What is product market fit?
Product market fit is the stage of development of your product where your ideal customer thinks that your product is valuable and worth paying for.
This is what Marc Andreeson said about product market fit:
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of “blah”, the sales cycle takes too long, and lots of deals never close.”
“And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it.”
How do you achieve product market fit?
The steps required to achieve product-market fit happen to be very similar to the steps you would follow using the Lean Startup methodology.
These are the steps that I think you need to follow:
Define your target customer
Identify your customer needs
Define your value proposition
Define Minimum Viable Product (MVP)
Create version 1 of your MVP (prototype)
Test your MVP with customers
Create a new version of your MVP based on feedback from the test
Iterate until you achieve product-market fit
Step 1: Define your target customer
The starting point is always the same. Who is your customer? The best to answer this question is which customer research that leads to a buyer persona.
Your customer persona should be as specific as possible as you can possibly be but keep in mind that this is an iterative process.
The feedback you get during this process might result in adjusting your buyer persona.
That’s okay. This is just a “hypothesis” that you plan to test. Just create the most accurate buyer persona you can create based on your existing research and knowledge.
If you think your product will appeal to different types of customers then go ahead and create a separate segment for each of them.
Step 2: Identify your customer needs
Now that you’ve defined your customer, you need to get clear about what they really want.
At the risk of stating the obvious, you want to identify everything that might want.
You need to identify things they want that also represents an opportunity.
The most organized way to approach this is to ask your customers to tell you about their biggest pain points and do your best to prioritize them on a list of most painful to least painful.
Then narrow the list down to the pain points that you can solve and represent an opportunity.
The heavy lifting you need to do here is understanding the problem and solution.
Step 3: Define your value proposition
Your value proposition is just a statement about how your product will solve your customer’s problem in a way that’s better than your competitors.
The value proposition is usually expressed in terms of “the problem your product solves”, “who you sell it to” and “why it’s unique”.
Again, I made a separate article/video that goes into more detail about how to create a unique value proposition.
Step 4: Define Your Minimum Viable Product (MVP)
Now it’s time to figure out what you will include in version one of your MVP.
If you’ve done a good with your research you probably have a long list of pain points that you want to address.
But you need to focus on just solving one (or at most 3 related) problems with version one of your MVP.
This is where theory and reality might have to diverge a little.
Deciding what to include in your MVP is NOT an easy decision.
The problem you decide to solve with your MVP could be the most painful problem.
It could be the problem with the biggest commercial opportunity.
It could be the most important problem that you can build with your existing budget.
This is one of those points in time where you don’t want to get bogged down in theoretical and academic crap.
Use a combination of the data you collected in the previous steps, your time constraints, your budget constraints, and your entrepreneurial instincts to make the best decision about what to include in version one of your MVP.
And remind yourself that this is an iterative process so you don’t have to get everything right in version one.
Now, here’s another critical thing that academics forget about.
If you’re planning on creating version one of your MVP and you agree that this is an iterative process, then by definition, you eventually need to create version two, three, ten…whatever.
You need to think about how much time needs to be allocated to do this.
If you have an arrangement with your investors to get access to more capital after creating an MVP then you need to plan everything according to your agreement with the investors and make sure you clarify anything that needs clarification because this is the point where a lot of startups and investors end up filing for divorce.
You need to make sure that you’re both on the same page before you take the next step.
If you’re not working with investors and you’re just using your own capital then I strongly suggest you revisit your budget and your time frames and make sure that you have allocated enough money and time to create three versions of your MVP.
Those of you that know me well, know that one thing I always say is: “The first version of everything sucks”.
Regardless of whether you’re writing a book or creating a product the first version always sucks.
“But the road to the versions that work is paved with the versions that suck – but were improved based on customer feedback”.
If you’re new to entrepreneurship, the best advice I can give you is to think of your new product or business as a highly regarded article.
Imagine that you had to write an article about how to do something in your industry that is so good that everyone in the industry refers to it as the definitive article about this topic.
You know with 100% certainty that the first version of your article will not be good enough.
You’ll set a deadline to finish the first version then you’ll get feedback from the most highly regarded people in your industry that you can get access to.
Then you will finish multiple versions of your article before releasing a version that will stand up to scrutiny from the industry.
Your product development process will travel down the same road.