What is Product Market Fit? How to achieve Product Market Fit?

Product market fit is a valuable mental model for the interaction between a business, its products, and their customers. In other words, it's the degree to which a product satisfies the market demand. Which is why it's important to not only understand but master the concept of “Product/Market Fit”.  This will change the way you look at the world and inspire new ways to provide value to your consumers and build your business. 

"If you build for yourself, you’ll always have product-market fit" - Naval Ravikant

"A lack of product-market-fit is never solved with more features" - Brian Norgard

"Understanding what your audience wants is more effective than trying to change what your audience wants" - Matthew Kobach

What exactly do you mean when you say “product-market fit”?

Product-market fit is defined as having developed a product that satisfies the market or the demand. That demand can be:

• Latent - for e.g. MyGate & their apartment services
• Obvious but unmet properly - like Swiggy / Food Delivery

Once you have identified the need or a gap for a potential demand, the next step is to talk to some early customers / adopters, gather some feedback and gauge their interest (by giving them free / special access) and if they would eventually convert into a paying customer. And then build / forward-iterate the product around those customers' needs. If you don't achieve this fit, you'll never unlock the growth. Most companies fail because they spend money without thinking clearly and assume what customer’s needs are, instead of understanding their actual need. 

One of the most crucial goals for a business is to achieve product-market fit, yet it is also one of the most misunderstood notions. When a startup has produced a product that provides considerable customer value, it has reached product-market fit. “This signifies that your solution satisfies real client expectations in a way that is superior to the alternative solutions”. And from thereon its about scaling the product to reach more and more customers.

Product Market Fit History & Origin

Product-Market-Fit as a concept was developed and named by Andy Rachelff and Product-Market-Fit pyramid framework was created by Dan Olsen. 

How To Identify Product Market Fit (Lean Product Principles)

• Identify your target market:

In the end, it’s up to the target customers to judge how effectively a product fits their demands. To properly define your target customer, utilize a market segment strategy. The splitting of the entire market into target markets, which are made up of prospective consumers with similar expectations and habits, is known as segmentation.

Identifying the characteristics and traits of different target customers, also known as “persona archetypes”, is a wonderful method to define your target client so that everybody on the product team knows who they’re creating and producing for. Begin with an increased assumption about your target client and change it as you learn more about, improving, and altering the aspects of the product to make it better.

• Determine underserved customer demands: 

Once you’ve developed a target customer hypothesis, the following stage is to figure out what their unmet needs are. Determine which unique demands relate to a promising potential market. In order to provide value to customers, address any needs that aren’t being satisfied adequately.

• Establish your unique selling proposition: 

A business model offers a plan for how a product will meet customer demands better than the alternatives and is at the heart of product strategy. Select the client needs that your product can meet. Determine which of a product’s distinctive features will excite consumers as well as how your products will surpass the competition.

• Define your product’s minimum feasible set of features:

After you’ve defined your value proposition, you’ll need to figure out what features your minimum viable product will have. This strategy focuses on developing only what is required to provide enough value to your target consumer to confirm that your product is on the correct track. The purpose of this method is to iterate until you have a minimal viable product that your consumers approve of.

• Test your minimal viable product with customers: 

After you’ve finished prototyping your minimal viable product, ask your target market for comments. Use a “screener,” or a quick survey, to make sure market research participants have the characteristics you’re looking for. To test, schedule one-on-one meetings with each customer. User testing should be done in waves of five to eight participants, as per the studies.

Observe what the target client says and does while using the prototype during the test. To get deeper insights and get the most out of user tests, ask clarifying questions. Closed questions that require a yes or no response from the interviewee should be avoided. To elicit thoughtful responses, use non-leading, open-ended questions. 

Analyze and understand the input acquired after completing user tests. Identify common themes in client feedback and prioritize any consumer problems so that you may resolve them. Then, to include their worries and experiences, refine the initial prototype.

Importance of Minimum Viable Product in Product Market Fit?

