How to find a product-market fit? – an effective 5-point approach

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how to find a product-market fit

A systematic way to arrive at a product-market fit


Product-Market Fit is quite a common thing in the startup community. According to Marc Andreessen, who originally coined this term,

“Product-market fit means being in a good market with a product that can satisfy that market.”

The first condition is that you need to have a good market i.e. there should be an urgent problem that customers want to solve anyway and the market for that problem should be large & growing. The second condition to achieve a product-market fit is that your product should satisfy that market by solving the urgent problem in a way that is missed by the competitors.

When you achieve a product-market fit, you start to experience a demand-pull for your product usually to the point that you can’t even manage to make major changes to your product because you are occupied keeping it up and running.

The following approach describes the main points that you should look for in your journey to achieve the product-market fit early for your startup.


The Approach

Image Source: growthx.com


Point 1 – Finding a hidden need

Most innovative startups are usually built around a need that people don’t realize exists. During the very early stages of such startups, everyone finds the idea to be dumb as there is no obvious need. The point that people make is that if the problem would be so huge, the solution would have existed. Finding this hidden need is the first step in the journey of achieving a product-market fit.

But there is a prerequisite condition that should be met before diving further. That is,

Market size should be large and expanding

If you are making something innovative, market research may not be a good option. It helps only when you are building something that already exists in the market i.e. when your solutions provide an incremental improvement over the already existing solutions. But since this is the only option you have while staring up, you have to bear with it.

Identify your total addressable market (TAM) i.e. the total number of people who can benefit from your product or service. Your TAM is – all the people who could use your product start using it.

TAM is calculated by multiplying your average revenue per user (ARPU) by the total potential customers in the market.

Apart from size, market growth is equally important and it should grow at a rate that makes it lucrative enough for a startup to scale.


Point 2 – Building a product

To build a product that people want, you have to follow a ‘build-measure-learn’ loop. Yes, you guessed it right! A minimum viable product (MVP) is the thing that you need to develop first. But wait; there is something you should be aware of before you start to build your MVP.

An MVP is a solution that may be a product, or service with just enough features to satisfy early customers, convince them to pay for it and get feedback for future development.

Here the most important thing to remember is that you do not have to work upon every feedback of your potential customer.

Many times customers just give feedback as a suggestion and it does not, through anyway, solve their problems. You have to avoid such feedback and take seriously only those that contribute to solving their problems.


Point 3 – Interviewing customers

Though customers are always kept in a feedback loop during MVP development, few points need to be emphasized upon while testing the solution with customers.

  1. While talking to your first customers, you may realize that they are not your target customers. This is very common when you are developing something innovative. Hence you should always be flexible to change your point of view about your target customer segment and be ready to test your solution with the new segment.
  • While conducting customers’ interviews to know about their problems, the type of questions that you need to ask is an important activity. The questions should be related to their challenges, their biggest problems, their pains, the benefits that they expect, their need, their motivation, etc.  The trigger questions related to customers’ jobs, pains, and expected benefits, put by Strategyzer, might be of help to you.

There is no rule of thumb for the number of customers whom you should interview. It usually depends on the type of product or service that you deal with. But it’s always good to interview at least 30-35 customers to get real insights.


Point 4 – Specifying the value proposition

Value proposition gives your customers the most compelling reason to choose your product/ service from among the available alternatives in your target market. Determine which customer needs you can best address with your product or service. Remember that you cannot solve all problems of your customers. Therefore it’s important not to lose sight of your product roadmap when determining which challenges you’ll address.


Point 5 – Testing your product for user-experience

For getting honest feedback from your customers, you need to hand over your product to them. Sometimes the entrepreneurs get so much attached to their product that they hesitate to give it to the users. Ask yourself – Whom are you building your product for?  Isn’t it for the customers? So, hesitating to give your product to your users is like Apple building the iPhone for itself. It is that funny!

 While testing your product with the customers, you can use the following methods for getting insights and feedback. :

  • Watch your customers use your product on their terms and not yours. While watching, you may periodically ask them, “Why are they doing this way?” Try to know when customers use your product. You might be surprised by the unexpected ways your product would be used or the things that would be ignored by them as against expected. This can be quite helpful in adding more value to your product/ service while reducing unnecessary expenditure on the less valuable features.
  • Create empathy for customer experience by performing their tasks in the real world condition. For example, if you are building a new stove for the caterers, cook the food alongside the chef in restaurants or catering shop to experience the actual challenges of commercial cooking. This will help you to gain direct knowledge of the problems customers face and understand their needs so well that you can envision solutions to problems they may not realize they have.
  • Identify your customers’ dislikes about your product by writing down the features that they don’t like. Then you can ask your customers to rank the features in the descending order of annoyance with the highest rank given to the feature that annoys them the most. In doing so, you’ll get new ideas for the changes you can make to address your customers’ most important concerns.


When to Launch a Product?

The simple answer to this question is as soon as you are ready with your MVP. But then your next question can be, “How do I know what I have is at the stage of MVP?”

Remember that your product should perform a basic function that you think will solve the problem of your customer. After all, what you think is just an assumption and you need to test it as quickly as possible. So all you have to do is launch right away without waiting to make it perfect.

If you still aren’t satisfied with the answer, Words of Paul Buchheit, the creator of Gmail might help you in deciding the time to launch.

He says,

“Launch when your product is better than what is out there”

Though it’s certainly true that since you are building something novel and there are no direct competitors in the market, there can still be substitutes for your product that you can compare with. So when your product is better than the available substitutes in solving your customer’s problem, you should launch it right then.

You can know your competitors or substitutes but the problem that you are trying to solve for your customers is just an assumption that needs to be tested.


How to know if you have achieved product-market fit?

Many indicators give you the idea that you have achieved a product-market fit. They are:

  1. When your customers are as excited about your product as you are and become promoters for your company. When you achieve a product-market fit, there is a demand-pull for your product in the market.
  • When your customers share their positive experience with others and when you can create the same experience for every new user who your existing users tell.
  • When your Net Promoter Score is greater than 50.

The Net Promoter Score is calculated as follows:

  1. Ask your customers the question, “How likely is it that you would recommend our company/product/service to a friend or colleague?”  
  2. Let them score for the answer to the above question on a scale of 0 to 10.
  3. Those who respond with a score of 9 to 10 are called Promoters
  4. Those who respond with a score of 0 to 6 are labeled Detractors.
  5.  Responses of 7 and 8 are labeled Passives.
  6. The Net Promoter Score = (percentage of customers who are promoters) –( percentage of customers who are Detractors)


To wrap-up

The 5 points described in the above approach are the pre-requisites for achieving a product-market fit. Arriving at a product-market fit proves that you have found a solution to a customer’s problem and that your customers are not only willing to pay you but also advocate on behalf of your startup.


Do you feel there is something more to be included? Kindly write to us. We will be more than happy to consider your valuable suggestions.