Product-Market Fit: Make Things People Want

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The life of a startup can be divided into before and after product market fit and within these two phases there a few questions you must answer.

1. Problem/Solution fit:
  • Do you have a problem worth solving? (Must have!)
  • Will customers pay for this problem being solved? (viable)
  • Can it be solved? (feasible)

2. Product Market fit:

• Have I built something people want?
• How well does my solution solve the problem?

Product market fit indicates that your startup is in a good market with a product that can satisfy that market.

3. Scale:

• Once PMF is achieved then the growth, scaling and optimizations of your business can begin in earnest.

There are a few frameworks you can use to test whether you’ve reach Product Market Fit

The Leading Indicator Survey

The Leading Indicator Survey is a Product Market Fit Survey Created by Sean Ellis (who popularised the term product market fit) that measures how ‘sticky’ your customers are.

The survey asks users “How would you feel if you could no longer use [product]?”

The measure of success is if 40% or more respond “Very Disappointed.”

The Net Promoter Score

The Net Promoter Score is then used to gauge a customer’s overall satisfaction with a company’s product or service and the customer’s loyalty to the brand.

“How likely is it that you would recommend our company/product/service to a friend or colleague?”

Scoring works on a scale from 0 – 10:  9 to 10 indicates a “Promoter”, 7 and 8 are labelled

“Passives”, 0 to 6 are labelled “Detractors”.

 

The combination of these two questions in the leading indicator survey data tells you what people say they would do.

The next step is to support that with data about what they are actually doing!

 

Leading Indicator Engagement Data

 

Engagement data (typically at a small scale) that tells a story that the user is getting meaningful value out of the product

This data must align with:

a. Events or actions, not viewsb. The core purpose of the product

b. The core purpose of the product

Did you reach Product Market Fit?

 

There are various methods for measuring PMF but we believe that Retention is the only metric that matters.

Focus on retention as your goal. If your product does not retain users, there is no point in scaling the top of your funnel as you have yet to offer a product that fits amongst an audience segment.

 

You can use the retention curve to plot whether you’ve achieved Product Market fit.

• Plot the % active over time (for various cohorts) to create your retention curve.

• If it begins to flatten off at some point, you have found Product Market Fit for some market or audience.

After Product Market Fit

Once you have a steady stream of users coming in the front door you can begin to run experiments and understand product market fit and optimise for scaling and growth.

Investors will begin to stand up and take notice of you at this point when you can demonstrate a substantial market size and a product that fits then you will be primed for investment. You’re now entering the growth phase of idea creation, testing & validation.

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