Marc Andreessen, co-founder of influential Silicon Valley venture capital firm Andreessen Horowitz, coined the term Product/Market Fit in a 2007 blog post, defining it as “being in a good market with a product that can satisfy that market.” Dan Olsen, product management expert and author of The Lean Product Playbook, further defines product-market fit as the end-game where a startup has built a product that creates significant customer value. “This means that your product meets real customer needs and does so in a way that is better than the alternatives,” Olsen explains. Olsen has created a process to help articulate, test and revise your business plan so you can achieve this goal. He proposes a six-step framework called the Lean Product Process.
In principle, you can measure product/market fit with surveys that identify what percentage of your users think your new product is a ‘must-have’. But more often than not, product/market fit is less about hypothetical numbers and percentages, and more about an in-depth and tangible understanding of who your customers are, and how they feel about you and your product. Is it creating organic growth, where people spread the word on their own? Are people willing to pay for your product? If they are, you have product/market fit. The road to product/market fit is often driven by finding customers via word-of-mouth, before you build a marketing engine to scale user acquisition. Establishing a relationship with your customers and talking to them (over and over again) is crucial if you want to develop this understanding in the first place.
- One-on-one interviews with your users and customers help you identify problems, generate ideas, improve your product, and build relationships. It also forms the basis for your initial thinking around customer segmentation.
- User and customer interviews can take place over the phone, over a Hangout chat, or in person; depending on what you want to discover/investigate, you will need to prepare a template of specific questions, but you should also feel free to improvise and elaborate as the conversation continues. In general, you’ll need questions about:
- your customer’s background - who they are, where they work, what does a typical work day look like for them;
- what your customer is trying to do - what pain points they experience, what they are doing to solve it, what solutions they have tried
- how your product might help - how they heard about it, how they are using it, whether or not they found ways of using it with other tools
- Another way to collect data is through your internal team members, especially customer staff. If you are a small team, you need to be the support yourself; when you grow, if you can, keep customer support staff in-house: it is the only front line you have where people can come in and talk to you, and this can drive your understanding of what your target market and customers need.
Product/market fit is the golden rule for any startup – entrepreneurs need it or their concept will fail. However, defining product/market fit isn’t as easy as it sounds because it requires a deep understanding of the market you are targeting. Product/market fit is more than simply providing value, it’s about providing the right solution to the right person and being able to clearly explain why your product is valuable to them. You haven’t successfully achieved product/market fit until your prospects can tell you why your product is valuable and then offer to buy it.