Achieving product-market fit is a dream for many entrepreneurs. You reap the benefits once you’ve found your product/market fit. But what is product-market fit in the first place?
Product-market fit is a situation where your product is fit to address market needs. In other words, you have found the perfect audience for your product and can solve their pain points or problems efficiently.
In this article, we will cover the meaning of product-market fit in detail and explain why PMF needs to be your highest priority.
Product market fit definition & meaning.
Everyone has a different theory about what it means to achieve a product market fit.
One of the earliest (and most credible) definitions of product market fit comes from Marc Andreessen’s blog in 2007. He is an entrepreneur and venture capitalist and is credited to be the father of the PMF concept.
According to Marc, product-market fit means standing in a good market with a product that can address their pain points and satisfy their needs. It bridges what you have built and what the market needs.
Dan Olsen, the author of the popular Lean Product Playbook, defines the product-market fit pyramid, which explains what it takes to achieve a product-market fit. The product-market fit framework is a structured process to reach PMF. Have a look:
Why is product market fit important?
Product-market fit is a crucial point in the life of a startup or business. Mainly because 34% of the startups cite the lack of product-market fit as the reason for shutting down.
Marc Andreessen says no product needs to be ‘great’ to succeed. It is not about a spectacular team, excellent credentials, a solid product, or something else. You need to focus on your product and market needs, and that is enough.
Companies lose the battle when there is a lack of market (or they are not ready to listen to consumer insight. That is where product-market fit enters the equation. You need to achieve your product-market fit.
Your startup must solve a ‘real’ problem, and customers will happily adopt it. If that is not a good reason to chase PMF, here are a few more:
- Organic growth: When you’re serious about user research or feedback and develop a product according to their need, it will make your job easier to attract, onboard, and grow your subscriber base. Your audience is willing to try you out and even give you feedback on improving your offering further.
- Market recognition: Product market fit will ensure that people will talk about you and your solution. Most of your marketing will be ‘user’ run, and you will experience word-of-mouth publicity. This will help you turn into an authority and even a market leader in the long run.
- Cost savings: You will not burn cash in experimenting with things that do not work (or tumble). Instead, PMF will ensure you build something that your customers want. It will save you a lot of resources across development and marketing.
How do you achieve product-market fit?
Imagine your customers lining up in front of your store (or visiting your website) every morning. Every waking day, you hire more people, add more servers, answer their queries, and see your revenues grow.
Feels like a beautiful situation, right? That is what happens when you’ve reached product market fit. You are so busy that you cannot even imagine experimenting with new tactics. But how do you go there in the first place?
The journey to achieve product-market fit is as simple as following five simple steps as below:
- Identify the Problem: Conduct market research to validate your hypothesis
- Develop an MVP: Create a v1 based on the audience’s expectations and market demands
- Gather Feedback: Present it to your audience (or community) and start gathering feedback through NPS surveys, outreach, etc.
- Iterate & Improve: Improve your MVP based on the audience’s feedback.
- Rinse & Repeat: Keep repeating the above steps until the audience is really happy with your product.
Feels like a lot? Need step-by-step handholding on how to implement this for your startup? Check out our blog on the product market fit framework now.
Successful product-market fit examples.
If the PMF framework above made you scratch your head, do not worry. Hundreds of examples of startups use some form of product-market fit framework to succeed. Here are a few examples to help you get a clear idea:
Superhuman’s PMF survey is a case study on achieving product-market fit correctly. An email client promising the fastest email experience, SuperHuman floated a simple survey asking users how they would feel if they could not use the tool.
Their survey revealed that 22% of the users would be ‘very disappointed’. They wanted to meet the goal of 40% (at which they felt they would have reached the right audience).
So, they asked further questions on how they could improve their solution. Their agile PMF and development approach helped them reach a level where 58% of their current users agreed they would be disappointed if Superhuman ceased to exist.
Read more: How SuperHuman Built an Engine to Find Product Market Fit?
Netflix’s pivot from DVD-on-demand to an online streaming service is a perfect example of listening to the consumers and achieving product market fit. At first, when Netflix launched, the users wanted a way to avoid late fees they paid at physical DVD rental stores. Netflix removed that by mailing DVDs on a subscription basis.
Next, when the internet boom was at its peak and people were looking for better ways to watch movies, Netflix quickly pivoted to grab the consumer pulse. They launched an online streaming service catering to users’ expectations and demands. A true example of being flexible, catering to market demand, and growing in the process.
Listening to and acting on customer feedback is integral to the product-market fit equation. Slack understood it deeply and used customer feedback as a growth engine for its communication tool.
Slack’s founder, Stewart Butterfield, was known to handle customer interactions on Twitter himself in the early days. That helped them achieve product-market fit and grow phenomenally. Between 2014 to 2015, the app grew from 15,000 daily active users to 4 million DAUs, thanks to the feedback-driven PMF approach of the founder.
Read More: Slack’s Launch & Active Listening Strategy
Next Steps: Achieve Product Market Fit using Customer Reviews
By now, you know how important it is to chase product-market fit to grow. While reaching out to your audience at first might appear daunting, you will find it more accessible as you grow. If you feel like gathering audience insights from the beginning, keeping an eye on product reviews is a great idea.
GapScout can help you scan all online customer reviews automatically in real-time and provide you with daily analytics. Online customer reviews and testimonials give you an understanding of your audience is thinking. You can use knowledge for informed decision-making.
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