I have come to some simplifying definitions on how to validate product market fitness in a competitive environment like ours. For market, if you constrain the definition to people who know how to search for products in your category, you can develop a pretty concrete test evaluating pre-existing demand. And by doing this, you can develop a central design intention that leads to better product design. This, in turn, can then be validated by comparing your product metrics to competitor numbers, as well as user tests that focus on grouping and differentiation.Companies that find just the right market fit for their product tend to see dramatic and rapid growth. “You’ll suddenly see a pickup in the business in the industry and customers coming to you, and revenue just starting to take off exponentially.
I’ve tried to make the concept less abstract by offering a specific metric for determining product/market fit. 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. Admittedly this threshold is a bit arbitrary, but I defined it after comparing results across nearly 100 startups. Those that struggle for traction are always under 40%, while most that gain strong traction exceed 40%. Of course progressing beyond “early traction” requires that these users represent a large enough target market to build an interesting business.
You should measure your product/market fit as soon as possible because it will significantly impact how you operate your startup. If you haven’t reached product/market fit yet it is critical to keep your burn low and focus all resources on improving the percentage of users that say they would be very disappointed without your product. Avoid bringing in VPs of Marketing and Sales to try to solve the problem. They will only add to your burn and likely won’t be any better than you at solving the problem.
Get Fitness Quickly By
Understand your customers’ current needs and foresee future ones. Learning the needs of your customer takes time and experience. If you don’t know your customer, you won’t have much luck figuring out the product-market fit. To get a better understanding of your target demographic, you should spend time with your customers, write for industry news outlets, attend industry tradeshows, and find a mentor in the market to help you learn the ropes. Doing so allows you to gain invaluable connections and gain an inherent sense of the industry needs. Developing a deep understanding of the problems facing your customers enables you to relate to them better and ultimately helps builds trust and credibility.
Build credibility. The best way to build credibility is to offer up a story. Customers want to know how your product or service is going to make sense for them, and the easiest way to do this is to inject their needs into your brand’s story.
Focus on one significant value proposition. Narrowing your feature set down to the one feature that is a game changer is difficult, but it an absolute necessity. To determine which feature you should initially focus on spending time with customers, analyze major emerging trends in the industry, and examine areas where competitors fail to solve problems. The ancillary features can come later as your customers will be willing to wait if your product solves one major pain point they are facing.
The Benefits of Being Fit in Market
Enterprises that have established a high level of innovation fitness benefit from having everyone, everywhere, take responsibility for innovation every day whether as an Idea generator, mentor, sponsor, facilitator or team member. These organizations enjoy numerous advantages:
An infinite source of high potential ideas
Delighted and loyal customers
Speed and agility of implementation
Employee engagement and satisfaction
Continuous performance improvement
In conclusion, I hope you find this framework useful in helping you diagnose what you should try out. Let me know what you think and if you’d add/subtract anything to it.