Tech Word of The Week is a weekly series where we look to explain commonly used words in the tech ecosystem in a simple, engaging way.
Even among seasoned founders, product-market fit is a concept that causes division. In this article, I will attempt to break it down in an easy-to-understand way that helps even the newest inductee into the ecosystem understand.
What is product-market fit?
Product market fit happens when there’s an alignment between the need of a market and the product of an organisation.
It's a perfect blend between a product and the market’s need such that clients become raving ambassadors. At this intersection sales soars and it's able to sustain the startup’s growth and profitability.
Who coined product-market fit?
The term was first coined by Marc Andreessen (the co-founder of venture capital firm Andreessen Horowitz) in 2007. He defined it as “being in a good market with a product that can satisfy that market.”
Dan Olsen, a product management expert and author, defined product market fit “as the end-game where a startup has built a product that creates significant customer value. This means your product meets real customer needs and does so in a way that is better than the alternatives.”
Why is product market fit important?
Product market fit is a goal every startup must target. Unfortunately, most startups do not fully understand it, hence, they fail. It guides the activities of successful companies. They focus on meeting the needs of early adopters, gathering feedback, tweaking the product, and getting the interest of the market on the product.
Before you focus on other core objectives as a startup entrepreneur, ensure you have product-market fit. Most startups waste resources when they do not confirm if the product actually meets the market need adequately. Before you build your product to solve a problem, ascertain how people (the larger the better) want the problem solved and their willingness to pay. The feedback you get should give you an insight on how to achieve product market fit.
How to achieve product market fit
To find out if your product would fit your target audience, here are three things you can do:
- Pay Attention: Observing and paying attention to reviews, complaints and pain points of customers is a sure way to discover the perfect product that would blend with the market need. There might be existing products which are not fixing the pain points or not doing it the way clients want it done.
Building your product to plug the hole can set you apart and help achieve that ideal product market fit. Paying attention to the reviews clients are giving to your product, your competitor's product will point you to how you can adequately satisfy their needs.
- Ask Questions:Many startups neglect feedback clients give to their suppliers and marketers. Thing is startups should ask for and encourage the clients to give honest feedback. Let the market guide you on how you should meet their needs.
If your product is not meeting the need the way the market dictates then you’d be wasting your time building a product nobody wants to buy. Physically interact (encourage your developers too) with your market so you can feel their pulse and be able to build the exact product for their needs.
- Surveys: Sharing surveys is one of the oldest and most reliable ways of interacting with your clients. CEO of Growth Hacker, Sean Ellis asserts that if at least 40% of clients would feel disappointed if your product is no longer available then, you have a potential product market fit.
Ensuring you have the right questions will play a huge part to authenticate your survey. Some suggested questions to help you get the relevant answers include: What problem is this product helping you to solve? What is the benefit you get from this product that alternatives don’t have? How can this product be improved upon? Etc.
When your startup achieves product market fit not only will you intuitively know but it would be evident to all. Your clients will become a huge part of your sales force through their word of mouth marketing. Product market fit is also not static because the market needs change with time. So it’s important you evolve with the market.