"Product/Market fit is not just a prerequisite for growth; it is the fuel that powers all sustainable growth efforts."
Achieving a product/market fit (PMF) for your business may seem like a difficult task. However, it is vital to your business's future growth and success. PMF is the reason your business will grow and scale in the future. Without it, the group of people who could benefit from your product will never know about it, which would be a shame!
Leveraging your PMF
Leveraging your product/market fit starts with understanding a few core points about your product.
- What is my target audience's user experience as before my product launch?
- What specific solution does my product provide to this target audience?
- Why is that solution important to them?
- Are there other benefits my customers will get exclusively from using my product?
Your company's answers to these questions boil down to giving your target customers the product or service they want and need. The unique selling proposition you manage in your marketing and sales messages must translate into a "must-have" for your audience, or they won't convert into new clients.
Eliza Nimmich, Co-Founder of Tutor the People, had the following to say about her company's experience with product/market fit. "Product-market compatibility is critical, and you don't know at that stage whether or not what you are creating addresses a particular challenge a big enough consumer has.
You may continue investing in creating anything that is not financially feasible without clarification on this."
By truly understanding your business's answers to the 4 critical questions above will ensure your team constructs the ideal customer journey that will turn your leads into paying customers. Delivering on the promises outlined in your customer journey not only positively positions your brand, but it may incentive happy customers to become brand evangelists.
If you want your business growth to skyrocket, make sure you can check to have a product/market fit off your checklist.
Look towards business growth
A business that sees sustainable growth cashes in on its success because its team did what was to find its PMF. Similarly, startups that fail do so because they do not find product/market fit before trying to scale.
Ensuring you have found a product/market fit can be tricky. During the process, you may see promising signs that hint at it. Increased user engagement on your social media or increased customers look and feel like PMF, but they may be signals of gaining traction with your target audience.
If you see these signs, but your customer base is not growing, do you have a product/market fit?
You may need to implement some swift changes to start seeing a return on your investments.
As Marc Andreessen put it, "do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don't want to, telling customers yes when you don't want to, raising that fourth round of highly dilutive venture capital – whatever is required."
If your current strategy is not yielding results, change it.
Rahul Rana, Head of Digital Marketing of Vdocipher, a secure video hosting platform, had this to say about his company's strategic change in the market to find a perfect product/fit for them. "Finding the right audience for our product has been a game-changer for us. Being a secure video hosting company, we initially targeted all sorts of organizations, including corporate training, ed-tech, or any business looking for a video hosting solution.
Soon we realized that conversions in the media and corporate training segments were quite low…competition in the market didn't let us convert much of them. Plus, our unique selling point, i.e., video protection, wasn't their priority.
We eventually realized where to focus our attention. E-learning businesses rely heavily on their video content to generate revenue. Our product solved a major problem they faced, the loss in revenue due to video piracy. We decided to focus on this segment and finetune our product accordingly.
This changed helped us reduce our churn to around 10% and obtain a quarterly growth rate of ~ 20 to 30%. We were able to penetrate about 30+ countries and serve about 1000+ happy customers. Our ARR is ~ 1.2 million USD, and our customer acquisition cost is roughly 90 USD."
Without this pivot in the target market, Vdocipher would not enjoy the success they currently have.
Once you find the ideal product and target market combination, you know that you can focus on company growth with the right marketing message and sales tactics.
Growth Marketing
Growth marketing is the mechanism behind the product/market fit that creates business growth.
Growth marketing looks at your customer lifestyle, analyzes its various components, and uses that insight to determine the strategies a company needs to take to drive more customers and greater overall returns.
The connection between growth marketing and PMF is that without product/market fit, your team does not have the data it needs to drive sustainable and rapid growth for your business.
Therefore, when you examine your customer lifecycle and your product from a growth marketing viewpoint, you aim for sustainable growth by establishing customer retention.
Customer retention is one of the biggest indicators for product/market fit. If you see an increase in repeated customers, you know that what your team is doing is on the right track. With retention, you can have a clear idea of how much your business is growing.
Defining your CPV
There are many ways to measure your business growth over time. One of these methods is to determine your company's core product value (CPV).
A core product value is a solution your product provides to others. It continuously answers why your customers should keep using your product or service.
