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Product Management

Achieving Product-Market Fit



The product-market fit defines the success of any product. Product owners hence must be aware of what product-market fit is and how to reach that point. In this blog, we will start by defining the product-market fit and discuss how to reach this point. We will also discuss the differences between enterprise and consumer products and how your client relationship will differ between these types of products. 

What is product-market fit?

Product market fit is an ideal situation in which the product you have built solves the problem of your target market. Co-founder of Andreessen Horowitz, Marc Andreessen, coined the term “Product Market Fit” in a 2007 blog post. He defined it as “being in a good market with a product that can satisfy that market.”

The journey to product-market fit begins with your customers. All the qualitative interviews with your users during the product discovery phase can lead to product-market fit. However, the journey and the timeline can differ as per the categories of products you are building. The product you are building can be either of the following:

  1. Consumer product
    The consumer products as Facebook, Instagram, and others involve more market risk. With the new product, you need to figure out if there is a market for the product you’re building. Thus, incorporating a higher risk.
  2. Enterprise product
    Enterprise product involves more execution risk. You need to make sure whatever you are building is 10X better than what already exists. If we know the problem already exists, we want to make the execution of the solution faster and cheaper. The enterprise product can also be divided further into:

    1. Existing Solution
      For an existing solution, you would to launch the product early and pilot early. You need to invest more time in polishing the product. For instance, Slack took 3-4 years to iterate and launch. Today it has replaced communication tools like Hipchat.
    2. New Solution
      If the solution is new, you would want to launch early and pilot it to customers and then iterate from there.

Different products will have a different journey and time taken to reach the product-market fit. For the consumer product, you release your product early while for enterprise products, it needs a more extended period for polishing the product. We need to understand the above journey to validate hypotheses about our products.

The trick to validating hypotheses in any product category lies in a quality interview session with your users/buyers. Don’t ask leading questions or pitch your product. Let the users talk about their problems and the possible ways to solve it. While they playback the solution, match it with your value propositions. If what you are proposing aligns with what your users are talking about, you know what you are building is making sense. You know you are up to something. Always iterate after the interview sessions.

How to measure for product-market fit?

You can analyze various metrics to know whether or not the product is inching towards the product-market fit. Improved activation rate, downloads, referral rate, and others are all hints your product is reaching the market fit.

For a consumer product, a good sign is when people start referring to other people. Paid reach starts decreasing, and organic reach increases.

In enterprise products, where there is a longer sales cycle, still, have consumer connotations. Even when users have free access to your product, the sales process is happening. In a year, one or two customers may land in your product, but this still means you are moving towards product-market fit.

In B2B sense,  the product-market fit might not be defined by sales funnel as buyers and sellers are different, and the sales cycle is different. Once, people are aware of your product and are using it; you know you’re inching towards product-market fit. Thus, for an enterprise product, sales cycle, engagement may be more important metrics to look at rather than activation and referral. In a Single utility thing like how often people use it, and comeback is essential. 

Things to remember as product owners and development partners:

  1. It takes time to reach the product-market fit. In the best-case scenario, few users will use the product you launch. In the worst case, it will be rejected. Expect the rejection from the user for a first 1-2 period of time, especially in the b2b market. Get emotionally ready for rejection. It takes more time to move in the direction of product-market fit.
  2. Rather than developing a product in a whimsical way, we suggest an experimental method. Keep your buyers and users profiles in mind, and build the product for them. When measuring, don’t just use tools like analytics and mix panel, instead go and demo in front of people. Do not pitch your idea, watch, how they use the product, and listen to what they say. Filtering out the noise about what they say and taking up the signal of what they do will help you better match your value proposition with user needs.
  3. If you are a development partner, prepare your clients for rejection. Entrepreneurs become entrepreneurs because they are highly optimistic people, even when the odds of success are low. The expectation that the product will wow the customers are inspired by optimism. Reality check! It is not that easy. As a development partner, remind your clients that it will take time, and we are on this journey to make this product work. Just using our imagination and hypothesis will not work. Some may listen to you and others may not, but preparing your clients for rejection is necessary. Walk them through the process and give examples. Even the most successful companies have to go through it.
  4. Activation can sometimes be deceiving. Your marketing team can drive people who do not have a problem that your product solves. When they are not your core customers, the conversion rate is low. You are just getting people who aren’t your core customers. In such cases, check the retention rate, and give feedback to the team to target users who match our profile.

Regardless of the product, consumer, b2b, or existing market, we need to know in which stage we lie, then improvise accordingly. The only thing which matters to reach a product-market fit is the user using the product. Everything else is noise. Hence, start measuring from the user’s perspective and have realistic expectations.


Done with Step 5? Learn about all the steps in Product Development from this series.


To unpack more questions related to product development dive into our Product Podcast.

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