Nailing the market in product-market fit
Finding product-market fit is the first milestone that really matters for new products. Popularized by Marc Andreessen, the term product-market fit can most simply be defined as “being in a good market with a product that can satisfy that market.”
When you achieve product-market fit what you will see is rapid increase in product usage, more demand for your product than your ability to fulfill that demand, as well as organic growth and expansion in your customer base primarily through word of mouth.
Unfortunately, most startups don’t achieve this first milestone. For the ones that do, most don’t find it the first time around but are able to change direction, iterate and pivot quickly enough before running out of resources.
Although there are several factors that contribute to building a successful startup, being in a good market is the first pre-requisite to finding product-market fit. You can have a great team and a great product but if you aren’t addressing a market that really needs or wants your product, you will likely fail.
So how do you ensure you are in a good market? And how do you know if the market is interested in your idea?
Several products are conceptualized based on a strong intuition or some sort of personal experience. If you have a good idea of the problem you want to solve you could run design sprints and smoke tests to validate your business model and initial iterations of your product. (More on that in another post)
But what if you are interested in a problem space, have several ideas you are experimenting with and aren’t quite sure which direction to go in? This might be the perfect opportunity to evaluate the market appetite before you build anything.
At this phase you want to answer questions like:
- What are people interested in?
- Who is the customer, what jobs do they need done and where do they struggle the most?
- How big is this segment?
1. What are people interested in?
To answer this question start by trying a google search: A really simple way to see industry trends and what people are searching for is to look at Google Trends . This can give you a pretty good idea of the macro level trends and the solutions people are looking for. You can also look at secondary market research to get a pulse on where industries are moving.
2. Who is the customer, what jobs do they need done and where do they struggle the most?
The best way to answer these questions is through research. My personal preference is always starting with qualitative interviews. There are many styles of qualitative interviews and various methods you can use to get actionable data. At N5, we use various research techniques in our week long problem discovery sprints (watch out for an upcoming post on how we conduct research).
The primary objective at this stage is trying to understand what consumers are trying to accomplish and their biggest struggles. If you are using design thinking interviewing techniques, you could cluster your research findings into themes and do some problem framing around challenges you think are worth solving. If you prefer to use methodologies like jobs-to-be-done you could collect data around unmet needs and use those to craft job stories or desired outcome statements.
If you don’t have the bandwidth for interviews consider writing open ended surveys to learn about pain points and what people are trying to accomplish.
A word of caution on open-ended surveys: Survey writing is tricky, requires practice and skill, and it’s hard to be unbiased when interpreting survey results. There are many resources out there on writing open-ended surveys. Here’s a good one to start with.
2. How big is this segment?
Once you’ve discovered problems and opportunities, you need to know the size of the segment. This is an important question to answer, because you want to ensure that you have a large enough addressable market. Although there are several market sizing techniques you can use here and probably will at some point, the simplest first step is turning to Google and leveraging the engine to see how many people are seeking answers to this problem. By using Keyword Planner you can get a sense of search volume for certain keyword phrases.
To get quantitative data around problems customers are trying to solve you can leverage a technique promoted by the team at Strategyn to discover market segments with unmet needs. Once you have conducted qualitative research and discovered insights around customer needs, you can survey a large sample in your target segment to validate some of the insights you got from qualitative data. By getting a large group of people to rank needs by importance and current levels of satisfaction, you can identify the biggest underserved and overserved needs in a market.
Once you have done some market validation and narrowed in on a problem to solve, you can run design sprints and smoke tests to de-risk investments, evaluate willingness to pay, craft your value proposition, define and validate your MVP, and so on and so forth.
TLDR;
If you look at the three-legged stool that great companies are built on, the three legs being people, markets and value generating products; the only variable that is out of our control is the market. If you are addressing a market that really wants your product, then you have the ability to tweak the other two legs and iterate quickly until you achieve product-market fit.