When your organization has found a product/market fit, it can set its sights on growth. CPV is important because it helps to measure customer engagement and whether your business is growing.
Take Uber, for example. Once they found their PMF, they knew users would be willing to pay for an affordable transportation service that was safe, reliable, and easy to use. With this goal in mind, they implemented driver ratings, more affordable costs (compared to the standard taxi rate), and made the Uber app easy to use. As a result, they started acquiring approximately 1 new rider for every 7 rides – without any additional marketing efforts.
Similarly, after your organization has achieved a product/market fit, remain clear of its CPV. As you perfect your product's features, price range, and marketing message, you should see an increase in user engagement and customer acquisition.
Every business's CPV will be different from its competitors; therefore, the ideal time interval your team uses to measure growth may vary. Keep track of your customer retention rates and customer feedback on your company website and social media profiles because they are clear indicators of whether your target audience is aware of your CPV.
An irreplaceable product
Unique products make it easier for a business to keep attracting new customers and inspire brand loyalty.
When you have achieved PMF, your team can rest assured that you are on the right track to growing your business. Products and the industry trends that popularize them come and go, so it is vital to keep on top of any changes that could influence how successful your product remains in the long term.
Testing your product and evaluating customer feedback with techniques such as the Sean Ellis Test will help you determine how satisfied clients are with your product over time.
Keep connecting with your customer base
Running a business that serves a growing marketplace does not always equal success. Without a solid understanding of your target customer, it is impossible to know how to best suit their needs.
The key to connecting with your target audience is to diligently research your target market and ensure your buyer personas accurately reflect who they are. By now, your team should have a complete buyer persona profile for every type of customer your business targets – this is crucial to achieving PMF.
Having a product/market fit is only part of the process toward long-term, sustainable business growth. This includes continually educating yourself on the market's changing trends and your customer bases' changing motivations and obstacles.
Product/Market Tips to Grow your Business
Achieving PMF is not the be-all and end-all of business success. It merely gives you a north star with which to guide your marketing and sales efforts to acquire and retain more customers in the long run.
Once your team is sure about the market and the type of customer(s) it aims to attract, follow these tips to improve the likelihood of growing and scaling your business.
Tip #1: Avoid scaling before it's time to
A good number of initial sales is not a clear indication your team has found the magical combination between product and market. It could be traction, such as curious buyers willing to try your product out, or a stroke of good luck.
Once you have a hefty number of repeat customers and positive online reviews from clients raving about your product or service, you can safely think about scaling your business. This can include increasing production costs, hiring new team members, and look for new investors.
Tip #2: Focus on one market before trying to expand to others
The fastest and most efficient way to keep testing your business's PMF and to grow is to focus on a specific market and win at it.
Tip #3: Focus on your growing revenue
While this tip may be obvious to some, it is important to mention. If you have a product/market fit, monetizing your services should come naturally.
When you create an irreplaceable product and offer it to the right market, your revenue should increase.
#4: Measure PMF continuously
Contrary to popular belief, product/market fit is not a permanent quality that once a company has got it, it will always be there. Economic downturns, new technological innovations, and changing customer needs all collaborate to make business ever-changing.
For this reason, high-performing companies adopt various methods to measure how their product performs in its chosen market over time. Measuring success by evaluating customers' net promoter scores (NPS), customer feedback, increased revenue performance, and overall demand help determine a business's long-term success.
#5: Keep customer feedback at the top of the list
While investors will help you fund your business in its early days, customers will drive your growth.
Therefore, their feedback should be one of the top things your team pays attention to when deciding which changes, if any, are needed to your product, marketing, and brand message, or sales strategy.
Designing a one-of-a-kind product that wins over its target audience will always be a work in progress, so do not be afraid of learning what others think about it.
Stay on top of consumer reviews, user engagement on social media, monthly active users, purchase frequency, and how your bottom line compares to your business numbers to stay on top of popular opinions about your product.
Growth is gradual
Finding PMF is only the beginning. It is useful because you know exactly what you offer and who you are offering it to once you have it.
As you implement new strategies to entice your target audience to purchase the product, be mindful of the core reason(s) they should invest in. Allowing this idea to remain at the center of all your marketing and sales efforts will help catapult sustainable growth in the long run.
