The term product-market fit is a popular term within the startup world. However, it often raises questions about what it means exactly, and how you can search and measure the market fit of your product or service. Knowing the position of your product on the market is essential for the initial success of your product, as well as the long-term sustainable growth of your business. It forms the interplay between a business, its product(s) and its customers. In this blog we tell you all you need to know about the product-market fit, how you can measure the position of your product on the market, and how you can use this information for the sustainable growth of your business.
What do we mean with a product-market fit?
A product-market-fit revolves around the extent to which your product fits within a certain market segment. It’s an interplay of both the product and the market, as they both need to satisfy each other at the same time: the right product needs to satisfy the market and its customers, and the right market has to contribute to the success of the product. Generally, these aspects go hand in hand. If you launch a product in a market segment that’s not aligned with the main functionality of your product, it will undoubtedly fail. There is a reason why digital partners never just dive into the development of your app before they’ve done an extensive market and target audience research. All in all, concretizing the right product-market fit is one of the first steps to take to increase the potential success of your application.
But how do you know if you’ve found the right market for your product or service? Usually, you’ll notice soon enough when your product-market fit isn’t quite right. Customers aren’t really getting value out of the product/service, you struggle with acquiring and retaining your first users, your customer base is shrinking rather than growing, reviews lack enthusiasm and positivity, sales cycles take too long, and lots of deals go astray. On the other hand, you’ll also notice when your product-market fit is done right. Your customer base is growing quickly, you gather a lot of good reviews, and your profits probably rapidly increase. A sign of an effective product-market fit is when the advertising is done via word of mouth by your end-users, rather than by your own initiatives. A right product or service on the right market results in happy customers, and happy customers will sell your product for you. However, keep in mind that markets change, and a product-market fit that used to work in the past, can lose its effectiveness later on. Here are some things to keep in mind when thinking about the right market for your product:
- A good product-market fit doesn’t always result in immediate profits. Your customers need time to discover your brand and try it out before they share it with the world.
- A good product-market fit also isn’t a guarantee that your product will succeed. The overall quality of your product in comparison to its competitors can also make or break your success.
- With the passing of time, markets change along. A good product-market strategy can turn into a bad fit over time.
- If you found the right market for your product or service, it doesn’t mean you don’t have to be afraid of competition. A good product-market fit or not, there will always be competitors around the corner.
How to find the right market for your product?
Now that we talked about the importance of a good product-market fit, it’s time to look at how you can actually make sure you’ll find the right market for your product or service.
Create the perfect fit yourself
Good to keep in mind is that it’s normal to sometimes adjust your product or business in order to make it fit in the market. This involves making internal changes in your business, changing your branding choices, changing your main focus, etc. Popular companies like Instagram and Twitter, and many more, had to radically change course in order to stay relevant in their market.
Talk to your users
One, and possibly the best way to find out if your product or services is positioned within the right market is to talk to your customers. They are the ones who actually use your product or service, and are therefore the ones with the most viable perspective on your product-market fit. You can create personalized surveys for your customers to fill in, or get in contact with them directly. No matter how you do it, your customers are your main source of information.
Different markets, different requirements
No market is the same, but it’s good to make sure that you pick a market that’s generally easy to enter. For example, niche markets ask for an already very developed product/service/business, as it has strict requirements of what fits inside that market and what not. Bigger markets typically give businesses more space and time to find their way towards its customers. For example, the IT market consists of a broad range of businesses, from physical objects like smartphones and other gadgets to services like graphic design, software engineering and much more. Therefore, a bigger market often offers a more lenient way of treating newcomers.
How to measure product-market fit?
Once you’ve found a market that seemingly fits your service or product, the next step is to measure the actual product-market fit. Only by consistent measuring can you fairly quickly find out of a certain market fits your product or service. And the faster you discover uncertainties, the quicker you can make adjustments.
Like said before, word of mouth sales among customers is probably one of the most concrete ways of finding out if your product-market fit is working well. You can create short surveys in the form of popups on your website or integrated in your newsletters that simply ask your customers the question how likely they are to recommend your product or service to a family member, friend or colleague. This is mostly done in combination with a 1 to 10 scale, to create a more narrowed down insights into the experience of your customers.
Ratings, reviews, and surveys
Ratings and reviews in, for example, app stores or google’s search engine can also give you a fairly good insight into how your customers experience your product. Once you have managed to collect some reviews here and there, you can create surveys to dive deeper into the experience of your customers. An often used question in these kinds of surveys asks for the reaction of customers if the product or service you offer suddenly wouldn’t be available anymore. They can choose questions between the range of “very disappointed” to “not disappointed at all”, which gives a pretty clear image of the success of your product.
Unhappy customers will likely leave very quickly after making use of your product or service. Tracking down how many customers you are losing, as well as how fast they are leaving after trying out your product or service will give a pretty good insight into their experience of it. You can track this by consistently measuring the statistics of your app or website.
Need a hand?
As a full stack digital partner, Lizard Global is specialized in finding the right market for your product or service. Our experience has made us highly value the strengths of proper market research, and we gladly guide you through the process of finding the right product-market fit for your business. Get in contact with us, and we gladly start off with a free digital consultation session in which we have a first look at your innovation and its potential place in the market.