Product-Market Fit is the very first step of growth hacking, but it’s what most solo startups get horribly wrong. The single biggest mistake startups – especially solopreneurs – make is to start with a product that no one wants. The typical behavior of startups is this: they start an idea they love with gusto, run to create reams of content, find no takers, go back to the drawing board a couple of times, and still see thin results … and then one fine day, they get the formula right (purely by happenstance), and they hit the mother lode of big demand. Meanwhile money has gone down the drain several times, and the cost of repeated poor product-market fit has set back the startup financially, so there’s no money for that “sumptuous and robust launch” of the finally right idea.
We, shoestring solopreneurs, need to get it into our heads that we don’t really have the resources or time to waste in iterative, trial-and-error product-market fit. Content Growth Hacking is about the need for hitting the ground running. We need to find a product that has the kind of demand where our content makes customers queue up for your product launch, only to find a board saying “Sorry, already sold out! More stocks in by Wednesday, that’s a promise!” Achieving that kind of product-market fit is one of the most important goals for a startup, yet it is also one of the least understood concepts.
What are the signs of a good product-market fit? How do we know we have a winner?
I believe three kinds of thoughts prevail in the market on how to tell if you’ve got a product-market fit that you can launch your start up’s offering with. Here are the three angles of thinking:
The Marc Andreessen angle of thought on product-market fit
Marc Andreessen, the renowned entrepreneur, investor and software engineer, had this to say in his original article on product-market fit. There still is no better exposition of the whole idea. This is what he wrote:
Product/market fit means being in a good market with a product that can satisfy that market.
You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.
And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.”
The Value Hypothesis validation approach
The second angle of thought on how to judge product-market fit comes from what is popularly known as the Value Hypothesis validation. Andy Rachleff, the CEO of Wealthfront, wrote an article titled “Why you Should Find Product-Market Fit Before Sniffing Around for Venture Money”. In that article he analyzes the thoughts of Eric Reis and Steve Blank to create this explanation:
A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. A growth hypothesis represents your best thinking about how you can scale the number of customers attracted to your product or service.
Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis addresses both the features and business model required to entice a customer to buy your product.”
What this angle of thinking means is that you can’t believe you have a product-market fit, unless your assumption about why a customer is likely to use your product is validated by the actual use your customer finds for your product. There are many occasions when we entrepreneurs like to think we know why our product will be of benefit to the consumer, but in actuality the consumer’s need for it is quite different from our assumption.
Especially if there’s enough initial demand for our product, we need to know the “real underlying why” – the indisputable reason why our product is likely to be purchased – if we are to feel satisfied that we have a product-market fit. Otherwise we’ll be blinded by the initial demand, but our strategies will not be grounded in reality, and our product may not be a sustainable fit. We will get led astray by the misplaced reliance on our assumptions, and see all initial success as validation of our assumptions.
The idea of aiming for “Resonance” as the sign of product-market fit
A third approach to product-market fit judgement comes from experts who believe that there has to be “resonance” between the product and its identified potential customers. Merely having customers with a dire need for the product will not be an adequate yardstick of judgement. Those who believe in looking for resonance between customers and products, believe “resonance” is about the customer and the product “being on the same wavelength”, so to speak. Itamar Goldminz, uses a metaphor of resonance from Physics to describe product-market fit:
A good analogy for finding PMF comes from Physics: finding resonance with your customers and getting on the same wavelength as them. Note that this can be accomplished both by changing your product and by changing your customers (market pivot). Changing your wavelength is a gradual, continuous process; you know when you’re close to being on the same wavelength but it’s hard to tell if you’re exactly there. Since both your product and your customers constantly change (wavelength), it’s easy to get out of sync again and it’s clear that your actions don’t prevent others from getting on the same wavelength.”
Going by this approach, product-market fit is not a one-time fit. This approach suggests that the process of a product finding its wavelength with its consumers is fluid – and an ever-present challenge. Both products and their customers evolve all the time, so the product-market fit has to be arrived at and maintained by continuous balancing and adjustments.
All these three angles of thinking are valid in their own ways. At the very least, they tell us that we have to be conscious of the principle of product-market fit when we start business, we have dig into the real reasons why there may be a fit and not make hasty assumptions, and we have to stay conscious of the principle of constantly adjusting “fit” as our business scales and grows.
With this understanding in mind, let’s look at two possible frameworks we can use to evaluate product market fit …
PMF Evaluation Framework #1: The Product-Market Fit Canvas
The company Creatlr have developed a template called the Product/Market Fit Canvas, as a thinking aid for entrepreneurs looking to achieve a good fit between their customers and their products. According to Creatlr, “The Product/Market Fit Canvas is a strategic innovation tool. It allows you to define, validate and reach your customers. It also allows you to define and iterate your product to achieve market validation with your product.”
Below is an image of their template. It can be downloaded from the Creatlr site.
Image courtesy: Creatlr
Notice how in this template, the four elements on the left must fit with the corresponding four elements on the right. These are the four levels of fit to be evaluated and adjusted.
