Andrew Brabant
Introduction:
Business growing pains can come in many different guises. I would say to any business owner that is experiencing a slowness in business growth, or really wants to propel their growth, then listening to your customers is the answer. Product market fit means knowing your customers and what their needs / pain points are better than they do.
Andy Rachleff:
current CEO and co-founder of Wealtfront and Benchmark Capital created and named the principle of product/market fit (PMF). His concept PMF was based on his study of the innovative venture capitalist and Sequoia founder Don Valentine’s investment style.
Product market fit.
once defined the stage of a start-up business where a target customer has been successfully identified and served with the correct product. The next step was to scale up by finding more clients within the target market through research after achieving a product/market match.
This definition was applied by venture capitalists when betting on the viability of a company and its single launch product or idea.
My definition is the process of identifying who the business is for, what problem it solves, its uniqueness, how it is advertised, measured and monetised
Of late, there has been significant disruption of business and business landscapes forcing businesses to pivot, review their target customer and reinvent their channel to market and sometimes reinvent their product or business as a whole.
Product Market Fit is no longer simply the measure of a startup’s viability, it is now the methodology to measure you are getting your mix of marketing, customer and product right in the face of increased competition, online sales and world that requires that if you are not the cheapest then you are unique with a better customer experience.
I now use this process to design a new marketing campaign and review one that is not working. In general, if I can understand those elements about the business or product. then I can build a targeted campaign for most products or businesses. The exception to this is when a customer comes to me with an ill conceived product or a misconception of their ideal customer. (They have no product market fit)
Why does the market matter the most?
Product-Market Fit (PMF) is a fundamental principle in the marketing world of start-ups and development. For new enterprises, achieving PMF is the most significant target. Gaining success and entering a period of rapid growth is needed.
In simple terms, we are ensuring the success of the business before we start to market it, by identifying what makes it a desirable product in the world of many choices to the target audience.
I commonly find that if a business is struggling or a campaign is struggling, not getting their product market fit can be one of the biggest obstacles and business growing pains and through analysis and some great ground work, can be one of the biggest contributors to easing one of the biggest pains to growing your business.
According to Marc Andreesen:
“Do whatever is required to get to product-market fit.”
Rachleff developed and teaches a Stanford course, Aligning Start-ups with their Markets. Rachleff states that “you need to identify and test your hypothesis of value first.” And then you only move on to your growth hypothesis until confirmed. The idea determines what, who, and how. What are you going to create, who’s going to be desperate for it, and what business model would you use to produce it?’
How To Achieve Product-Market Fit:
Product-Market Fit (PMF) means having a group of consumers who genuinely appreciate the product, in the simplest terms.
By buying or pre-ordering your product, using it regularly, spreading word-of-mouth, and so on, consumers show their gratitude in acts, not just statements.
As an entrepreneur, PMF is the single most significant thing you need to prove if you are going to quell those business growing pains around marketing ROI and product development. If you don’t have it, your business will fail, If you don’t do it in time, the company will run out of cash and collapse.
Many new entrepreneurs believe that clients would come if they create a product. It doesn’t work like that. Communication and empathy are necessary. You need to know your clients well, speak their language and concentrate on what they care about. You need to set the product in a way that is important to them.
Below is the PMF matrix that I use in my Work Life Mentor courses. It helps to bring the picture of the business into focus by identifying who is buying, why they are buying, where you find them and how you monetise your brand.
1: DETERMINE YOUR IDEAL CUSTOMER
Work to distinguish the ideal customer who represents the users that your product will most likely benefit them. To define your ideal client, create a profile / persona or
“Persona archetypes” is a great way to define the attributes and characteristics of different target users, to specify your target customer so that everyone in the product team understands for whom the product is designed and built. Start with your ideal customer’s elevated hypothesis and continually revise it as you learn, analyze, and modify your product’s features to enhance it, with a process known as iterating.
2: INVOLVE THE ENTIRE TEAM:
Every company employee should know that they’re looking for Product-Market Fit and expect it to be a tough journey. It’s not a question of linear progress; it’s a place where you spend much of your time lost, never knowing whether you’re making progress or only removing an idea by invalidation.
