Product / Market Fit: The Very First Step to Successfully Launching Your Product
Every day, I talk to founders who seek to acquire more users and increase their growth. I always question the stage they’re in. Is acquiring new users the solution to their growth problem?
Most of the time, they have very few users with very little feedback. They launched their startup based on their vision and ignored market signs.
If you are in that position you don’t have an Acquisition problem, you have a Product / Market Fit (PMF) problem.
If you don’t really know where to focus and struggle to acquire your first users, or struggle to keep growing steadily, this article is for you.
Since the concept of PMF can be quite complicated, I gathered a handful of resources in order to help you understand the concept and better reach your goals.
Disclaimer: this article distills a lot of resources to give you a general overview of the concepts; if you want to know more, then check out the resources listed in each paragraph.
What is the Product / Market Fit?
Product/market fit means being in a good market with a product that can satisfy that market. – Marc Andreesen
Steve Blank developed the Customer Development Process in which he describes all the steps involved in building your startup.
One of the first steps is to setup the CPS (Customer, Problem, Solution) hypothesis. Basically, reaching the PMF means validating these hypotheses:
- Customer: you know who you’re going to serve
- Problem: they have the problem you thought they have
- Solution: they take advantage of your solution and are ready to pay for it
In simple words, it means that a satisfactory number of people are ready to pay for your solution.
I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?” Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. – Sam Altman, Before Growth
Your product should become a must-have in your customer’s minds. Without that, you’ll struggle with Retention and therefore slow down your growth.
Beautiful graphic created by Dan Olsen
The main issue with the PMF is the concept of a “satisfactory number of people”. How much is that? How can you measure it? When do you measure it?
Why & When bother?
Nothing kills a bad product faster/quicker than good advertising
The product is at the center of your marketing strategy. Without a truly valuable product, there is no possible growth.
The concept of PMF is here to verify that you can satisfy a market need and make money out of it (business model validation).
Reaching the PMF is primary as it’s going to drive every one of your actions. At first, your main aim should be to get the wheel turning and provide your users with something truly valuable. Once you get that, you can start with the marketing plan.
You should worry about your PMF at all times. Just because you reached it once doesn’t mean you can’t lose it.
Let’s say that we can accurately measure the PMF over time, here is something that might depict a startup journey:
They quickly started to provide value for their users but kept working on their product to reach the PMF. At some point, a new competitor gets into the market, innovates and then shifts the market equilibrium. It’s now time to get back to work on their product…
Although we can’t really plot the PMF on a graph, I hope that this chart can help you to understand what might happen during the startup lifecycle.
Focus on the Right Thing
Sean Ellis, in his article The Startup Pyramid, describes the PMF as the first step to building your company.
Getting the PMF is therefore the very first step to building your company. Before reaching that momentum, you need to work on your product and Value Proposition.
There is no point in starting a fully-featured marketing plan before you have something worth shouting about, right?
The Marketing plan comes into play during the Transition to Growth. During the early days, you need to recruit early-adopters in order to gather valuable feedback and reach the PMF.
To do so, you have to talk to people and understand who they are and what problems they have. Once you understand all this, you need to build the product that can solve their problems (CPS hypothesis).
Do whatever it takes in order to achieve that. This is the hustle phase.
Once you get a sufficient amount of people onboard, you can move to the next step and develop a Customer Acquisition plan.
How to reach the Product / Market Fit?
The whole idea here is to experiment on your product. You want your product to evolve with customer’s feedback in order to solve their needs.
You should therefore implement feedback within your product and iterate. You’ll measure your PMF (as shown below) several times until you feel that you’re in the right direction.
If you want to know more on that, you can read The Product / Market Fit Playbook. The process looks like this:
- Determine your target customer
- Identify underserved customer needs
- Define your value proposition
- Specify your Minimum Viable Product (MVP) feature set
- Create your MVP prototype
- Test your MVP with customers
You’ll then iterate based on customer feedback in order to build something that can solve their needs.
How to run Online Experiments?
You may run online experiments, however… Most people start by building a web page and then acquire traffic with Twitter, AdWords, Facebook Ads, Webinars, Inbound Marketing…
Building an audience on all of these channels is going to take plenty of time.
You should always begin by talking to potential customers, and if you feel you’re solving a need, then you can start launching an experiment.
The following plan could be a good one to follow:
- Talk to potential customers and verify that they have the problem you’re trying to address
- Create a landing page and drive traffic through 1 or 2 channels
- Generate discussions with the people that signed up
- Build the product in collaboration with the most interested prospects
- Measure your PMF (see below)
Focusing on fewer channels allows you to keep focusing on your end goal (the PMF). If you launch too many things, you’ll lose track of your progress and waste time.
If one of your channels isn’t working, just try something new.
How to measure the PMF?
The approach of Sean Ellis in his post The Startup Pyramid consists of surveying your users:
I ask existing users of a product how they would feel if they could no longer use the product. In my experience, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product.
I like that method very much because it’s a simple method that can’t lie. However, you need to make sure you’re surveying enough users.
If you only have 40 users, with 10 responses to work with, then your results aren’t significative enough.
If you want to run such a survey, then great folks have designed the tool Survey.io.
It’s hard to explain from the perspective of an analytical marketer, but you can also use your gut in order to realize whether you have PMF or not.
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.
