Failure to launch is a phrase used to describe an adult's inability to leave home and support themselves. Fun movie if you haven't seen it. But, in the world of business, failed launches are less fun.
Of the 30,000 products released yearly, 95% of fail. Of the 305 million startups started globally every year, 90% of startups fail. That leaves your chances of creating a successful product or company at around 5%. How can you expect to succeed where countless others fail?
The formula is simple: a product that meets the needs of customers. Marc Andreessen calls it "The Only Thing That Matters", also known as product market fit.
Finding Product Market Fit is Easier Said Than Done
Getting a product to fit into a market where the customer needs and competitive landscapes shift rapidly, creating demand challenges. Tech companies have evolved in this environment by developing faster and establishing connections with their target market.
Part of the struggle of evaluating product market fit is how performing market research too early can result in stale data if not acted on quickly.
On top of research decaying with time, each stage where testing or research is conducted provides a limited evaluation of product market fit. For example, a survey to evaluate an audience's problems and needs assumes you'll build the right product. Testing a mockup or prototype assumes after developing the code for the product, it will still solve those problems.
This means that to determine your fit, you'll need to evaluate it throughout the development life cycle.
How to Determine Product Market Fit
To ensure your market fit, you'll need to put in some work. You and your product must be vulnerable to listening to customer feedback. Here's a process to find and determine product market fit in 4 easy steps:
Step 1) Get to know your target customer and their needs
Start by chatting with potential customers or doing some research to uncover the problems they face. For example, maybe you've noticed that people in your city struggle to find affordable, healthy meal options. It could be worth exploring if others share this pain point and are seeking a solution.
Step 2) Craft an irresistible value proposition
Take a page from Clayton Christensen's "jobs to be done" theory. Ask yourself why customers would choose your product over the competition. Let's say you're launching a healthy meal delivery service. Your value proposition could be that your meals save customers time and effort while still being nutritious and affordable. Highlight the unique aspects that make your offering stand out.
Step 3) Test and validate with your target audience
Keep checking in with potential users throughout development to ensure your solution resonates with them. For instance, you could conduct taste tests with your meal delivery service and gather feedback on meal variety, pricing, and delivery options. Remember, validation is an ongoing process that should be woven into each stage of development.
Step 4) Learn, iterate, and improve based on feedback
Take the input you receive to heart, make changes that make sense, and keep customers in the loop. For example, if people want more vegetarian options, consider adding them to your menu. Prioritize adjustments and sketch out a roadmap outlining your plans to address improvements.
Ways to Test Your Product Market Fit
Like any job that needs to be done, you'll need tools to complete the job. Testing for product market fit is no different. Here are useful ways to put your product through its paces and test product market fit:
Chat with Potential Customers
Have casual conversations with potential users to learn about their needs and opinions on your product. For instance, if you're creating a meal planning app, talk to busy parents or health-conscious individuals to see if your app helps with their meal planning struggles.
Design short questionnaires for your target audience to share their thoughts and preferences. If you're building a fitness tracker, ask potential users about their exercise habits, desired features, and what would make them pick your tracker over others.
Try Private Beta Testing
Give a select group of people access to your product before the public release. If you've designed an online project management tool, invite project managers from different industries to test it and provide feedback so that you can fix any issues before the official launch.
Go for Public Beta Testing
Release a nearly finished version of your product for a broader audience to test. For example, if you've made a mobile game, offer it as a beta version for download and encourage players to report bugs or suggest enhancements.
Gather Customer Feedback
Use surveys to collect feedback from your target customers, helping you understand their needs, preferences, and satisfaction levels.
Measure Net Promoter Score (NPS)
Assess customer loyalty and satisfaction by asking how likely they are to recommend your product or service to others.
Check Retention and Churn Rates
Examine the percentage of customers who keep using your product or service over time and the percentage who stop using it.
Compare CAC and LTV
Analyze the costs of acquiring new customers against the revenue they generate throughout their lifetime to ensure your business model is sustainable.
Achieving product market fit is a critical component of business success. By understanding your target customers, developing a compelling value proposition, and validating your product or service through proven tests, you can increase your chances of achieving product market fit and driving business growth. Remember to continuously iterate and improve your offering based on customer feedback and market changes to maintain your product
Are you looking to learn more about collecting customer feedback at different points in product development? Download our ebook on Understanding Customer Feedback.