” …a human institution designed to deliver a new product or service under conditions of extreme uncertainty…”. As most small businesses of a startup nature don’t know where they fit in, it would make sense to use the build/measure learn cycle.
We all need to accept the fact that we don’t know what we’re doing. We need concrete proof of what we assume. With any product, we could easily assume hundreds of things, including:
- People would want to use our product
- People would be willing to pay x/month for our service
- Our product is backed by a blue ocean strategy.
Working with our assumptions and getting substantial proof that this is the truth is central to getting that fit.
Validate your assumptions
Assumptions can be validated with different indicators:
The channels of validating your assumptions appear different, depending on your business model, product and channels you want to use.
As there is not a one size fits all, I would like to use some examples to illustrate how one can validate assumptions:
- Advertising and idea validation: Testing interest might be as simple as putting up a splash page and running a Facebook ad campaign
- Existing products/Adding new features: Adding a menu item in your existing product or website to see if your existing userbase wants the new product or service.
- UX/Usability validation – Contact sessions with a core group with Copic marker mockups
By iterating (learning), a better idea can be formed about client expectations and requirements. The art is to do this as quickly and meaningfully as possible, so not to exhaust financial resources.
The four fits framework
Brian Balfour wrote about the growth framework. A $100 million company needs to consider four aspects and how they fit together:
- Product/market fit – does your product fit into the market that you are targeting?
- Model/Market fit – Your engagement model will show if you need one big customer or several smaller customers (i.e. the market).
- Channel/Model fit – your engagement model should fit in with your channel. If an advertising model is used, then the ROI model should be sufficient for the channel.
- Product Channel fit – Whichever channel (Marketing, APIs, Technology) you decide to use, you need to follow the rules. Your product needs to fit into the channel, as you don’t play by your rules, but by theirs.
Using this framework, one can scrutinise each part of the startup assumptions and validate if this would be feasible and if one would need to explore other indicator options.
How do I know if the product/market fit has been achieved?
Achieving Product/market fit means that the product/service does not require additional changes or pivots. The market, model, product and channel have reached a sweet spot.
There are a few metrics that can assist in deciding that product/market fit has been achieved:
- The 40% rule – If 40% of the customers indicate that they would be “very disappointed” if they could no longer use the service or as a “must-have”.
- Online metrics – Most of these metrics can be tracked through Google analytics
- Low bounce rate – i.e. the customer expectations are met
- Time on site
- Pages per visit
- Returning visitors – i.e. the impact of your product or service is so big, that they keep on coming back for more.
- Customer lifetime value
Understanding the assumptions that are made concerning your product/service will guide you in testing your idea. You need to have proof that you’re on the right track.
Using the four fits framework, you can establish if you have a good fit in product, market, model and channel.
Finding a product/market fit is not easy – but worth the journey.
Simply be effective.