Product market fit is all the rage among the startup circles—and deservedly so. Personally, I think it’s as mythical as a fantasy movie’s plot.
You set out on an adventure to start a business. The adventure ends when you find two secret keys which—when combined—will reward you with riches and open new doors of possibilities.
Product market fit is what makes a seemingly trivial invention like the swimming pool noodles a million-dollar success. And when you don’t have the magical PMF combination, it’s what fails million-dollar ideas like Steve Jobs’ NeXT Computer.
But despite all the hype, product-market fit remains to be an elusive subject in the startup communities. For instance, below are a few questions that either don’t have black-and-white answers to them or stir highly opinionated answers from startup experts:
- What is product-market fit exactly?
- How to achieve it?
- Is it a metric or a process?
- Can you optimize it?
These are a few questions that pester both curious marketers and startup founders alike. In this post, I try to answer them through the lens of a marketer. Let’s begin with the cold hard fundamentals.
What is product-market fit?
You’d assume that it’s a question that belongs in the r/explainlikeimfive community of Reddit rather than in a blog targeted at mid-career marketers.
But it’s a question worth pursuing because—since we don’t have its universally agreed-upon definition—everyone defines product-market fit in their own terms.
The usual definition of product-market fit is finding the right market for your product after you have built it.
But since product market fit doesn’t have a dictionary definition, you can also interpret it the other way around—i.e., building the right product for a specific market.
Most of us gloss over the latter probably because of the term’s syntax—it’s product-market fit and not market-product fit for a reason.
This inverse nature of product market fit is what makes the concept unnecessarily tricky. It shouldn’t be this complicated though. We have plenty of real-world examples around us that explain product-market fit much better than Paul Graham or Marc Andreessen.
Finding the PMF is like looking for a Tinder match and setting yourself up for the ones that show interest in you. When you find the right match, you do everything in your capacity to make the relationship work.
Or, it’s like finding the right memory foam mattress for your bed. Once you find the one that alleviates your chronic back pain, you will stop looking at all the other options.
The only other thing you will agree to is for you to exchange your pillows with a pair of matching memory foam pillows to upgrade your sleeping experience.
It’s also like ignoring the closest grocery stores near your home to shop at a specific deli store because they have everything you want at a price you can afford. And hey, the people there greet you with your first name! 🙂
You get the idea.
As a tunnel-visioned marketer, I see product-market fit the way I see marketing—it’s just like a funnel! Or, like a flywheel or the loop—whichever mechanism of marketing you prefer to believe in.
More often than not, finding a PMF is an exercise of throwing spaghetti at the wall and seeing what sticks. It behaves the same way marketing funnels do—you start out by targeting a wide demography and gradually narrow down your offerings to a niche market.
How to achieve product-market fit?
Given the parallels I drew between PMF and marketing funnel in the above paragraphs, you probably already know the answer.
You start with the broad strokes of a hypothesis—assuming a certain kind of person will use the product you have launched. That person is your ideal customer persona—the mystique ICP that marketers drool over.
Let’s take an example of a brand to understand this better.
Avoma is an all-in-one meeting intelligence software that is used by a ton of brands around the world. During the initial days of the product launch, Avoma’s team conducted several rounds of customer discovery interviews to see if their hypothesis had legs.
Though they knew all kinds of knowledge professionals could be their users, they realized that their initial buyer persona (within their ICP) were the sales and customer success teams. They observed that sales and customer success professionals derived the most value out of Avoma’s offerings and were willing to pay a premium for it.
Hence, Avoma let go of the temptation to cater to other segments of knowledge professionals (e.g., teachers or students) who also had similar use cases, but didn’t fit the B2B customer segment that Avoma was hyper focused on.
This is a great example of a young brand casting a wide net in their early days to pin down on a niche market once they understand their ideal customer segment (credit to a lot of active listening).
When you’re hypothesizing, you’re likely to attract a wide variety of audience to use your product especially if it’s free, you have created a hype around your product that’s not niched down (yet), and nobody (including you) knows for sure what problem your product solves.
But don’t worry about attracting the wrong audience at this point. It’s important to know how people think about your product—even if it is mostly white noise.
Your job is to look for the signals that match your assumptions or add new dimensions to your product’s use cases. Once the initial hype dies down, you will have the opportunity to test your hypothesis.
If the product was able to attract your ICP—your intuition was right. If not, you will have to refine your marketing to speak more directly to the intended audience. That means communicating about your bare-bones features rather than glamorizing them for the whole world.
The folks at Velocity Partners offer some fictional examples to warn us of how not to excessively generalize your product’s positioning:
- Increase your profitability with our spell-checker.
- Boost your share price with our middleware.
- Double your revenue with our test software.
Don’t do this—not when you’re looking for a PMF, not ever.
These overambitious generalizations might feed your ego, but they most certainly will delay the process of finding the right takers for your services.
How do you tell the white noise apart from the signals? Superhuman’s founder and CEO Rahul Vohra has some tips. In an interview with Reforge, Vohra says that the wrong customers:
- are unusually vocal
- demand distracting features
- present ill-fitting use cases
But eventually, they will churn out for good. The risk here is—these are noises that sound like signals. If you fail to identify and tune them out, you will soon drown in a sea of static noise that will lead you to a spiraling maze.
