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

 

What is Product Market Fit? | motarme

Product Market fit jigsaw

Product Market Fit is the goal for most companies launching a new product or service. Product Market Fit means you have a product that closely matches the needs of a well-defined and large group of customers.  You have sold to a few of these customers, and the sale is similar each time. This makes it easier to sell your product to other customers.

But getting to Product Market Fit takes time. Sometimes your product needs to be adjusted to make it sell. And sometimes you have to try selling to different people if your first target customers don’t want to buy.

This process of experimentation – testing different combinations of product features and target audiences – is the search for product-market fit.

Product Market Fit And Your Sales Process

Achieving Product Market fit comes before finalizing your sales process. You need to get Product Market Fit nailed first, then you can look at setting up a repeatable sales motion. This idea is nicely illustrated by David Skok of Matrix Partners in this diagram for the Zero to 100 Growth Academy training program:

Product Market Fit

How Do You Know When You Achieve Product Market Fit?

My definition is aimed at our Business-to-Business customers, most of whom are in software, technology or services. If they can sell the same thing, at the same price, to the same type of customers about 10 times, then they are on their way to Product Market Fit.

Sean Ellis, first marketer at Dropbox and GrowthHacker founder, proposes a more precise definition of Product Market Fit.  He suggests that you survey your customers 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.

How Do You Get to Product Market Fit?

If your product is new, it’s probably going to take some effort to get to product market fit.

You will have to

  • Tweak your product’s features and pricing
  • Try targeting different groups of customers
  • Test different ways to promote your product to those customers

The Lean Startup approach provides a good framework. In this approach, you build a basic version of your product to start with – the ‘Minimum Viable Product’ or MVP – then test it with some initial customers at low cost.

Based on their feedback, you decide what changes you need to make to the product and how you promote it. You test changes as cheaply as you can.

For example, a company thinks a new feature could improve customer traction. 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. (This is known as ‘smoke testing’).

Using this Lean Startup approach, you run a series of controlled, low-cost experiments that give you insights into your customers and what they actually need.

Additionally, Sean Ellis suggests surveying your first customers to understand 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 message.

Proceed With Caution Until You Reach Product Market Fit

If you are lucky enough to have access to sales and marketing resources, and you are under pressure to show results, it is tempting to throw money into acquiring customers before you are ready or hiring a sales manager in the hope that they will fix the problem for you.

However, you’ll quickly burn through that money without correctly understanding your target customers and what they need.  When the money runs out, you will still have the product-market fit problem to solve. 

You should hold your money and resources in reserve until you’re sure you have a product that your target customers want to buy.

When You Achieve Product Market Fit, Switch Focus to Customer Acquisition

Once you’re confident you have 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 focus on acquiring new customers as quickly and efficiently as possible. 

You should now focus on what David Skok calls a “repeatable sales motion”. You want to identify repeatable ways to acquire new customers, ranging across outbound lead generation, paid search marketing, search engine optimization, social media, email marketing, and any other channels you think could work. 

He has some great advice on his ForEntrpreneurs blog on how you achieve that repeatable sales motion.

Written by Michael White

Michael White is co-founder and Managing Director of Motarme, a Sales Engagement Technology vendor that provides sales lead generation technology and services to Business-To-Business (B2B) Software, Technology and Services firm. You can find him on LinkedIn and Twitter.

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