On this, Ryan Holiday has a great comment:
“Product Market Fit is not some mythical position that occurs by accident. Companies work for it; they crawl toward it. They are prepared to throw out weeks or months of work because the proof holds up that decision. The services as their clients know them now are fundamentally different from what they were at launch before they had Product-Market Fit.”
3: UNDERSTAND YOUR CUSTOMER’S PAIN POINTS:
Your job at this point is to identify the most critical needs of potential clients. It’s important to identify what your product service does for the customer. What are the top 3 problems it solves for the consumer, is a great place to start. If you can’t answer this, find a new product that solves a problem
4: UNDERSTAND WHAT YOU’RE OFFERING AS A VALUE PROPOSITION
The value proposition is largely about how the market is going to face you. The market may be full of manufacturers of similar goods. So, to win people’s hearts and outperform your rivals, you should come up with something totally creative and completely ground-breaking.
Be sure to include innovative features, fresh new ideas, and items that can excite consumers as you roadmap your production processes.
Even better if you have a unique selling proposition. Why are you different or better? Cheaper is generally not a sustainable USP!
5: FIND OUT HOW YOUR REACH YOUR CUSTOMERS.
Knowing what channel your ideal customer is reachable on is no longer a viable solution to marketing to them. Customer acquisition and customer lifetime value need to be part of that equation. When clicks on Facebook and Google were a few cents per click, you could afford to use the scatter gun effect and put ads up everywhere for everyone. Now that clicks are $5 to $25 on Google ads and the average conversion rate is below 5% for ecommerce, you can easily spend more money on ads than you can make in sales.
6: CHOOSE A MARKETING CHANNEL WHERE YOUR IDEAL CUSTOMER IS AND ONE THAT PROVIDES AN ROI.
Interestingly we are running a Facebook campaign for a industry specific software solution and we have identical industry based audiences for three regions and the cost per conversion is entirely different for the three target regions:
- Middle East and North Africa $2.50
- North America $10.00
- Western Europe $ 4.00
The same audience of engineers and industry specialists and due to the competition for ad space with these groups, the cost of conversion is massively different. In this case, low lead conversion cost was not an indication of a customer who would use the freemium product and then upgrade to the paid collaboration version.
We measured the conversion rate of these customers through the Unbounce landing pages that were tuned for message match and the average conversions looked like this:
- Middle East and North Africa 4%
- North America 18%
- Western Europe 11%
Of these signups to the free version, to date, all of the paid users are located in North America.
Marketing can be tricky and is rapidly changing and what you know about one region doesn’t apply to another.
My recommendation is to interview a few agencies that have a strong track record and find one that looks like they will do a good job and put them on a 3 month probation period to get you leads or sales.
If they don’t recommend landing pages and want to send traffic to your website, then they aren’t serious and you might as well burn your cash.
How to evaluate your product-market fit:
“Start-ups occasionally ask me to help them evaluate whether they have achieved product/market fit. It’s easy to answer: if you are asking, you’re not there yet.” —Eric Ries, The Lean Startup.
- Google Ads and Google Analytics provide a raft of information on your market, keywords and performance
- To manage your success, you must measure your performance. Identify key points of data that will help you monitor performance.
I have built a free questionnaire form that asks the questions that you need to know the answers to. Once you have completed the questionnaire, you will be able to use the data to speak to your ideal customer’s problem that your product or service solves and modify it or your messaging to speak to your ideal customer’s compelling reason to buy.
Avoid complacency:
I don’t think you’ll always have it if you manage to achieve product-market fit. Your clients’ needs will change over time, and to continue satisfying those expectations, you must continually re-evaluate market conditions.
If things were working and they have stopped then go back the start and start working out what has changed for your ideal customer.
CONCLUSION
To gain market success, achieving a few metrics is not enough for a start-up. A moderate or extremely high degree of product/market fit should be in your product. So, it’s important to consider whether you’re only solving a problem or removing a massive burden from the users’ hands.
Remember, people or businesses buy a product or service for only two reasons:
1. To elevate their status – this relates to luxury items or perceptions of their business
2. To fix a problem or move them away from pain
These two relate to every buying decision and sometimes a good product does both, which is why design and brand is so important to a product’s success.
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