Instead, Vohra suggests that you should focus on talking to on-the-fence users. Oftentimes, the right prospects:
- offer constructive feedback
- have a supportive outlook for your product
- are patient with your shipping dates
- are attracted to your non-sexy features
- are willing to pay
When you are demoing your product to the right prospects, some of them will be wowed by the differentiation that your product offers. Those are the moments you want to highlight in your marketing.
And if you ask them “how would you feel if you could no longer use our product?” the right customers will invariably answer—“very disappointed.”
Bingo! Those are the users you need to marry your product with.
Is PMF a metric or a process?
This is an important concept to understand because the correct answer to this question can help you nail your product-market fit.
The very wording of “product-market fit” makes it sound like a goal—like putting the right pieces together to complete a jigsaw puzzle.
Many marketers try to quantify PMF as a metric that moves the needle of growth for startups, but many do so rather inaccurately. PMF is sort of a milestone, yes—but it’s also a malleable idea that evolves along with the changes in your product’s offerings.
Once again, we can borrow Avoma’s example to explain this better. Avoma started as an AI-powered meeting assistant tool, but the new features added to the product are quickly turning it into a sales intelligence platform that contributes directly to a company’s revenue.
Many others believe that PMF is a goal—one that keeps moving. And when something is a metric, there are ways to optimize it.
Who owns product-market fit?
Originally speaking, Andy Rachleff owns product-market fit. After all, he’s the one who came up with the concept in the first place.
But Andy can’t help you with your product-market fit puzzle. He’s busy being the CEO and co-founder of Wealthfront Corporation.
You can’t hold one person or team responsible for achieving product-market fit for your startup. By definition, it’s a composite of at least two elements—product and market.
But there’s more to it than meets the eye. PMF stands at an intersection of three things—product, distribution, and customers.
Therefore, attaining PMF is a company-wide shared responsibility especially between the product, marketing, sales, and customer success teams.
Your product folks are the artisans who take an idea and wireframe it into a tactile product—the MVP (minimal viable product). They do so based on the hypothesis we discussed above—by identifying a market’s demand and building the MVP to fill that gap.
If a hypothesis fails, they have to go back to the drawing board and chalk out better product features. And if they can’t ship the product updates on time, you risk being a fly-by-the-night startup—the 70% that either fizzle out completely or turn into zombies.
Sales and marketing bridge the demand with supply, collect critical intelligence about your customers, and report back to the product team. The reason why growth marketing and/or product marketing teams are one of the most sought-after teams in any startup is because they sit at the cusp of product and distribution and play a crucial role in making PMF a reality.
Your customer success team is the key to finding new market frontiers for your product because they help your customers maximize your product’s utility, learn about their growing needs, and understand the different new use cases.
In my opinion, sales and customer success play the biggest role in achieving PM fit due to their proximity with the market.
How to optimize your product-market fit?
Here’s a hypothetical case of what can happen if you don’t optimize your PMF.
The biggest fear that haunts startups all over the world is the danger of seeing their product die due to customer churn.
Obscurity—if not death—is certain for products that can’t keep up with the growing problems of their users or fail to diversify their current offerings.
The only way to stop your growth from flattening is to keep innovating your product to meet your customers’ newer use cases. And because you’re expanding your product’s capabilities, it will lead you to discover new market segments.
Optimizing your product-market fit is an incremental climb. But you can improve it by measuring the following metrics:
- Organic growth
- Net promoter score (NPS)
- Customer churn
Measuring your organic growth tells you how well your product is faring among your customers. It will help you discover new acquisition channels or build scalable channels for distribution.
Your NPS data will introduce you to your best customers, help you tune out the critics, and show you the possibilities of leveraging word-of-mouth marketing.
Customer churn is the biggest red flag in your product-market fit. And although it’s impossible to completely stifle it, you should keep your monthly churn rate under 3–5%. That’s a harmless leakage as long as you don’t let it grow big.
The common thread that weaves across all of the above is customer retention. And nothing will get you to retain your customers if you don’t understand the voice of the customers (VOC).
Done well, optimizing your PMF creates a viral loop for your product—the right customers will come back to you to fulfill their recurring needs.
They will also volunteer as your salespeople and bring more customers in. The right customers will wear your product like a badge of honor and brag about you to the world.
In order to stay fit, you have to adapt
Achieving a PM fit is like holding sand in your hand—here today, gone tomorrow. It’s a fleeting mirage that you have to keep chasing as your startup expands its impact radius.
The only way to keep your product in sync with the market is to evolve with your customers. Make them the compass of your growth—come up with new product roadmaps, prioritize feature releases, or roll out new offers based on their response.
When your customers have new use cases to fulfill, you can’t stay complacent and not cater to their needs. Because if you won’t—a new competitor will.
Remember, it only takes a few weeks for an existing incumbent in your industry to come up with a new product or feature and steal your customer from you in one fell swoop.
The hustle to keep your customers happy and engaged—is the core DNA of a lean startup.
