If you are here reading this, then you might be struggling to understand whether your startup is on the right path or not. Your understanding of product market fit can give you a lot of useful answers. But the hardest part here is that few people have any idea of this and few people can provide you with specific metrics to measure product-market fit. So, in this article, I will try to give you at least some insights into product-market fit.
Let’s get started with the definition. While a lot of people have come with definitions of product market fit, the most cited one by far is Marc Andreessen’s definition:
“Product market fit means being in a good market with a product that can satisfy that market.”
Sounds too broad, right? This definition along with the term itself was coined back in 2007. And although it might have some blank spaces in between, it is still being circulated as one of the best definitions of product market fit.
But what is “a good market?” Isn’t this something a bit vague? Markets can be different and categorizing them as roughly good or bad might not be the best strategy so far.
Andrew Chen has an interesting article on this topic. He also discusses what a market is and how to know if it’s real. In fact, according to Chen, there are three things that are characteristic of a great market:
- a large number of potential users
- high growth in the number of potential users
- ease of user acquisition
Accordingly, you can always feel when product market fit is present and when it is not. Let’s discuss the two scenarios one by one.
Your customers aren’t getting a lot of value out of your product. They do not tell their friends/family members about it: word of mouth advertising does not work. What is worse, customer reviews do not seem very positive. The usage of your product is not growing, and the sales cycle takes way longer than at the beginning. In addition, a whole lot of deals never close.
If this is the case, then most probably, product market fit is not present.
Your customers are buying your product/new features as fast as they can. The usage is growing rapidly. You are hiring sales and support staff as fast as you can. Customer reviews are all or mainly positive. Reporters are knocking on all your doors and windows to get an interview with you. Your customers/users are real brand ambassadors for you. They are selling the product for you through word of mouth.
If this is the case, then most probably, product market fit is present.
How can you measure product market fit?
There are a few tactics you can use to see whether you have reached PMF or not. More concretely, if you want to reach product-market fit, you need to set proper goals. So, below are a few metrics that help understand your progress and see how near you are to the completion of your goal.
Net Promoter Score
By this, you will be measuring how likely your users are to recommend your product to a friend. This test is all about measuring how much people love your product. The more they love it, the more prone to sharing it they will be.
Engagement is the metric that shows how much a user interacts with your product in a given timeframe. If a certain amount of new users starts using your product, and then they never stop, then you have nailed the engagement.
Is a significant amount of your users paying money to buy your product or a feature of your product? If you are solving a big problem for them, then they are sure to pay you money. In addition, if you do not solve a big problem well enough, you won’t be paid. Note that this “well enough” does not only relate to great design. Take Reddit, it has an awful design, but it does solve the problem of knowledge sharing for its users.
Organic user base
Do you get your users through lots of paid ads and sales efforts or you get them through word of mouth? If your existing users are so happy with your product as to tell everyone else about it, then organic growth is ensured.
Now you have at least some idea on how to reach product-market fit. No one said it will be an easy journey. But it’s definitely worth a try!
Thanks for reading!