As the term “product-market fit” is relatively new and confusing for many new managers to understand.
So… what is product-market fit? How does one achieve it? And, how does one find it for their products? Let’s help you answer a few of these questions.
What is it?
Having a product (solution) that can satisfy a specific market (with a problem). Imagine you’re in a city that has a massive demand for food? Consider opening a restaurant! Open a show shop if you live in an area that is crazy about new kicks!
What are some common signs?
- When you witness good organic growth: If your product shows high levels of sales, conversions, and engagement, this means you’re closer than ever to achieving a good product-market fit.
- User Retention is very high: If your product retains at least 40% of your customers over a long period… It’s a vital sign of Product-Market fit!
- A 3:1 return on customer acquisition cost: If the cost of getting a new customer is three times less than the lifetime value, you’re closer to achieving it, for instance, spending 10$ to acquire a customer with a lifetime value of 30$.
- 40% of your customers NEED your product: If you are close to a good fit, 40% of your customers will be disappointed if your product leaves the market.
How do you find product-market fit?
The secret formula to finding the ideal market fit is easy. Maximize the number of product iterations with your limited resources. The more you know about your customers, the closer you are to finding it.
Six step process to find product-market fit:
Step 1: Define your product goals and line them up!
Step 2: Come up with product hypotheses.
Step 3: Prioritise the product hypotheses.
Step 4: Get feedback from five customers.
Step 5: Experiment with your MVPs or prototypes.
Step 6: Evaluate market traction.
Remember: product-market fit is a prospecting process that takes multiple iterations. Nobody gets their product right in the first turn, and even Thomas Edison took 999 times to get the lightbulb right!
Twitter was an SMS service, LinkedIn was a job portal, and GoPro was just a film camera.
The six-step process will help you find YOUR market fit upon launching. We wish you luck on your journey, brave entrepreneur! God speed ahead!