Once you have identified your Product Market Fit exercise, the best way to dip test and get feedback is to build an MVP (Minimum Viable Product). At times, we can just use a no-code / low-code approach to create illusion of the product and test the market. Some of the startups who achieved Product Market Fit in a very low cost manner are:

• Meesho: Story goes that Meesho's founder used whatsapp + excel sheet to manually create a list of product and made it available for home-makers / women reselllers. Once they saw the traction and 10's of order per day, thats when they started building a proper product
• Swiggy: Back in 2015 when Swiggy started, they just focused on Koramangala as the only area where they served. As MVP and PMF, they tied up with few restaurants and leveraged their friends and family network for initial orders. Catch was - impeccable delviery speed

Three Mistakes Product Managers Make When Trying to Find a Market for Their Product:

Many startups haven’t figured out how to solve the growth challenge because it’s too often framed as a math problem. We know how to get from point X to point Y and what metrics we need to reach. But what about the areas in between? Building a sustainable business requires a shift in attention away from numbers and toward the quality of your people, processes, and goods. What defines your company is how you do things, not what you’ve done.

When reviewing a product market and determining a go-to-market fit, Product Managers frequently make the following three mistakes:

Mistake no:1 

Believing that your product and market are a good match, just because you have customers doesn’t mean you’re successful -

When a company reaches a particular number of paying clients, many executives believe they have achieved product-market fit. Investors frequently affirm this client count validation, encouraging them to raise additional money in order to move faster and develop a go-to-market model that allows for even greater growth. They may have some consumers, but are they the proper customers? Are they going to stay? To guarantee that they’re investing in the correct go-to-market strategies, startups should spend time identifying target customers.

Market segmentation, according to one product management expert, can be used to define a target consumer by separating the entire market into segments of customers with comparable wants and habits. He also emphasizes the significance of developing “persona archetypes” to characterize your target consumer; you can then disseminate these materials throughout the company so that everyone is on the same page regarding which customers to pursue.

Mistake no 2: 

Using False Indicators to Raise Too Much Too Soon

There is a prevalent notion that market fit can be discovered fast and that Product Managers should not devote much time to it because acquiring capital is the most crucial step toward growth.

When startups raise too much money too quickly, they frequently don’t spend enough time evaluating product-market fit, which can have major implications. Choose the incorrect delivery methodology and pricing, and you’ve effectively removed a portion of the entire market that may have profited from your product or service. In the age of subscription-based business models and hyper-growth mindsets prevalent among today’s founders, this error has become all too typical.

Before coming to market, leaders should ask themselves the following questions regarding their product:

• Am I trying to deliver my service or product through a one-time price, a membership, or a license model?
• What is the limit of how much is too much?
• Should I go after small and medium-sized businesses (SMBs) or large corporations?
• Should I sell directly or via a middleman?
• Should I sell to consumers online, in stores, or both?

Mistake no 3: 

Without a Vision, You Can’t Move Upmarket-

Before moving upscale, leaders should take a step back and consider driving more penetration into their initial target sector. Moving upmarket can inject challenges into your firm that go beyond the product, such as customer support localization, time zones, local partner resources, and foreign currencies. You can also elevate customer expectations for what your product can do in terms of features and roadmap.

Conclusion

“Once you have product-market fit, you can’t lose it,” is a wrong notion and one of the most common product-market fit misconceptions. Markets and competitors are continuously changing. Even if you have a great product and go-to-market fit, be aware that the market is prone to change. You may reduce churn and be on your way to developing a sustainable and long-term business by understanding that product-market fit and go-to-market fit are interdependent and putting equal emphasis on attaining both. As a great Product Manager, its imperative that for any new product that you plan to build (& launch) as a part of startup or a matured organization, you get the Product Market Fit right. It does take some effort, but Product Market Fit exercise can help you avoid costly mistakes.  

PG Tip: Please dont confuse MVP with Product Market Fit. PMF is about understanding your target market and if your product is solving some problem for them. MVP is build a minium viable product which can help achieve Product Market Fit.

Reference Articles:

1. https://medium.com/swlh/slack-dropbox-spotify-product-market-fit-318838eb7de2
2. https://a16z.com/2017/02/18/12-things-about-product-market-fit/