Setting your product up for success is the goal of any company, big or small. But as smaller and newer companies first get started in their category, it’s even more important to get a good start that helps your target audience catch onto the joys of your offering as quickly as possible. Product-market fit is increasingly mentioned in the world of startups and enterprises alike, so what exactly is it?
What is Product-Market Fit?
First coined by entrepreneur and investor Marc Andreesen, the term most basically refers to the concept of identifying a customer market with a specific need and creating a product to meet that need. It bridges the gap between target customers/pain points and an optimized product that adds value to the customer’s experience.
Obviously important for any company, it’s especially relevant for early-stage startups that are finding their place in the market and in the process of designing a product that can outperform competitors. A thorough understanding of the audience’s current desires and options means that you can create a product that stands out and offers features not otherwise available.
Additionally, product-market fit becomes even more critical for startups when it’s used as a measure for potential investors in whether they should get behind your product. Many venture capitalists will want to see proof of solid product-market fit before they commit to your company, because that can set the tone for your success later on down the road. Other efforts, like adding new features or upgrading existing users, are useless if the first iteration of the product is not well-suited to its target market. This first impression, so to speak, can make or break the audience’s reception to any further developments, so you’ll want to make sure that that’s well-established (as will your investors!).
Who Develops Product-Market Fit?
Although it’s typically associated with the marketing team, a product manager is also responsible for building out product-marketing fit and guiding various teams to align with it. Marketing is often responsible for continuing to expand on this framework, and as your company grows marketing will shift more and more towards building campaigns that speak to its target market as effectively as possible.
How Do You Know If You’ve Achieved It?
There’s no one metric that you can use to officially declare when you’ve reached product-market fit. Instead, there are signs to look for as you develop your product that signal you’re getting closer to your goals.
- When doing user surveys, do participants indicate they’d be willing to choose your product over competitors’? Are participants who have rejected competitors indicating they’d use your services?
- Do users understand the unique elements of your product that differentiate it from similar ones?
- Do user testing results show that your product is accurately being categorized?
- Are you gaining users through word of mouth?
- Is there an uptick in company and product coverage from outside sources that indicate your product is catching on?
Aside from these qualitative metrics, quantitative markers like churn rate, growth rate, and market share are also helpful for gauging how successfully you’re fitting into your target market.
Product-market fit is a journey, not a destination, and there is always work to be done. Diligent market research and an adaptable business model allow you to efficiently design and market a product that will stand out from the competition and become a customer favorite.
To start, you should decide on who your target user is and what need you’re trying to answer to. Define your value proposition and hone in on that, making it as perfect as possible before you begin trying to add new elements that could cause you to expand before you’ve settled comfortably enough into your category. From here, you can develop and test your MVP with users and use the results to guide you in the right direction.