Written by Daniel Thai, Fluvio Consultant
Product marketing focuses on developing strategy around introducing products into the market. Product marketing, however, can only take a product as far as the market wants it; a well-designed product won’t be successful if it doesn’t address an existing market problem. This is where product marketing’s visibility into customers’ demand and needs can help identify product-market fit.
What is Product-Market Fit?
Product-market fit was a concept invented by Sequoia Capital founder Don Valentine and popularized in the mid-2000’s by Marc Andreessen of Andreessen Horowitz, the venture capital firm. It occurs when a solution (product) satisfies the needs of a particular target audience (market) -- which should be the goal of every product launch.
“You can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it – or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account,” Andresseen said.
While a growing bottom line is a great indicator of product-market fit, other metrics to measure product-market fit include NPS score, adoption and retention, and usage rates. These metrics work well if a product is already in users’ hands, but what if your product isn’t in market, yet?
Identifying and Tracking Product-Market Fit
Product-market fit can serve as one data point in whether to launch a new product or service, so building a process to measure it pre-launch can be critical to your business’ success. Superhuman founder and CEO Rahul Vohra developed a four-step process to identify leading indicators of product-market fit rather than relying on the backwards-looking lagging indicators mentioned above.
The process revolves around the following four questions:
How would you feel if you could no longer use this product?
What type of people do you think would most benefit from this product?
What is the main benefit you receive from this product?
How can we improve this product for you?
Entrepreneur and startup advisor Sean Ellis found that product-market fit occurred when 40% of respondents answered they would be very disappointed if they could no longer use the product. Vohra’s process, however, expands on that and provides baselines to identify target markets and key customer values and benefits that can drive product improvements. You can find our short guide to Vohra’s process here.
Fluvio Product-Market Fit Guide
Implementing the Process
Build this process into your beta program, where you have a captive audience with hands-on experience with your product. The questions can be part of an exit survey to quantify the sentiments, and then you can explore further during exit interviews. The initial results may not hit the 40 percent threshold for product-market fit, but it provides a starting point for refinement.
Executing this during the beta provides additional adoption and usage benchmarks to verify the features that are most important to users. In the end, you’ll be able to identify new personas to target, key benefits to promote, and key obstacles to address. As a product marketer, you can use this data to inform new positioning and messaging to a narrower, more relevant market segment and re-prioritize the product roadmap to meet the customers’ needs.