Many entrepreneurs who heavily invest in their business think they have found product/market fit when they really haven’t. It can be a disastrous issue when they begin hiring staff and optimizing their product before they figured out who actually needs what they made. You only really reach fitting your product to the target market when you are so overwhelmed with usage that you aren’t allowed, by your customers, to make any changes to your product because you are swamped just keeping it up and running. You can’t point to the success you have in building up a staff or pointing to outside sources of faith and funding. Entrepreneurs are often focused on the quality of their solutions and never listen closely enough at the problems that cry out to them. Actually, the problems out there in the marketplace are what outline the product. A shiny new product that doesn’t have a problem behind it will never find a product/market fit.
The first rule in product development is never put the cart before the horse:
Making sure you have a product that is marketable is the single most important determination before you launch. Start-up advisor, Sean Ellis puts product/market fit at the base of his “Startup Pyramid.” Startups require a solid foundation of product fitting the market before progressing up the pyramid, transitioning to growth, and growing.
There are two stages to the life of any startup, before product/market fit and after product/market fit. When the startup is before product/market fit (BPMF) the company has to focus obsessively on getting there. It has to do whatever it takes to get there including changing people, rewriting the product, moving to a different market, raising extra venture capital, anything necessary. This is life or death for a company (or at least for a development team).
Defining Your Target Market:
If you have a product, your target market should not be a vagary. You should have long experience with the pain points being expressed in the marketplace. Your product should be built around providing relief for the objectively observed needs of your customer population. You have to get a good understanding of your target customer demographic.
- You should spend time with potential customers.
- You should look for industry news outlets.
- You should attend industry trade shows.
- You might also find a mentor in the market to help you learn the ropes.
Not only does this kind active participation in the marketplace gain you insight toward understanding what you should create but gains you valuable connections when it comes time for a physical demonstration of your product.
Assessing Product/Market Fit:
A first metric is to ask existing customers how they would feel if they could no longer use or obtain your product. Sean Ellis sets a rule-of-thumb threshold of 40 percent of customers saying they would be “very disappointed” without your product. Products that struggle to gain traction are always under 40 percent and products that gain strong traction exceed the 40 percent threshold. Of course that 40 percent of customers represent an early traction percentage. This group has to represent a large enough target market for the product to take hold.
A company has to measure product/market fit as soon as possible because it will be central to the way the company is run. If you haven’t reached the point of product/market fit yet, it is imperative that you focus all your resources on improving the percentage of potential customers who say they would be very disappointed without your product.
Product/Market Fit, Sales, and Story-Telling:
Will Caldwell, developer of Dizzle, a smartphone app for real-estate agents, created a number of different versions of his product to obtain a fit with his market. Eventually, he decided to simplify the product down to essentials and strip off many of the elaborate bells and whistles. With this focused product, he was able to make the way clear to his customer how his product works. Instead of having to explain his product, he started asking the customer to explain it to him. He measured product/market fit by customers being able to explain the product and being willing to pay for it.
Providing value is what product/market fit is all about. Once a potential customer is able to explain the exact value proposition of the product, the product/market fit for that customer is nailed. Of course, it has to happen enough times so that the number of potential customers would represent enough of a target market.
Assessing product/market fit is akin to selling and persuading. This is not simply a research project. You have to get out there and meet potential customers to make sure they see the product as helpful. You have a new product that you carefully designed to meet pain points and needs you have identified. Now you have to convince likely customers that you really have done that. Good selling principles apply.
- Narrow your feature set down to the one major feature that is a game changer. It is difficult, but it is necessary. Find the one thing that your product does that competitors don’t in solving the problems of potential customers. Show how your product does answer those needs. You can add in discussion of other features later.
- Build credibility by offering up a story. Have a story that makes sense to potential customers about how your product is going to help them. Inject the customers’ needs into your brand’s story.
- Know your customers by living a day in their lives to find the places where your product could help. Then focus your product and your presentation on those pain points.