What Product-Market Fit Means
For businesses to prosper, they need to understand and study the interplay between the company, its customers, and the products that they offer. This is called a Product or Market Fit.
There are several definitions of Product Market Fit. First, let’s tackle the description given by Marc Andreesen, who was one of the first few people who coined the term. He says that the concept means “being in a good market with a product that can satisfy that market.”
Product – Market Fit happens when:
- Customers flock to buy the product as soon as it is available on the market.
- The money in the company’s checking account is rising due to the increase in customers.
- The need to hire new sales reps and customer service staff heighten.
- Media tries to contact the company to ask about the upcoming products or services.
Product – Market Fit is not happening when:
- Customers are not receiving enough value from the product.
- News about the product is not spreading fast, even by word of mouth.
- Usage is not growing as fast as expected.
- Media coverage is low.
- The sales cycle is too long.
- Several deals do not close.
Jobs to Be Done (JTBD)
Professor and advisor Clayton Christensen spoke about the need for marketers to segment markets in ways that reflect how customers actually live their lives. He forwarded the concept that people hire products (and services) for jobs to be done. If a marketer can understand the job, design a product and associated experiences use to do that job, they will hire the product.
One example is Marriott hotels. Marriott built its brand around full-service facilities that were ideal for hosting large meetings.
Customers would “hire” the facility to do that job: host big meetings. However, different customers might hire Courtyard by Marriott to host business travelers who had a different set of needs. And, more segmented still, Marriott longer-term travelers would “hire” Residence Inn by Marriott.
In an optimal Product/ Market Fit, people sell for you.
The concept is achieved once people truly understand the value of the product and is willing to talk about their positive experiences with other people. Other potential customers would take notice of products with excellent reviews, and this could encourage them to buy the item for themselves. In a way, the customers become the salespeople.
Product Market Fit Process
To achieve Product – Market Fit, a company needs to undergo a series of trials and errors and experimentations. A business must discover a product that customers will want to buy and then harden that fit. As long as the item works and can get the attention of the public, there will be a Product Market Fit.
Companies need to begin with a value hypothesis. That is, they will need to determine what they are going to manufacture, who they are going to offer it to, and how will it be marketed in a way that can bring in profits to the company. After that, they will try to test and prove that hypothesis with a model that can be used to promote the product. Once it is verified, they can then move on to the growth hypothesis.
Before anything, business owners need to select the right market to place the product in. Venture capitalists will wait until the company reaches Product – Market Fit before investing. If the firm wants to bring in more investors, they will need to make sure that the market they choose is the right one for the product. If not, not only will they lose investors, but the business itself will fail.
The process does not end there. Once PMF is attained, the company needs to create a sustainable growth model. Also, instead of focusing on making new products to create another demand, businesses need to fulfill the demand of the first product.
Product – Market Fit Playbook
When trying to reach Product – Market Fit, the company needs first to determine the target customers and their underserved needs. Afterwhich, the business needs to find a way to define its value proposition, feature set, and lastly the user experience. These five concepts are like a pyramid, which companies will have to satisfy one by one before they can reach PMF.
There are four easy steps to follow based on this pyramid and the Lean Product Process:
A prototype can be made instead of a working version for this part of the process. However, creators must make it look as similar and as interactive as the end product. With the prototype, the business can introduce their upcoming product to the public and simulate user experience.
During the testing, managers will need to observe the reactions of the testers and their comments regarding the product. Moderators must ask the right questions and avoid leading ones that can create biases and closed ones that are only answerable by yes or no.
Testing Product – Market Fit
Companies can start with beta tests with controlled focus groups, trial products, A/B testing of messages and more. At the most fundatmental level, marketers can review, analyze and adjust six commonly-known marketing metrics, including: