For new startup founders out there, the first question is almost always Product/market Fit. Have you found your Product/market fit? How do you know if users are willing to pay for your product? Searching deeper into the market, you noticed how information regarding this topic are scattered and it feels more like luck than science. Does it have to be this way?
While the space of business is highly dynamic therefore much success are often times attributed to luck, I believe one could always put themselves in positions in which they can be ‘luckier’. Such methods can include putting yourself out there to learn from giants whom have walked down the same path before you, reading on experiences whereupon has similarities to your own, or get yourself connected with a personal coach of valuable knowledge. Today we will attempt to go through some of these nuances to PMF to better position ourselves for PMF success.
In this article, we will address a few topics regarding PMF:
⁃ What is a product market fit? ⁃ What do you need to achieve PMF faster, better, cheaper ⁃ How do you know you have achieved it? How do you measure ⁃ How to find that product market fit?
I’ve added in some other points I’ve learnt and a TLDR at the end of the post as well.
One is to note how PMF requires a holistic perspective to your customers, business and product. Every interaction between two entities has to be aligned in its requirements and contraints.
#1. What is product market fit?
Product Market Fit (PMF) tells you the scope of the problem you are attempting to solve and how well is your product or service solving that problem.
Make something people want
Make something a lot of people want
The journey of PMF
Getting from idea to traction.
Return its still “Continued product market fit” from Traction to growth and beyond
What are the challenges of your early stage company
- Finding PMF, so that is the topic for today
- Hiring a world class team - very unintuitive to be able to grow through the rapid growth phase.
- Making money - a lot of easier than to find PMF (finding out a product that many people really wants)
- Easier to make money after getting a bunch of people hooked on your product.
- Later, How to build an organization that scalably and repeatedly launches great products
- Going beyond the founder.
There is this need in your target market. Find that that not many people know; not obvious.
You shouldnt be pushing your customers to a solution. You should be finding out where your customer is pulling you to.
#2. What do you need to achieve PMF better faster cheaper?
The fundamental fact of getting your product out there is: It doesn’t matter how revolutionary your idea is; or how value adding you think your product is. It’s about whether anyone needs it and whether anyone is eager to pay for it.
So the market always wins
In the process of getting product market fit, the biggest trait to put yourself on-route to success is velocity.
You don’t just need speed to pivot quickly or to iterate your hypothesis and learn about your customers. You need to move strategically in the direction as what your target customers are telling you. You wouldn’t want to consistently be moving in circles.
_ source by Giphy _
You need to move quickly in the right direction.
Before you can proceed to make sense of the methods. One concept crucial as part of the validation journey is Value Hypothesis.
A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. A growth hypothesis represents your best thinking about how you can scale the number of customers attracted to your product or service.
Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis addresses both the features and business model required to entice a customer to buy your product.
- Andy Rachleff, the CEO of Wealthfront, WHy you should find product-market fit before sniffing around for venture money.
Find out what traits of your product actually provides that value for your customers. Test that value hypothesis. Get that sorted out first before you even proceed to consider about growth.
After all, if the dogs don’t want to eat the dog food then what good is attracting a lot of dogs?
- Andy Rachleff, the CEO of Wealthfront, WHy you should find product-market fit before sniffing around for venture money.
#3. How do you know you have achieved it?
Like how every car has a dashboard to tell you the current state of the vehicle, you too have to have your own set of matrix to measure your company’s current state of affairs.
You want instant/immediate/quick feedback on your current state. Liken to the analogy of a car, you wouldn’t want to know that your vehicle’s wheels are missing only when you’re on the road. You want to know on the first detection of the defect.
To achieve this, you need to have matrix to track your key progress.
You know when you have not yet attained PMF
That is the first trait, you always know when product/market fit is not happening
Customers seems to feel confused about the value of your product/service. Your usaging isn’t growing as rapidly. The sales calls are not getting through to the users. People’s objections are prompt and adamant.
