Posted by | January 30, 2013 | Blog | No Comments


What is Product Market Fit? | motarme

The secret to business success is easy to describe and hard to get right:

  1. Make something people want
  2. Sell it to them
What is Product Market Fit?

What is Product Market Fit?

Or as Peter Drucker said “the aim of Marketing is to know and understand the customer so well the product or service fits him and sells itself”.
I was lucky enough to attend a recent one-day seminar on growth strategies for startups, hosted by Sean Ellis, formerly VP of Marketing at DropBox. The seminar focused on Product Market fit i.e. “making something people want”. The key points were:

  • Product market fit is essential – you need to understand it when introducing a new product
  • Get your product market fit sorted out before you pull the trigger on your full product launch
  • You can test for product-market fit at low cost
  • One you have achieved product market fit, stamp on the accelerator pedal and drive up customer acquisition as quickly as you can, using scalable channels (i.e. online and automatable).

I thought it was worth writing a post on the subject, because I think technology startups commonly get product market fit half-right and then hit the road too early trying to build a customer base. I’m not suggesting that you slow things down – fast is always better than slow in startups. But by using the Lean Startup approach and the advice from Sean Ellis you can continue to make progress in your business, in a way that is likely to lead to product market fit.

What is Product Market Fit?

Product Market fit is the point when your product closely matches the urgent needs of a well defined and large group of customers.  They have to have it.  This is still a pretty vague definition – how can you be sure you’ve reached product market fit?

Sean Ellis proposes a more precise definition.  He suggests that you survey your customer base and ask the question “How would you feel if you could no longer user our product?”, with the response options of (a) very disappointed, (b) disappointed and (c) not disappointed.  If you get 40% or more respondents saying “Very disappointed” then you are achieving product market fit.  If you’re at 40% or less then you have to iterate and experiment to identify a different blend of features or services or a different target customer group. You are trying to achieve what Ellis calls the MHX or ‘must have experience’ – that stage where your customers use your product on a daily basis, see and appreciate the value it produces for them, and don’t think it’s easy or desirable to switch to an alternative solution.

Don’t Pull the Trigger On Your Product Launch Until You Reach It

If you are lucky enough to have access to sales and marketing resources, it may be tempting to throw money into acquiring customers. However, you’ll quickly burn through that money without having identified the secret to meeting a target customer group’s needs.  When the money runs out, you will still have the product-market fit problem to solve.  Instead, you should hold that money in reserve until you’re sure you have a winning product for your target customers.

How Do You Get to Product Market Fit?

It is unusual for a startup to hit the ground running with a new product that immediately presses all your customers buttons. There are usually a few hurdles to jump first.  It is more likely that you will have to:

  • Tweak your product’s features and how you promote it until it starts to achieve “traction”
  • Redefine who your target customers are, or
  • Do both

Using the Lean Startup approach you should run a series of controlled experiments that give you insights into your customers and what they actually need (the key step in achieving product market fit).

Eric Ries’ “Lean Startup” book uses the example of a company that thinks a new feature could improve customer traction. He suggests that rather than building and deploying the feature, which could take months, the company could instead promote the new feature from their product website as if it already existed, driving web traffic with online ads to test the response, at comparitvely low cost. (This is known as ‘smoke testing’).

Additionally, Sean Ellis suggests running a customer survey to calibrate how they perceive your product’s value versus what you think the value is.  He recommends writing out 5 very different statements of the value your product delivers to customers e.g. “Our system reduces your IT management costs by 30% in 9 months”.  Then send a questionnaire to your customers, asking them to pick their favourite of those 5 statements, and to explain their choice.  This is a quick way to verify that what you’re thinking matches what they’re thinking.  When you have a match, make sure your website and all outbound communications consistently promote that value.

Now Hit The Accelerator

Once you’re confident you’ve achieved traction (i.e. 40% of your customers will be distraught if you unplug your servers and join a monastery) then it’s time to shovel in some resources.  You want to identify scalable, automatable channels for customer acquisition, ranging across paid search marketing, search engine optimization, email marketing, social media and any other channels you think could work.

Carefully monitor and compare performance of campaigns, and watch what your competitors are doing.  When you get a tactic that works, then “double down” on it – don’t just increase it by 10% or 15%, double it and double it again while you can see straight line growth.

Finally, Sean Ellis emphasizes that it’s a competitive world out there so tactics that worked last year may not work so well this year.  Keep measuring, improving and testing new tactics.

Written by Michael White

Michael White is co-founder and Managing Director of Motarme, the Marketing Automation vendor. You can find him on LinkedIn and Twitter.


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