If you’re in a small B2B market with 40 paid users and they’re all talking to their peers about your product, then you’re probably onto something.
NPS stands for Net Promoter Score; basically, it gauges how likely your users are going to refer a friend.
It gets back to surveying your users, however, you’ll also obtain qualitative feedback with it.
The good thing about NPS is that you can engage with people who are either satisfied about your service, or dissatisfied.
Promoter.io is one of the tools that can help you to quickly send a NPS to your customer base.
Alex Schultz explains in the video below how they measure the PMF at Facebook with Retention data.
On the other hand, if you can’t properly retain your users, you’ll only limit your growth. You should therefore iterate on your product until it becomes a must-have.
Brad Feld gives some precious financial indicators that might help you to know where you stand.
K9 Ventures also have a different, but similar approach as follow:
Although I really like this approach because it categorizes startup and gives you clear indicators, it’ll always depend on a whole lot of other metrics (ARPU, LTV…).
Besides depending on metrics, it also depends on the size of the market. If your market is as big as $99k, will you always have a semblance of PMF?
In his article, Marc Andreessen explains a few myths behind the PMF. They’re useful in order to tackle any misconception you might have.
Myth #1: Product market fit is always a discrete, big bang event.
Achieving the PMF generally comes after several small fixes and tweaks. It doesn’t happen overnight.
Myth #2: It’s patently obvious when you have product market fit.
The PMF isn’t something you can easily measure. In some markets, having 10 customers will be a sign of PMF while in other markets, 500k MAU is a sign that something is wrong.
Myth #3: Once you achieve product market fit, you can’t lose it.
We already talked about it above, but the PMF is a state; you can reach it and lose it in a matter of days. Markets are like moving parts; you need to adapt quickly if you want to stay on top.
Myth #4: Once you have product-market fit, you don’t have to sweat the competition.
Once you reach the PMF, chances are your competitors are going to follow you and innovate. If you don’t outpace them quickly, they’ll build something better and shift the market equilibrium.
In this article, Ellie Cachette, the founder of Consumer Bell, explains their journey towards the PMF and all that happened along the way.
It’s definitely a great read to understand that the PMF isn’t linear and might require you to pivot several times before reaching it. It doesn’t even guarantee your company’s success…
Buffer explains how they designed the Power Scheduler feature and how they spent a lot of time before reaching the PMF for that specific feature.
The awesome thing about that story is that they applied the concept of PMF to a feature. If they didn’t do that, they could have built something no one wanted.
Instead, they spent a massive amount of time making sure they were building something valuable, and it paid off.
You’re probably familiar with the referral system of Airbnb. Well, they redesigned it a while ago. Here is the process they used:
What’s interesting is that their old referral system was bad and barely used. They redesigned it in order to improve it and turn it into something valuable for users.
Slack is one of the hottest startups right now. They grow at an incredible pace.
Hiten Shah recently ran an experiment and decided to survey a few of Slack’s users. Here is one of the questions:
As Hiten mentioned in his analysis, Slack reached the PMF. However, don’t you think they could still work on the product in order to foster their PMF? They probably could.
That’s why you need to find the right fit between: scaling your Acquisition and working on the product. Who told you building a business was easy?
The Music Industry
We use to listen to music on cassette tape. At that point, we would all have been “very disappointed” if we could no longer use them.
Later on, CDs came and revolutionized the industry; it shifted the market equilibrium. Cassette tape companies weren’t happy.
Cloud services then came in and shifted the industry again. Today, people who still buy CDs and cassette tapes are rare.
This example clearly shows how the market evolves and how you need to evolve if you want to stay competitive. If producers of cassette tapes quickly understood where the market was going and changed their product, they could still be here.
Before thinking about acquiring new users, you should focus on your PMF and transform your actual customers in evangelists.
The PMF can be a tough concept to understand but it’s a primary goal for the survival of your startup. I hope it’s now clear in your head:
- Your product comes first, before Customer Acquisition
- Once you get some sort of signal from the market that you are onto something, you can then really start Marketing your product
- Make sure to keep working on your product to avoid losing your PMF
The PMF is all about saying “get the product right first, and make sure you stay competitive”.
If you’ve taken this understanding away, you’re on a great path. If you don’t really know where you stand or how to measure your PMF, just add a comment and I’ll help you out!
It’s your turn now; do you have interesting stories related to the PMF you would like to share? What do you think about the PMF? Is there a better way to measure it?
Love the depth you went into here, Pierre. We encourage our clients to spend at least some time thinking about what their customers value. Your break out hit on some great points. Nice coverage.
Thanks for the kind words Jay!
“launched their startup based on their vision and ignored market signs.” Couldn’t agree more!
Actually we started our startup (Kilometer.io) without a product idea at all.
We built a team of six , rented offices and self-funded the company with a $250,000 investment that came out of our own pockets.But, We didn’t know what we wanted to build or how our product would look.
First, we choose the market. We wanted to build an analytics tool as we felt that it’s a great fast growing market, and we knew we wanted to be part of it.
We made a strategic decision to define our target audience first (we decided to focus on startups), develop relationships with our future customers, and then use their feedback to find out what we needed to build.
Thanks for your comment Alex. Always nice to hear stories from fellow entrepreneurs. Definitely sounds like you nailed that part. Keep up the good work!