You also know when you have attained PMF
The one key indicator is you have more more demand than you can handle.
Customers are rushing to get your product. People are putting their money into the product/service even if it requires time for them to get the service.
Interestingly, some may consider the news catching up with your product and are in consistent contact with you to report on your company. While it can be an indicator, nothing beats the clear indicator aforementioned. Demand > supply.
One other indicator of successful Product/market fit is when people are selling for you. They saw the value in your product, they share their positive experiences with others. Replicating the same positive experience with the new users, you then find yourself having a product market fit.
When people understand and use your product enough to recognize it’s value that’s a huge win. But when they begin to share their positive experience with others, when you can replicate the experience with every new user who your existing users tell, then you have product market fit on your hands - evergreen-business-weekly
You noticed how the PMF requires you to:A) know what constitute a good experience for your users
⁃ Know thy customers
Do you know their pain points? How does this pain point hinders your customer’s journey? And what are your customers trying to achieve in which they are hindered?
⁃ Address their pain
Is your service a painkiller or a vitamin? You want to be the cure to their pain points.
⁃ Replicate this same experience consistently
Are you able to replicate what your users are preaching to others about? If you are able to provide that confidence to your customers, they then can have that confidence to sell it to their friends. After all, their reputation are on the line when they are preaching your product and services. Be accountable to your evangelist!
#4. How to find that product market fit?
0. Building a remarkable product
you need to keep looping with focus on moving forward. Not pivoting on every new information.
Get to your functional prototype as quickly as possible.
Get in front of users as fast as possible to learn and understand them better
Dont worry about monetizing at the start. initially, just make sure that your product is working for people.
Keeping your burn low. Count by the number of iteration you can make.
2. Listen to their problems not their solutions
Critical to talk to customers and understand their pain.
Don’t to listen to their proposed solution, listen to their pain points. Iterate on whether you are able to fulfil the job they are trying to do.
#3. Rapid prototyping and user testing
Building a fully functional product is the most expensive way to test your hypothesis.
Focused more on getting your functional prototype as quickly as possible in front of your users.
Don’t worry about scaling, monetizing.
Get your features infront of your user as fast as possible. Don’t worry about scale and monetizing. This will come later. and you will have time to look into that issue later.
Expect it to take 10x the number of expected iterations.
⁃ Keep your burn low so you can expect longer iteration cycle.
⁃ Build a team that can do this quickly.
If you are considering to build an app, quickly getting your app infront of your users for the freebies is most important to learn compared to first figuring out the scalability portions before you even put the app out.
Perhaps one of the examples of not overengineering and thus hindering your own iterative learning.
Keep launching until you get something that people wants (both a market validation of the problem + the right product to solve the problem).
4. Test the solution with customers
Two important rules
Make sure you are talking to your target customers. Not just anyone.
Don’t overthink it. Get into it to iterate consistently is the most important.
Most helpful tools in the early days
Customer interviews 5-10 needed
⁃ talk to customers about an hour or whatever.
⁃ Understand what motives them, whats their pain are. Get their qualitative view of the problems
UX testing sessions (3-5 needed)
- Get someone to use your app in front of you
- Encourage them to give open and honest feedback. They usually wouldn’t because it is awkward but you have to encourage them
- Ask them to perform a task, you are not allowed to do it for them
- Do not say or do anything during the test. Even when they ask you for your help.
People don’t read usually. People have associations to other websites that they visited before.
Usually 3-5 sessions are needed to get most of the crucial bugs out of the way.
People don’t read!
Metrics ( you’ll never have as large a sample as you’d like - beware of telling too many stories with too little data
⁃ Track the right metric. ⁃ Dont tell a story more than what the data is showing. You can have them as hypothesis, but test them. Categorize them as hypothesis clearly and not truths.
When to launch?
MVP - Minimal Viable product.
MRP - Minimal Remarkable product. - the least you can do to be remarkable.
