Product-market fit is a lot like being in love–when you know you’ve found it, you just feel it. Similarly, product-market fit can look a little different for every company, evolves over time, and takes a lot of work. The comparison to love doesn’t seem too far off now, does it?
Corny metaphors aside, achieving product-market fit is widely seen as a crucial part of a technology company’s growth trajectory, but the “how” is less straightforward. In our latest webinar, we aimed to de-mystify product-market fit with the help of two industry experts: Mike Mike Gozzo, VP of product at Zendesk, and Eric Boduch, co-founder at Pendo.
Before we dig into some best practices for finding and measuring product-market fit, let’s start with the basics: why is it so important?
Why does product-market fit matter?
There are many different ways to define product-market fit, but two that stand out are when the customer and the product are in agreement, and when your customers become your sales and marketing people. Slack, for example, placed an early focus on delightful user interactions and being highly responsive to product issues. This delight caused customers to act as a word-of-mouth marketing force, helping to drive adoption (and an explosion of growth).
Product-market fit is all about showing how your product can solve a particular problem, which is important since a large potential market is worthless unless it gets realized. Many venture capitalists won’t invest in a company without evidence of product-market fit, as it is such a key springboard for scaling and growth. Think about it: How can you justify putting resources toward innovation or strategic initiatives if you can’t first prove that your product has enough of a potential market to sustain itself and, ideally, generate profit?
As you work toward product-market fit (or work to regain it), keep these five best practices in mind:
1. Product-market fit is not a single point in time
If there’s one thing you remember about product-market fit, let it be this: achieving product-market fit is not a single moment in time that you check off your to do list. In fact, you can even lose product-market fit, and you’ll likely need to reassess it throughout your company’s growth. Take Netflix as an example. It started out as a DVD subscription business by mail, and had to alter its product as the market need changed in order to maintain fit and become the streaming platform it is today. Although we often talk about the moment of achieving product-market fit, remember that it is an ongoing process.
2. A lot goes into finding product-market fit
Just as there are many different ways to define product-market fit, there are also a lot of things that go into finding it. This includes iterating on product features and functionality, adjusting pricing, and maybe even pivoting the product and its value proposition. Most importantly, you should always be getting feedback from your customers to inform these decisions. Achieving product-market fit is also a company-wide effort–not just the responsibility of those building the product itself. Your prospect and customer-facing teams are in the best position to gather valuable feedback, so it’s important that everyone at the company feels empowered to make an impact here.
3. Product-market fit can manifest in different ways
While it’s true that product-market fit is often something that founders and product leaders feel, there are some signs to look out here. These include:
- Usage is growing (customers are buying) as fast as you can add more servers (make the product)
- Customers are your marketing (i.e. through referrals)
- You have a high volume of outside inquiries (investors, press, etc.)
- Your product grows exponentially without marketing
It’s best to think of these more as signals to be aware of, versus requirements to check off. Similarly, just because you have one or more of the above doesn’t necessarily mean you have product-market fit.
4. Measurement requires quantitative and qualitative metrics
When it comes to measuring product-market fit, quantitative and qualitative metrics are both valuable. For quantitative, track things like acquisition, activation, retention/churn, and revenue. Balance these out with qualitative metrics like customer feedback, NPS, and referrals and reviews. It’s also useful to ask customers (e.g. through an in-app survey) how they would feel if they could no longer use your product. This will help you assess whether or not you’re truly solving a problem for them, or if your product is just a nice-to-have.
5. Customer feedback is absolutely crucial
Something that came up multiple times throughout the webinar was the importance of customer feedback during the road to product-market fit. You need to understand who your customers are, their pain points, and how they’re using your product. Also keep in mind different factors that affect the value of this feedback, for example usage frequency (if someone who rarely logs into the product provides feedback, it might not make sense to prioritize their request) or whether a customer is using the free or paid version of your product.
To watch Eric and Mike’s full discussion on product-market fit, check out the webinar recording: