Product-market fit is one of the key concepts for a business to take off. The product-market fit analysis determines whether or not there’s an audience for a product in the market and the right time to launch it.
What is product-market fit? When an entrepreneur recognizes the need for a particular product in the market, launches it at the right time, and starts attracting an audience, we say that the product fits the market. The number of people referring your product to other people also comes under the definition of product-market fit.
Many people make a mistake when it comes to measuring product-market fit. They’d launch the product, start running ads, then begin the analysis, which should be done before the item’s release.
How would you know the right product and time to launch it? Research. It is the critical ingredient that plays an essential role in making or breaking a startup.
Let’s take an example. When Whatsapp was launched, there was a need for it in the market because there was no other messaging app as good as Whatsapp, which makes it evident that the creators researched the market.
Read along to learn numerous ways to determine product-market fit and its importance.
Importance of Product-market fit
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Investors insist on measuring product-market fit before investing in a company. Why? Because they are investing money in a product, and they aren’t sure if it’d sell and make a profit. If there is no product-market fit and you still invest, it would be as good as throwing your money away.
If you’re unaware of your product’s demand in the market, you will keep supporting your money, time, and energy on an item that may not generate enough sales to make a good profit. Further, if your business solely depends on that one product, you might have trouble keeping up with company taxes, employees’ salaries, and other expenses.
In conclusion, skipping the product-market fit analysis or doing it after the product launch can result in your brand losing money and your company being shut down (in worse cases). A significant failure like that doesn’t only harm your financial condition, but can also affect your mental health. A major career failure leads many people to disbelieve in themselves and lose motivation to start over with their job or business.
Ways to Find Product-market Fit
Finding product-market fit is not easy. It requires months of hard work and deep understanding product-market fit. Know that you will come across flattened graphs, low numbers, and failed results, but when you achieve it, you’d know that everything is worth the effort and wait.
Follow the steps below to learn how to find product-market fit.
1. Find a Solution to a Problem
Start by looking for a problem that revolves around your expertise. You may not have to be too hard yourself to find a problem. Sometimes following your routine and observing your surroundings does the trick.
Now that you have a problem, find its solution. If you can explain the issue to someone in simple words and they understand, it means you’ve comprehended it well enough to find a solution. If not, narrow it down, and define it more precisely.
Let’s take Tesla’s example. Its electric vehicles solve two problems. Cars release smoke that causes harm to the environment. And people who can’t drive depend on others for a ride. Tesla’s electric vehicles are not as harmful to the environment as regular cars, and the auto-pilot mode enables people who can’t drive to take themselves wherever they want in the vehicle.
2. Find Your Audience
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Find the audience that experiences the problem you found a solution to. Your audience cannot be everyone. Find that group of people who can relate to the problem, wants the solution, and might even contribute to improving it. If you try to do everything on your own, you may end up creating a product that nobody wants or doesn’t solve the issue.
Now, you want to test the product. Examine how often your target audience would use it and how much value the item will give the user. If the value your product adds is low, the frequency must be high. If both value and frequency are low, your product may not be needed in the market, and it’s the right time to find something else.
Here’s an example. Cab services have added a high value but have a medium frequency. Not everyone uses Uber every day, but when they do, the service fulfills an essential need: to commute from one place to another.
Instagram is an example of low value but high frequency. It has more than a billion users, and most use it daily. But its use doesn’t add more value for most people than entertaining.
Once you’ve calculated your metrics, start building the solution. Don’t let limited resources be the reason you can’t create the solution. If you can’t implement it, go to the first step, and find the solution you can apply.
3. Build a Minimum Viable Product (MVP) and Get Feedback
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A minimum viable product is the first version of your product that only consists of the main features.
Suppose you want to launch an app like Instagram. You won’t release it with all the additional features in the beginning. You would start by adding chat features and sharing photos, videos, and stories. When your app gets a great response from the target audience, you add more features like video and audio calls, story highlights, reels, etc.
Remember, when you want to get feedback on your minimum viable product, there are better people to go to than friends and family. They may not love your product, but they love you; therefore, they might not be more honest and tell you what it lacks. Instead, you can give it to a small group of people for testing. Ensure that a group of people knows that it’s an MVP. A stranger’s feedback is more valuable than your friends or family’s review.
4. Don’t Consider All the Metrics
If you built an app that gets more than ten thousand downloads a few months after launching, this can lead you to mismeasured product-market fit. How do you know that the people who have downloaded your app are using it and love it enough to refer it to their friends and family? Looking at the number of downloads for your app is not how you measure product-market fit correctly. You want to keep your eye on consumer retention and usage.
Find the number of monthly active users to calculate retention. Then, find how much users utilize your product. For instance, YouTube’s usage can be estimated by considering the minutes watched per month. Low consumer retention and usage numbers are better than a fancy number of downloads.
5. Measure product-market fit Using NPS and PMF
NPS is one of the most impactful ways of measuring product-market fit. It stands for Net Promoter Score. NPS can be accomplished by asking your users how likely they are to refer your product to a friend, family member, or other person.
They can rate on a scale of zero to ten, zero being “not likely at all” and ten “most likely.” Then, minus the percentage of your negative feedback from the percentage of positive feedback. If your results lie between zero and fifty, your product needs little modifications to raise the NPS.
Another way to determine product-market fit is by using a PMF survey. This time you will ask your users how they would feel if they could no longer use your product. They answer in three options. Very disappointed, mildly disappointed, or not disappointed.
If 40% of the users say they’d be very disappointed, congratulations, You have achieved a good product market fit.
Launch Your Product on the Internet
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Now you want to launch your product online. This era has technologically evolved to the extent that you must spread the news about your product on the internet for it to thrive.
Creating social media pages and a website for your brand helps educate people about your product and its purpose. You must’ve done a lot and spent vast amounts of money to achieve product-market fit; that’s why we’ve eased some of the steps after it. You don’t have to pay extra thousand dollars to the developer for a website. You can build one yourself using Strikingly. We’re a website builder that lets you create beautiful, responsive sites within a few minutes.
The process of creating a website with Strikingly is simple. You just need to sign up, select from amongst more than 200 pre-designed site templates, and edit them in the intuitive site editor.
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Strikingly offers the most valuable features that will help you showcase and sell your product. Add the Simple Store section to your site and gain access to features like displaying digital products in your online store, accepting payment through multiple gateways, customizing checkout forms, categorizing items, and adding a product filter.
Moreover, you can offer coupons to returning customers, which will help maintain product retention.
Now that you know the tips to determine product-market fit, don’t let your MVP-building process wait. Start implementing your solution today to grow your brand and start changing the world.