Dont give yourself the impression that it has to be viable before you launch.
“Launch when your product is better than what’s out there” - Paul Buchheit
⁃ Dont launch until we have something better.
How do you prioritize?
You have limited resources, time and energy. 0. Only one thing matters.
Focus on things that brings you to the next stage.
For example: Don’t go conferences, don’t write blog posts. Dont read the news.
Focus on getting yourself to your next milestone - PMF.
1. Optimize for learning.
What is our biggest unknown that would rewrite our priority list?
What is our biggest uncertainty and what is our cheapest fastest way to learn that?
Usually people approach learning by cost x benefit. But whatever that uncertainty is, if it is the biggest uncertainty, go for it.
“How do i know when I’ve achieved PMF”
2. Returning usage (day 1, 3, 7, 30 retention) - Number of people that are coming back to your application. Track this.
Interestingly, its not your family members that wants you to succeed the most actually comes back to your app.
3. NPS (should be > 50)
Would you ever recommend this product/service to your friend?
rank 0 - 10.
9 - 10 are your promotors
0 - 6 detrackers
7 - 8 are thrown out
NPS of 80% = 88% of people answers 9 - 10.
If you have more than 50% you are doing pretty well.
4. Paying customer renewal rates
Metrics not included 0. Signups
Signups are more of a reflection of market fit but does not imply product market fit. You’ve identified something alot of people want, but did you build the right solution?
Do not pay too much attention to sign ups but more attention to active users.
Ask yourself, how can you track your active users. Or conversions/ active users.
5. Conversion rate
Conversion rate improves can often be tactical and unrelated to product market fit. So don’t be focusing too much on this.
How do you feel when you achieve PMF?
You will know when you achieved product market fit when customers are beating a path to your door.
When you don’t have it, everything feels hard. feels like youre pushing your customers towards the solution. They are not coming back for it. When you have it, everything is easy and every move you make works. And the press is writing about it.
And you have to feel like your customers have been pulling you in. Listening to their problem not solution.
Reference for video
Referenced this video to learn more about product market fit. So much gold by Y-combinator open sourced for us all.
Beyond product market fit
1. Product that is meaningfully better than alternatives 2. How to acquire customers in a differentiated way that scales 3. Invent your business model without killing your traction
Your product market model fit.
Model - channel fit is important as well. So you have to figure out these parts after achieving product market fit.
reference for more information on this part: Article
• this is going to be an interesting path of learning how to find a product that fits the market you want.
consider how to go beyond just the product market fit.
How to scale the team
Don’t scale the team until you achieved product market fit.
Do not scale past 20 people until PMF.
23 - 25 is the point where everything breaks in a startup.
You cannot just be completely flat. It is that point when you need to start implementing your first layer of management. And this is not optimal for finding PMF.
You should know everything about your customers/product/market/channels. this helps you to make fast and high quality decisions. Don’t delegate anything important yet.
Once you have achieved product market fit, scale aggressively. Once you have found/created a new market, but you’re not the only one.
When you scale, then you have the resources to generate more revenue in which you can then have more resources to hire more resources.
Build your team aggressively but thoughtfully. Do not double your team size in any given year.
Once you are scaling your team, you need to completely change the way your company works + no more micromanagement. You have to delegate your roles a lot more.
This is the inflexion point to take note of.
Building a brand
Great brands are built on a core consumer insight which are some truths that are not acknowledged out there. Ideally that is the same insight which your product is built on.
⁃ [Find PMF first](https://www.fastcompany.com/3014841/why-you-should-find-product-market-fit-before-sniffing-around-for-venture-money) ⁃ [How to measure and find PMF](https://medium.com/evergreen-business-weekly/product-market-fit-what-it-really-means-how-to-measure-it-and-where-to-find-it-70e746be907b) ⁃ [Understand PMF from start to end](https://uxplanet.org/understanding-product-market-fit-from-start-to-finish-596a4653814)