Product-market fit is a concept popular among startups. It shows whether a product managed to solve clients' problems. After a brand reaches its product-market fit, it starts to grow.
In this article, we'll explain why a product-market fit is important, walk you through achieving it, and consider measurement.
Why is a product-market fit important?
Product-market fit is a product lifecycle stage at which you realize that your brainchild will bring you success. Every startup needs to make sure that its product will meet some customers' needs before the stakeholders invest in promotion. Otherwise, they risk spending money in vain.
Before launching a new product, every business looks for an audience segment that will be the first to try it. These people should have the same pain points to evaluate how well this or that product helps deal with them. When the product copes well with their challenges, the brand achieves its product-market fit. Now it is ready to see the world. So, a product-market fit boosts word-of-mouth and accelerates promotion.
Now it's time to learn how to find it.
How to achieve a product-market fit?
Every startup needs to go through several stages to find its product-market fit. Let’s walk you through this process.
- Find your target audience. This is the most essential step since the better you analyze your potential customers, the more chances you have to achieve your product-market fit. Choose a narrow audience segment with common needs, pain points, and preferences. Creating a customer profile is an advanced level. It implies building an ideal client profile. For this purpose, you need to know your customers’ demographics and have more details. The more detailed profile, the better. Your target audience will help you improve the quality of your product.
- Identify unmet customers’ needs. Most likely your offer won’t be a brand-new product on the market, so you should create a unique value proposition. When you are a startup, you need to provide users with reasons why they should give a try to your product if there are a lot of options available. So, interview your potential clients to uncover the needs they still have when using your competitors’ product. You can provide a better quality product, offer 24/7 customer service, or have a flexible return and exchange policy.
- Develop a minimum viable product (MVP). An MVP is a product that has the basic features which are enough for clients to meet their needs. Its goal is to attract users, get their feedback, and act on it. It allows startups to save money and helps prevent businesses from failure. With an MVP, you’ll be able to test your product, ensure that it solves customers’ problems, set priorities, and improve it.
- Test your MVP. Let your target audience test try your minimum viable product. To receive its feedback, make use of a survey. Create open-ended questions because they help obtain more valuable information about your product. Ask users what they especially liked about your product, what caused them troubles when using it, how they would improve it, etc. Analyze and interpret their answers to identify some common patterns. They will help you find a way to improve.
- Launch your product. By this stage, you have enough insights and experience. So, if you went through all the steps above, you would manage to achieve a product-market fit. Pay special attention to the choice of promotional channels. They influence your outreach significantly. Analyze the sources where you found your target audience and make the most out of them. Never stop collecting customer feedback since it is the buyers who know which product they need.
Now that you know how to achieve a product-market fit you need to learn how to identify its performance.
How to measure a product-market fit?
There is no formula to measure it because a product-market fit is not a metric. Nevertheless, there are some important measurements you should pay attention to. So, let’s take a closer look.
- Net promoter score (NPS). This measurement allows companies to understand whether their clients would recommend their brand to friends and colleagues. To calculate it, you need to subtract the percentage of Detractors from the percentage of Promoters. Detractors are unsatisfied clients, and Promoters are people who admire your brand.
- LTV/CAC. These are core metrics for each marketer. You should know the ratio between your customer lifetime value and customer acquisition cost to make sure that acquiring a new client will pay off.
- Retention rate. It shows the percentage of clients a company is able to retain within a certain time period. Since it’s easier to keep an existing client than to acquire a new one, companies invest a lot in customer retention. If clients buy again and again from a particular brand, it means that it satisfies their needs successfully.
Congrats, now you know why a product-market fit is important, how to achieve and measure it, so do your best to constantly improve your services.
Last Updated: 01.09.2021