There are a dozen buzzwords you often come across in the startup scene. One example is Product/Market Fit. Mostly mentioned in discussions surrounding new high-growth enterprises, the term hasn’t entirely made it to mainstream business conversations just yet, which is a shame, considering that it’s a distinct approach to understanding the back-and-forth among businesses, products, and consumers. Studying how Product/Market Fit works helps shape your worldview and encourages you to create improved value for your customers, influencing how you go about business strategies and expansion.
Defining Product/Market Fit
Depending on who you ask, Product/Market Fit’s hearty definition may vary, and its overlap of a few terms may cause confusion. Originally coined by software engineer and entrepreneur, Marc Andreesen, the term essentially talks about being available in a promising market loaded with a product that’s designed to satisfy that market.
It initially sounds like an unapproved thesis statement, but it actually makes sense.
What Andreesen is trying to say is that, as a business leader, you’re bound to know if Product/Market Fit isn’t present. This is exemplified and understood when customers don’t appreciate your product’s value, there’s an apparent lack of growth, and when your customers aren’t talking about what you have to offer. Oppositely, you know precisely when Product/Market Fit is there when your sales keep growing, you feel the need to expand your customer service team, and when people start talking about your business.
When your target market responds well
Written by Josh Porter, Principles of Product Design complements Andreesen’s approach to business. Josh believes that a customer’s natural excitement over your brand and product indicates that Product/market fit exists.
In his own words, he writes, “Product market fit is a funny term, but here’s a concrete way to think about it. When people understand and use your product enough to recognizerecognize it’s value that’s a huge win. But when they begin to share their positive experience with others, when you can replicate the experience with every new user who your existing users tell, then you have product market fit on your hands. And when this occurs something magical happens. All of a sudden your customers become your salespeople.”
How validation comes into play
Wealthfront CEO, Andy Rachleff, also shares his take on the subject. In his essay titled, “Why you Should Find Product-Market Fit Before Sniffing Around for Venture Money,” he says, “A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. A growth hypothesis represents your best thinking about how you can scale the number of customers attracted to your product or service.”
Fundamentally, Rachleff believes that recognizing an irresistible value hypothesis is what a Product-Market Fit is about. Because it addresses both the business model and features warranted to invite a customer to make a purchase, entrepreneurs learn in advance how urgent their space is in an industry. Across pricing, product features, and business models, Rachleff confirms the interplay these elements carry in predicting how an enterprise rolls out.
Entrepreneur and blogger, Ben Horowitz, lets us pick on his brains about the matter, too. In an article called, “The Revenge of the Fat Guy,” Horowitz shares four common myths that help us better grasp what Product/Market Fit covers.
- 1st myth: Product/Market Fit is a grand yet subtle occurrence.
- 2nd myth: Every business leader can confirm when they have Product/Market Fit.
- 3rd myth: You can’t lose Product/Market Fit once you achieve it.
- 4th myth: Having Product/Market Fit perpetually means you outperform your industry contemporaries.
The more you look at how the above-stated examples are simply myths, the better you understand the value this approach holds in determining how successful your business becomes.
In his article, “The Illusion of Product/Market Fit,” Evergreen contributor, Itamar Goldminz, uses a stellar metaphor of resonance that highlights what Product/Market Fit is and can be.
“A good analogy for finding PMF comes from Physics: finding resonance with your customers and getting on the same wavelength as them. Note that this can be accomplished both by changing your product and by changing your customers (market pivot). Changing your wavelength is a gradual, continuous process (anti-myth #1), you know when you’re close to being on the same wavelength but it’s hard to tell if you’re exactly there (anti-myth #2). Since both your product and your customers constantly change (wavelength), it’s easy to get out of sync again (anti-myth #3) and it’s clear that your actions don’t prevent others from getting on the same wavelength (anti-myth #4).”
Clearly, Goldminz affirms that an entrepreneur’s general assumptions of what Product/Market Fit is, is often faulty, and believing these theories to be facts only harms one’s business.
The Road to Product/Market Fit
Now that we understand the importance of obtaining Product/Market Fit to come up with more accurate forecasts, the next question to answer is “how?”
Curious to find out what the strategies are? Click here for the second part of this article. Otherwise, feel free to reach out to us to discuss startup ideas and web app ventures.