It sounds over-the-top, but product market fit is the holy grail of any startup. It’s something that you should be determined to find. It doesn’t matter how much traction you have or how much revenue you generate if your product doesn’t suit your customer’s needs or vice versa.
But what is the product market fit? And how do you measure it? We’ll show examples and break down the criteria below. A product or service is said to have achieved “product-market fit” when it successfully satisfies the target market’s requirements and product organization structure to continue to experience growth while maintaining its profitability.
That is, under the assumption that a sufficient number of people are using your product and offering sufficient value for them to continue selecting it over your rivals. It is okay if the people who use your product or who are your customers advocate for it in sufficient numbers to drive ongoing expansion.
This post aims to find the “sweet spot” where you offer just the right amount of value so that your customers find the product usable and your company sees it as feasible and viable.
So what exactly do you need to do to find product market fit? Keep reading so that you can discover some of the things that you need to think about.
How to achieve product-market fit?
As we’ve already discussed, the product-market fit has more to do with product design and sales challenges than marketing. That said, some marketing is required to determine if there is even a market for your offering.
The market: What is your target audience?
It might seem obvious, but you should identify the characteristics of your customers. There needs to be more than just considering them as a group interested in X product. You need to understand their needs, desires, and the pain points that they feel when using the product you’re offering.
The product: What is the core of your offering?
Consider what your product is providing and how it’s providing it. What are you selling? Are you selling a physical product? Or are you selling a digital service that is delivered over the internet? Are you selling data or a solution for common problems that people have?
Your product might be unique to you, or it might be a variation of something else. It doesn’t matter. What’s important is that you define your product.
The size of the market: How big is the market?
The market size can be best determined by performing a SWOT(Strengths, Weaknesses, Opportunities, Threats) analysis of your industry. Make a note of the size of your industry. Are you a small-medium-sized firm, or are you a large organization?
Plenty of studies can provide insight into the size of your target market and how big it could be. In such a case, you would seek to understand how many companies are offering products that fit your target audience and how many people use them.
Marketing: What are the advantages?
This is where the marketing comes in, which we’ll cover in more detail later. If you want to find product-market fit and innovate your way out of obscurity, you need to be able to articulate both what makes you distinct from your competitors and why potential customers would choose you over them. You can also rely on headhunting firms NYC to hire the best candidates for product market fit!
Market research: What is the demand for your product?
You must do market research to find product-market fit and prove that you have it. Find out what the demand is from your target market by either running a survey or conducting interviews with potential customers. You can also use competition analysis if your competitors have products that match your target audience’s needs.
How to measure product-market fit?
Now that you know what product-market fit is, it’s time to learn how to measure it. Unfortunately, there is no single metric that can tell you if you’ve achieved product-market fit or not. However, these metrics can show how well the market and your target audience receive your offering.
Acquisition rate: The first metric you can use to measure product-market fit is the rate at which new users are adopting your product. Think of it as a measure of the general usage of your product, not just the volume that a particular customer might be using. You might have a high retention rate, but as long as a smaller portion of potential customers is new users, you’re likely to see little growth in sales or usage.
Retention: The second metric you can use to measure product-market fit is retention. This metric tells how many users return to your product after making their first purchase or using it. It gives you a measure of how sticky your product is, which indicates how satisfied customers are with the experience they’re getting.
Engagement: The third metric you can use to measure product-market fit is engagement. This metric tells you how much people are engaged in the product that you’re offering. You want users to be interested enough in your product that they’re willing to interact with it and continue using it even after their initial use or purchase. In this sense, engagement measures how useful a product is according to its users.
Revenue: Revenue is the fourth metric to measure product-market fit. This metric tells you how much people are willing to spend on your product. You might have a lot of engagement or returning users, but if people aren’t willing to pay for it, it’s not likely to take off.
Customer satisfaction: Customer satisfaction is the fifth metric to measure product-market fit. The only way to know if people are satisfied with your product is to ask them. You want customers to be happy with their purchase, after all. The best way to determine how much people love your product is to send surveys or conduct interviews.
Product-market fit examples
Travis Kalanick and Garrett Camp laid the groundwork for the next generation of ride-sharing when they established Uber in 2009. As of this moment, it conducts business in 72 countries and operates in more than 10,000 cities across the globe.
Since then, Uber has broadened the scope of its business to include, among other things, the delivery of food, packages, and courier services, as well as motorized scooters and bicycles. The current value of the company is greater than $42 billion.
When we examine Uber’s strategy for finding the right product-market fit in terms of both the market and the product, we can see how the company started.
Market Analysis of Uber
Uber was particular about the type of customer it sought to attract and recognized a genuine demand that any other company was not adequately meeting. The initial target audience consisted of urban professionals in the United States; however, it is now clear that this demographic is no longer relevant. The demand has been there since the late 2000s; finding a taxi was frequently difficult, time-consuming, and inconvenient, although this may seem impossible to you now.
When Uber first started, there were several competitors in the ride-sharing business. However, Uber differentiated itself from them via several key features.
One of these features was that it allowed customers to hail their rides via mobile phones, thereby reducing the hassle of calling for a cab and eliminating the chance of being left waiting on the side of the road. Uber also calculated fares automatically; this helped customers control their spending and made it easier for drivers to know how much they would be paid after completing a trip.
The year 2010 marked the start of the company’s inaugural ride, and shortly after that, it was awarded its initial major funding of 1.25 million dollars.