A 3-Step Guide to find Product Market Fit

Product market fit is now a buzz word in the start-up world, everyone, from investors to talents looking for a new position will look at high-growth companies and use it as a metric to assess whether it is a good idea to get involved in it or not. Nonetheless, it does not seem to have spread yet to the wider business world, where it might be useful for professionals to help them see the world with a different perspective and inspire new ways to serving customers and ultimately grow their business.

But what exactly is product market fit?

According to Marc Andreessen, co-founder of venture capital firm Andreessen Horowitz (also known as a16z), who is credited to be the one who coined the term, “Product/market fit means being in a good market with a product that can satisfy that market”. To be more precise, product-market fit can be defined as the stage of a start-up in which the company has successfully identified a target customer market that is buying, using, and telling others about the product so as to sustain the company’s growth.

Why is it important?

The answer is simple: investing money and time on something you are not sure people want and are willing to pay for is an almost infallible way to running out of money. That is why is pivotal getting to that stage before further investing on other important strategic aspects such as growth or up-selling existing costumers.

[The] number one problem I’ve seen for startups I’ve advised has been [that]

they don’t actually have product/market fit when they think they do.”

Alexander Schultz, VP of Growth at Facebook

How to find product market fit

1. Always start by talking to your customers. Identify who your target customers are, and go talk to them. Ask them what are the pain points they are facing and what they are doing to solve them, have they already tried any solutions present in the market? Talking with consumers will help you identify new problems, generate more ideas and eventually improve your product.

2. Based on the insights you gained by talking with potential customers build a minimum viable product (MVP), sophisticated enough to deliver your value proposition and let customers use it. There are several different ways you might gain insights on what your consumers want and what they are struggling with by just looking at them using it. Ask them if they would be willing to pay for it, and if not, why?

3. Once your MVP is beginning to be used amongst early adopters collect data through your internal team members. If you already have a customer staff, directly go ask them, otherwise, ask whoever is on the front line talking to consumers. They will certainly help you understand what your customers need. Also set up a system for your product team to report and store customer needs and problems

How can you measure it?

There are some metrics that might help, but consider that every business is inherently different, so other metrics might be more accurate. Here is a list of some parameters to look to:

• Churn and retention rate

• NPS score

• Growth rate

• Word of mouth

Finally, notice that this is an iterative process, in which you strive for a constantly better product market fit, represented by better and better customers’ feedback. Think of it as you and customers having two different wavelengths, you want to get as closer as possible to the customers’ one and continuously check on it, as customers might evolve over time, and thus you might get out of sync.

Great! Now you are set up for the next stage, which consists in taking the product your customers love and adding fuel to it using growth marketing strategies to skyrocket your idea to the $1billion evaluation.