How do you know when product has PMF?
If you are here, I am sure you know what is PMF. So let us jump directly in how to determine if your product has PMF.
I. Run an AB test giving your product for free
Give your product for free to a segment of users. Pick one percent of users and give them your product for free. AB test it. If the user adoption and engagement increases by a significant margin, then you have PMF. Margin depends on the industry, IMHO a 2X increase is minimum. Dan Ariely wrote in his book “Predictably Irrational” that FREE! is indeed a very powerful force. People wait in queue for a free Burrito or a free ice-cream. If people don’t wait in a queue for your free product, then there is no need for that product.However, there are two caveats:
This methodology will work if you have targeted the right user segment for your product. Let me write this with an example, my friend Christy is a surfer and she has written a book on how to become an expert surfer. The book has a four-star rating on Amazon. If she gives that book for free to readers who neither plan to surf nor are interested in surfing, not many will read the book. However, if the book is given to budding surfers for free they are likely to read it. If the book is given to budding surfers who like to read, they will probably finish reading it overnight.
Product is functionally stable enough to be used. Following up from the above example if the pages are torn and not ordered properly. It will be hard for people to read.
Summary, once you have identified your target customer segment and your product is usable, running an experiment with zero cost to users will answer the questions whether you have PMF.
II. Net promoter score
Net promoter score of 8 or more is an indicator that business has achieved PMF. Sean Ellis suggests you focus feedback from your product users by starting with a specific survey question:How would you feel if you could no longer use this product?
· Very disappointed
· Somewhat disappointed
· Not disappointed
· N/A I no longer use your product
According to Ellis, if more than 40% of respondents select “very disappointed” then you have product/market fit. The “40% benchmark was determined by comparing results across 100s [of] startups. Those that were above 40% are generally able to sustainably scale the businesses; those significantly below 40% always seem to struggle,” explains Ellis.
III. Leveling of the Retention cohort graph
Brian Balfour explains it brilliantly here. If the business has PMF, the retention curve becomes parallel to the x-axis. If the slope of the retention curve has a downward trend and it looks like it will finally meet x-axis, then the business does not have PMF.
Please read this excellent article from Marc Andreessen about PMF.