In 2007, Marc Andreesen, co-founder of the Andreesen Horowitz venture capital firm, popularised the term ”product-market fit”.
He described it as being in a good market with a product that can satisfy the market. Although simple in theory, today, product-market fit has become one of the key metrics used to separate successful and struggling startups.
In this article, the concept and importance of product-market fit will be dissected. This article will also share reasons why many startups (established businesses included) fail to achieve product-market fit and explore how startups can achieve it.
What is Product-Market Fit, and Why is it Necessary?
For those not too familiar with the term, product-market fit happens when you recognise your target customer (“market”), and you have built the right product (“product”) for their needs.
The reason this concept is emphasized by venture capitalists within the startup landscape is that it plays a crucial role in determining whether a product is commercially viable.
Without the right product-market fit, it is difficult for a business to accurately pave the way for other strategic objectives, such as growth or upselling existing customers.
Product-market fit, however, is a mercurial metric; it depends on numerous factors such as location, cultural differences, emerging trends, and the socio-economic landscape. You may even have the right customer base, but your product might not address the correct problem, and because of this, many companies fall into the trap of thinking they have the right Product-Market Fit.
Alex Schultz, Meta’s Chief Marketing Officer (previously Facebook’s VP of Growth), said, the biggest problem facing the companies he advises is that they don’t have a product-market fit when they think they do.
One of the main reasons this happens is because many business leaders are quick to make assumptions about a market. A Genome Study found that in some cases, it may be due to pressure to scale.
It is best to rely on research and insights validated by industry experts to avoid wasting precious time and resources.
How Can You Determine Product-Market Fit?
Identifying your product-market fit isn’t always simple, but it can be determined in several ways.
Speak to your Customers
Start by speaking with your customers. Your current user base (if you have one) is one of your biggest assets. Not only do the members of this base function as brand ambassadors, but they are also the foundation upon which your future community will stand.
Get actionable feedback by conducting a customer survey. Remember not to neglect detractors or passive users as they are a good source for valuable insight and can highlight areas for improvement.
Speak to your Team Members
Another way to narrow down your product-market fit is by engaging every team in your company, from marketing, to human resources to finance.
Payment trends from your finance team, for instance, can provide insights into what payment methods your customers prefer. Marketing and sales teams, on the other hand, generally have a lot of data on consumer behaviour and demographic. Internal brand champions, as well as candidate personas, can also help you identify your audience. You’ll find that engaging different teams allows you to understand your product from multiple perspectives, allowing the organisation to make informed decisions in driving stronger returns over the long run.
Iterate Based on Customer Feedback
Another way of identifying product-market fit is by building it into your product roadmap. As you develop your product, you should continuously collect feedback as well as new feature requirements and areas of improvement highlighted by your customers. In this way, your customers will help you build a product relevant and compelling to them.
Experiment with Messaging
You can also experiment with messaging, tone, and highlighted features on paid ads. You will learn how different customer segments respond and engage with your product. It goes without saying that this method requires a certain level of financial investment. But if it helps determine your product-market fit, it will be worth the cost in the long run.
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