About product market fit- Why, What and How?

Approximately 90 percent of start-ups fail during the early stages of development. It is true that there are many reasons for failure, but the main reason lies in the company’s inability to find the right market.

Whether the product is tailored to its target audience is a question that arises not only in small startups, but also in large companies whose products have been on the market for quite some time. This is because the competitive landscape and the market’s needs are constantly changing.

A product market fit is a term we hear a lot, and it is relevant at any given moment of the product life cycle. But do we really know what it means?

As a PM for a large and seasoned B2C company, and in the past, as a PM for a small startup, in its early stages, I confronted the same question of determining the suitability of the product to a market.
In addition to the competition, there are other factors to consider, such as a change in customer behavior, a new geographic location where our product is introduced, and more.

The purpose of this article is to review the term from my point of view and suggest questions that any product manager could possibly need to ask in order to help determine whether there is a product market fit for his product and what exactly he can do to achieve the fit required.
Below, I will concentrate more on finding a product market fit for B2C products.

I’ll start at the beginning, what is ‘Product Market Fit’ to me?

Product Market Fit describes the level of market demand for the product you offer and the definition of your ideal customer. It occurs when you have identified your target customer and are providing the right product to meet their needs.
Due to changing market conditions and the entry of new competitors, we must ask ourselves if there is a way to better tailor the product to meet the needs of our users.

How to achieve product-market fit?

Both product managers in early-stage start-ups and those in companies with longstanding products will find the following points helpful when they seek out the right customers, the right market, and assess whether their product has long-term potential:

• Understand the needs of your customers and the customers themselves:
  A market segmentation is necessary in order to clearly define who the target audience is.
  In this process, diverse markets are divided into groups that contain as many homogeneous consumers as possible who have similar preferences and needs. An effective way to find out what your customers’ needs are is to conduct surveys and interviews.
  In the case of existing users, I would try to analyze those queries and understand the behavior of those users from retention and engagement perspectives.
  What keeps users coming back to your product, what features help them more in their daily lives, and what is the value that your product provides for them that triggers their return to using the product.
• Define your value proposition and understand the competitive landscape:
  A good question to ask would be: What similar products are available on the market today? In what way are these products similar to my product, or in what way are they different to mine?
  Can I benefit from a collaboration with one of the existing players in the market or vice versa?
  It is important to understand your competitors and their products in order to be able to compare your product to those on the market.
  The best practice I would recommend is to prepare a document with screenshots for every competitor’s product — make an accurate comparison and think about why the competitors chose to produce the product in the way they did.
• Identify your minimum viable product features and create one:
  MVPs can be utilized to gather early information that confirms the interest of users in a product or system. Positive results will contribute to the development of the full version and thus, help in terms of resources and budgets.
  We must clearly define our goals and objectives before setting out to develop an MVP. A well-planned and effective approach will ensure success, whether it will be the production of a full-featured product or making a pivot based on market demand and potential clients.
  Even for certain features within the product, I endeavor to do MVP by a minimal development approach that allows the user to get the essence of the feature I want to produce. The behavior of the user using the minimal feature gives me a lot of information and enables me to decide if it is worthwhile to develop it further.

How do you know if you have Product Market Fit?

Once you see that the KPIs you have chosen meet your expectations, you will know you are on the right track.

People say that when you reach product market fit, you feel it. I don’t like using the word “feel” as I am pushing for data-driven decisions.
I believe everything can and should be measurable. Of course, to do so requires planning a KPI, setting measurable goals, and more.

How to Measure Product-Market Fit?

It is difficult to write a long list of specific metrics because each product is different from the other and requires a focused distinction in the way it is measured.
However, the suitability of a product for the market can be measured by retention indices such as:

• Customer Retention Rate: the percentage of existing customers who remain customers after a certain period of time
• Customer Lifetime Value: The value that a customer provides to a business over a period of time.
• Customers churning: the percentage of customers who stopped using your product or service during a particular period of time.
• Repeat Purchase Ration and time Between Purchases
• Revenue Churn: The percentage of subscription dollars up for renewal that a company loses over a given period, or the ability to keep existing customers.
• NPS — Net Promoter Score

Don’t forget that measuring isn’t enough!
It is important to establish goals in measurements, ask yourself how far you are from your initial expectations. The metrics may indicate a change that needs to be made to the product and reinforce any doubts or queries that may have arisen along the way. An analysis must be comprehensive, conducted over a period of time, and of course — have conclusions and recommendations.

Here are a few tips that might be helpful for you:

• What is most important is to ensure that you are meeting a real need for a large segment of the population, thus providing real and relevant value to your target audience. Using the competitive map, determine if your product is superior to what is currently available in the market.
• Be aware that timing is often essential to success.
• By understanding who your opponents are, you can make tactical choices that will lead your product to knowledge and sympathy.
• Another thing to consider is analyzing the trends that exist today and gaining advantage of them. Getting on the wave of a trend may allow your product to reach more people than you think.

One last tip:
Don’t rush to make decisions. Spend time researching your competitors, understanding their needs, and identifying growth opportunities with high financial potential.