How do I know I have a product-market fit?
It’s easiest to understand when your product has found it’s market fit, after you’ve felt it not happening.
In dating lukewarm feelings don’t solicit a deep affection — the chemistry isn’t working its formulas; there are no texts, no calls after. No heart emojis filling your inbox. Try meeting some other people, because chasing after the uninterested party is a path of resistance.
One side pursuing a relationship without the effort from the other side can’t carry the unbearable weight of a partnership. Continuing that relationship will always be off-balance with the less interested side keen to leave at a better opportunity. Heartbreak is inevitable.
Selling a product that the target customers aren't particularly interested in, will mean a lot of pursuit and a lot of rejection.
There’s a misconception that sales is hard. It is, when trying to sell a solution to someone who doesn’t have a problem for it. Having a decent PMF (product-market fit) goes with a narrow customer profile, who 100% needs the product. Selling will mean distribution, not creating conviction. Client calls shouldn’t feel like a root canal if the product is what the customer needs.
However, strong will, will get you far. A hard sell might eventually commit and retain as a loyal customer.
Sometimes people do end up dating long-term and committing to relationships that were more slow burns and get under the skin over time. But hoping for that is the same as playing a lottery — there has to be some environmental or perspective changes that solicit such reconsideration.
One is able to polish down the initial lack of complete fit through showing that they really-really want the other person. Making the other side reconsider the match because the courter is being an outstanding communicator and showing up with their best gym selfies — leaving a deep impression and showing their value. But sometimes doing so out of character. Advertising a person that was conjured to impress, not to connect.
Clearly saying who you are and what you do is the easiest way to find your match. Positioning on the market for the ones who need you.
The consideration/reconsideration is a loud indicator that product is not really offering what the customer is aware of themselves needing. This is the place where a lot of marketing people would tell you that you need to market the problem first.
If the customer has to start doing mental gymnastics and recognise new problems, the team builds a sales cycles the length of a green anaconda. Not knowing which end is the head and which is the tail, but trying to market to both ends, just in case.
Marketing campaigns will not help with the “product problem” of not being needed on the market. Simply justifying increased spending in the marketing department.
Solution is going back and figuring out where a new product can create value that would instantly be recognised by the customer. When selling and trying to assess the PMF, the most important activity is understanding the other side with a depth that a lover would their partner.
The feedback from a startup's active and potential customers is not for them to tell the team how to build the product, but for them to help the team understand their daily dealings — so that a product they want can then be built.
Talking to clients will — expose their problems, the existing solutions they’re using, how they would like to be solving their issues and what kind of recognition the problem gets. Teaching the messaging people how to talk to them about the product in a way that resonates.
There’s more information to extract from the conversation — how open the customer is talking to sales, whether they’ve connected to the product, whether they’re using the product actively and asking for support; whether they would be upset about the product disappearing and how much they’re happy to pay. Signalling the level of interest.
It — the product-market fit — is not happening if the Ideal Customer isn’t happy to talk about the product. Being even less happier to pay for what would justify for the cost of developing and sustaining such a product.
Recognising the product-market fit as its happening
The relationship between the market and the product moves in levels. As there are different aspects to aiming at target customers, these aspects can either ruin or deepen the fit between the two.
Earliest signs of encouragement to keep learning about the targeted market includes:
Visible excitement
People love to have their problems solved, and they love to connect to something that they didn’t even know they could have. That’s when your date can’t wait to see you again and can’t stop talking to you — and you feel the same way.
The demos have great response and people are eager to start working with the product, yapping about how much better their life will be after that.
Happy to pay
Stinginess is the first sign that someone isn’t as invested as it might be coming off. Having only positive feedback isn’t enough. A clear intent for investment needs to be communicated.
When your date doesn’t show any kindness through sharing — buying a coffee, bringing you cookies or cooking you dinner — you might be suspicious about whether they really interested in you for the right reasons.
Signs that your product is right for the market
Information is king. In the fitting stage the “why” has more importance than the “if.” If the deal goes through the whole company should be aware of why it went through. Training on how to talk to the customer and where to focus more efforts in the product. All of the active customers should be asked the key question — “what is the purpose that you are using the product for?” If the deal didn’t go through — what was the problem that startup is trying to solve that didn’t resonate with the customer profile? Why did they decide to not make the commitment to the product? Deepening the quality of assessments made regarding the target market. Validating the continuance of the pursuit.
Signs of PMF beyond anecdotal evidence:
1
Significant retention in usage
In B2B retention can be measured for two different groups — the buyers and the users. The earlier stage the company, the more founders will value the buyer fit because sales is crucial for survival. Granted — MRR and ARR are very common performance metrics that companies look at over user retention.
For finding the User PMF, the team looks at metrics for platform usage activity, and the drop-off points. In a decent fit, churn should even out and a group of users should keep using the product steadily after a certain (defined) period. Hence, investigation into who are those people and why they didn’t churn should be main indicator of where the perfect fit resides.
Founders should look out for giving revenue too much weight as a leading metric in early stages. Especially if the buying decision is made by people who are not the main users.
Early-stage company can get away with having a weak fit with the users if the solution is selling well on the buying market, but that success might turn into churn. It might not happen in the first year or the second, but eventually not prioritising user PMF will come back to haunt.
2
Feedback and product consequences
Targeting a large, mixed audience leads to a disconnect between the product’s complexity and user needs. A good product needs a very well-defined customer profile. Without a clear audience alignment, even a sound idea can fall flat.
If the product team is receiving feedback from 6-7 different profiles — who are they going to be really servicing? There needs to be one particular type of customer that says, “yes, this is it.” Running after every tail will lead to shallow connections that are easy to detach.
By aligning deeply with a community need; and providing a solution to a recurring frustration for one specific customer type feedback starts to produce consequences that nudge the company into a decent PMF.
Product-market fit is anything but emotionless. If a well-built product vanished today, the market would be filled with wailing screams of sad users. A real PMF comes with a strong emotional connection to the solution; a deep reliance on the problem being solved seamlessly for the users.
All developing relationships need to have a discussion about the expectations and future plans. If your partner wants other things in life, that’s just a clue to move on to someone who is aligned with your life plans. However, when they tell you the terms in which they would be happy to change their direction to align with you, granted you do the same — is where market can be serviced in a way that they’re happy to buy.
3
Organic growth & lowering burn rate
People like to talk about things they enjoy, and they love for other people to take their recommendation. Product being championed means you’re on to something — not having any is a sign of a self-destructing business.
When the product solves the problem well enough and creates a strong ROI, then every growth indicator would be pointing up; without the cost metric correlating. Noticing two different indicators for growth — growth of usage and growth of users.
Growing usage will signal about the market segment finding active value in using the product. User growth will signal when the market hasn’t found this value in other solutions before.
Users who actively use the product will rarely churn — signalling a successfully moated business against competitors, raising the LTV and — beginning to saturate the ICP segment.
As new organically acquired users haven’t been marketed to via targeting, product will start to see new use-cases. Bringing in people outside of the ICP is the next step for developing the PMF. Having free feedback from different personas is great for discovering new insights.
References
https://www.howtheygrow.co/p/how-posthog-grows-the-power-of-being?r=271ql6&utm_campaign=post&utm_medium=email&triedRedirect=true
https://pmf.firstround.com/levels
https://www.lennysnewsletter.com/p/how-to-know-if-youve-got-productmarket
https://www.lennysnewsletter.com/p/finding-product-market-fit
