If you’re not familiar with product-market fit, it’s time to brush up on your knowledge. Without it, your business won’t go very far.
It’s a pretty easy concept to understand. Product-market fit means you’ve got a product that plugs a gap in the market and has demand from customers.
What’s harder to figure out is how to achieve product-market fit, how to measure it and, crucially, how to leverage it to scale up your business.
Enter: Go-to-Market Academy.
If you want to know all things product-market fit, including:
- How to define it.
- How to find it.
- How to measure it.
- How to use it to scale your business
Then keep reading…
How to define product-market fit
Justice Potter Stewart once said of pornography, ‘I can’t define it, but I know it when I see it.’ Ask successful business leaders how to define product-market fit, and you might get a similar response.
It’s hard to put a finger on how to achieve product-market fit and what it looks like. However, many of our product marketing managers and product leaders have described ‘just knowing’ when they have it:
“In the early stages, pre-product-market fit, founders push their product into the market. But then, at some point, the best companies achieve product-market fit, which is characterized by a pull from the market. This pull manifests in several ways. Customers start to demand your product. They come to you. They tell their friends about it. Many who have experienced this will tell you it’s a feeling, but there are ways to quantify this pulling force.”
Egan Montgomery, Director of Go-to-Market at High Alpha
So, how can we define it?
Well, if you have product-market fit, you’ll also have these things:
- Customers who are willing to pay for your product.
- The ability to source and keep customers.
- Customers who will recommend your product to others on your behalf.
- A profit when delivering your product at scale.
If you have a product-market fit, you’ve found a need in the market and you are fulfilling that need. Customers want your products and you can make a profit off of them. But, as we’ve said, the hard part is getting to that stage, and maintaining product-market fit once you’ve found it.
How to achieve product-market fit.
Product-market fit is all about having a product that people want, so you need to start with your customers. You might have a great idea for a product that you think will be popular, but you need to validate that assumption.
If you don’t, you could invest a lot of money in something no one wants.
Research the market and your hypothetical customers. Is there space or need for your product? Ask your target audience if your product will be useful to them: would they pay for it? Would they recommend it to others? If you can find real demand for your product, then you’ve got the green light to move forward.
It’s key that you have a value proposition for your product. If you don’t know the value of your product, you can’t expect anyone else to see it either.
Focus on your target audience. If you try to sell to everyone, you’ll end up with a product that doesn’t suit anyone. It’s best to put your energy into a specific market and ensure that your product has a cohesive identity that reflects your value prop.
Build in-depth buyer personas and use this information to guide your marketing. You’ll need to be patient, but once you’ve got this market locked down and you’re turning a profit, you can start thinking about scaling up.
That patience is crucial. If you start to scale without product-market fit, you’ll drive yourself into the ground.
How to measure product-market fit
Telling you to wait for product-market fit before you scale is all well and good, but you’re probably wondering how you’ll know when you have it. As Egan said, while it might be a pretty elusive concept, you can quantify product-market fit.
Customer retention is one of the clearest indicators that you've achieved product-market fit. It means that people are sticking with your products and continuing to use them beyond the initial sale, rather than churning.
If you have product-market fit, you’ll have a sustained retention rate. And the higher it sits above zero, the better.
Find out more about customer retention and how to measure it here:
The best way to know if your customers benefit from your product? Ask them.
Yes, it really is that simple.
Some key questions you’ll want to answer:
- How often do customers use your products?
- What problems is your product solving for your users?
- If your customer no longer had access to your product, how would this affect them?
- Would your customer recommend your product to others?
The answers to these questions will guide any adjustments you need to achieve or maintain product-market fit. It’s important to remember that product-market fit is not a static thing. It can wane over time, so you need to actively keep track of it and reassess if it starts to dip.
An NPS - or Net Promoter Score - is a ranking that indicates how good your product-market fit is. It’s worked out by breaking customers down into three groups:
- Promotors. These are the people who actively endorse your product and will tell others to use it. AKA, you guys are BBFs for life. You’ve done the secret handshake, made the blood pact and the deal is sealed.
- Passives. They like your product, they use it, but they could still be tempted elsewhere. Remember, snakes don’t hiss, they jump onto another tech train when you’re not looking. So make sure you pay attention to these customers and turn them into promoters.
- Detractors. Your classic Draco Malfoy’s. They don’t like you, and they’re going to badmouth you to everyone else. However, all is not lost. Who doesn’t love a villain redemption arc? It’s time to hear the other side of the story, understand why Draco doesn’t like you, and find a resolution. After all, criticism allows us to grow.
There are plenty of NFT tools out there that will calculate a score for you, and once you know how good your product-market fit is, you can set about the necessary work to improve or maintain it.
How to use product-market fit to effectively scale your business
As we’ve discussed, when you have a really good product-market fit, customers will refer you to others. This is essential because growing your customer base is the key to scaling up.
Establish feedback loops with your customers so you can keep improving your product-market fit and demonstrate how much you value their input. By developing that relationship with customers you can not only learn from them, but build their loyalty to you.
This will encourage customers to endorse your products, which in turn will drive organic growth.
You also need to make use of your frontline teams. They have the most one-on-one time with customers, so they’re in the best position to know what users like and what they want to be improved.
Having your frontline teams report back on recurring themes in customer complaints or questions, you can solve problems before they result in a loss.
If you keep a close eye on your product-market fit with the tactics we’ve discussed, you can use it as a key indicator to know when it’s time to scale.
You can avoid scaling too early and blowing your budget on a product that won’t sell, and when you do scale you can take a loyal customer base with you.
How to improve your Go-to-Market strategy
Our Go-to-Market Certified: Masters course will give you all the information and knowledge you need to up your GTM game.
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By the end of this course, you'll be able to confidently:
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