PMF Evaluation Framework #2: Olsen’s Lean Product Process of Six Steps
Dan Olsen, who is expert author of “The Lean Product Playbook”, has explained a method that he calls the “Lean Product Process”. The idea he offers is to look at the “minimum characteristics your product must have” to fit a market it intends to target. He also refers to this as the “minimum viable product” that startups should aim to have. The six-step process he outlines to get the best product-market fit are the following:
Step 1. Identify your target customer
Dan Olsen says you should start with an identifiable group of people who have a “hair-on-fire” problem i.e. one that that demands urgent solution. The problem has to be that dire. You cannot hope to launch any product on lukewarm demand. After locating the audience, use market segmentation to further clearly narrow down and define your target customer.
Look for the smaller groups within the larger groups who not only feel the greatest pinch with the problem, but are likely to become first adopters of the product.
Try to describe this finely identified target segment as a “persona” (your typical audience archetype described and visualized as if it was real person). Start with a top-level hypothesis of this persona as your target customer – but be prepared to frequently tweak and revise this persona and your product.
Step 2. Identify under-serviced customer needs
Now that you have a working hypothesis of the identified urgent-demand customer, try to hone in on which of his need areas is under-serviced by competition. See if you can find the need area that gives you a good market opportunity.
One of the smart tenets of growth hacking is to find needs that are important to the customer, but not adequately met by any one in the market.
Step 3. Articulate your value proposition
What is a value proposition? It is the articulation of how exactly your product will provide value for your customer by addressing his under-serviced but dire need. Try to get clear on why the customer should see your product as a more perfect answer to his problem than any competitive product.
Also see if you can explain which unique features of your product will specifically service the dire need of your customer most satisfactorily.
Step 4. Specify your minimum viable product feature set
Now that you’ve seen things from the customer perspective, re-look at it all from your own angle as the marketer of the product. What are the minimum features your product needs to have, to be a “viable enough solution” that can adequately service your customers’ dire need?
Trim all fuss and frills from your product. Drop off all unwanted extras. Aim for a lean and mean product capable of the exact job it should do i.e. meet the most compelling need of the consumer in a totally satisfying way.
Step 5. Create your minimum viable product prototype
Create a product prototype which matches this “minimum viable product”. Test your product prototype during stages of production to make sure you don’t have to go back-and-forth with the whole process. Pare down as much as possible on further unwanted features, without losing the essential value of the product to the customer.
One of the critical problems most entrepreneurs face is that they always begin with a very elaborate mental vision of their product, not realizing that most of the features they feel most excited by are not at all what their consumers will need or appreciate paying for. Consumers want the leanest, meanest product they can find, that offers a complete and satisfying (even delightful) solution to their most compelling need.
Repeat that sentence to yourself many times. Cut down that bloated product vision in your mind. See if you can bring it all down to just what the customer will find “delightfully perfect” – nothing more, nothing less.
Step 6. Test your minimum viable product with customers
Once you create your minimum viable product prototype, solicit feedback from your target market. Show your target customer a version of your product to elicit feedback. Olsen recommends running user tests in waves of five to eight users. Then incorporate that feedback into the product to improve it.
During the test, ask non-leading, open-ended questions to encourage meaningful and genuine responses. After conducting user tests, refine the initial prototype to incorporate their concerns and experiences.
Going through this six step process will create the mindset and rigor in you to always see how “less can be more”.
3 ways to measure product-market fit and its sustainability
It is not easy to measure product-market fit, simply because, as we saw earlier, both the product and the consumer keep evolving, and so must the fit. But experts agree that there can be three ways to get as close to knowing reasonably surely if the fit is good and sustainable. These tests of fitness need to be checked after you have had the product in the market for some time, because you have to give the customer enough time to judge the product before feeling qualified to evaluate its pros and cons.
1. See if your customers recommend your product to their friends.
The Net Promoter Score (NPS) is a simple survey, that asks customers to rate from 1–10, “How likely are you to recommend this product to a friend or colleague?” If your product passes the NPS test, you can be sure your product also passes the “fitness for the customer” test – because people have a predilection to recommend by word-of-mouth only those products they are truly satisfied with. But beware that the Net Promoter Score is not a complete validation of product-market fit. It is just one of the ways to see if there is a fit.
2. See if your customers will care if your company closed tomorrow.
Many entrepreneurs and marketers say this is a very difficult question to ask customers, without sounding like you are contemplating closing down tomorrow. So if you must ask this question, phrase it carefully: “We want to further improve the product, so we want to know how much you like the product, and how much you’d miss it, if it went off the market.” Check on a rating scale how disappointed people would feel.
If over 40% of users say that they’d be “very disappointed” without your product, there is a great chance you have a sustainable, scalable product. This 40% figure is just a general benchmark, though – it may vary in your niche and industry. So the final test below is the real one.
3. See what your customer retention levels are.
There’s no further proof you need that your product has a good market fit, if it is able to retain loyal customers – and in fact, re-draw customers back to itself if they have left for other products. Customer attraction may prove that the product-market fit exists to start with – but customer retention or re-attraction is the surest way to know if your product-market fit is evolving along with the evolution of the customer.
So what are your thoughts on this topic? Do share!
This post is incomplete without your input. The community of aspiring digital solopreneurs would feel galvanized to hear from you … so do share your thoughts on this topic with us in the comments field below this post.
Other articles in our series “Content Growth Hacking”:
- Set Your Growth Hacking Priorities By The Purchase Funnel’s Stages!
- My Collection Of 10 Most Awesome Infographics On Growth Hacking!