Product/market fit
Product/Market Fit is the degree to which a product satisfies a strong market demand.
History
Marc Andreessen was the first person that used the term: “Product/market fit means being in a good market with a product that can satisfy that market.”.[1][2][3] Many people interpret product/market fit as creating a Minimum Viable Product that addresses and solves a problem or need that exists.
Sean Ellis is often associated with popularizing the term. He placed Product/Market Fit as a precondition for effectively scaling marketing for company in his Startup Marketing Pyramid.[4]
Steve Blank referred to the concept of product/market fit as a step in between Customer Validation (step #2 in "The Four Steps to the Epiphany") and Customer Creation (step #3).[5]
Interpretations
In Alexander Osterwalder's Business Model Canvas paradigm, product/market fit could be interpreted as a business model's value proposition, customer segment, relationship, and channel are fixed without requiring additional pivots.
Popular Frameworks
Ten Steps to Product/Market Fit
Ash Maurya outlines ten steps for exploring Product/Market Fit.[6]
- Your product is not "product"
- Explore different business models and prioritize where to start
- Understand the three stages of startups: [Problem/Solution Fit], Product/Market Fit, Scale
- Focus on the right metrics
- Formulate falsifiable hypotheses
- Architect for learning
- Architect for speed
- Go only as fast as you can learn
- Validate qualitatively, verify quantitatively
- Systematically test your model
Product/Market Fit Storyboard
Building a Minimum Viable Product requires four components of the Business Model Canvas in the Product/Market Fit Storyboard:[7]
- Customers
- Value Proposition
- Channels
- Relationship
The Startup Pyramid
This framework looks at companies, products, or services before Product/Market Fit and after Product/Market Fit (i.e., Transition to Growth and Scaling/Growth).[8]
Before Product/Market Fit:
- Measure product/market fit as soon as possible because it will significantly impact how the startup is operating
- If product/market fit has not been reached yet, it is critical to keep burn low and focus all resources on improving the percentage of "very disappointed without your product" users
After Product/Market Fit (Transition to Growth & Scaling):
- Highlight the benefits described by your “must have” users (those that say they would be very disappointed without your product)
- Implement the business model that allows you to profitably acquire the most users
- Streamline a repeatable, scalable customer acquisition process by testing multiple approaches and tracking to improve the right metrics
- Scale
Popular Metrics
The 40% Rule
One metric for Product/Market Fit is if at least 40% percent of surveyed customers (Users) indicate that they would be "very disappointed" if they no longer have access to a particular product or service. Alternatively, it could be measured by having at least 40% of surveyed customers considering the product or service as "must have." Sean Ellis is noted for popularizing this heuristic after examining many startups.[9]
Common Mistakes
It is important to differentiate between Product/Market Fit and Problem/Solution Fit when measuring a company's customer base. More specifically, when gauging a customer's desire, companies need to be sure they are measuring desire for the product or service—not just for a solution. Misinterpreting customers' desire for a solution as a company's product or service will end up being a False positive for Product/Market Fit.[10]
Popular Quotes
- Marc Andreessen: "The #1 company-killer is lack of market."
- Marc Andreessen: "…The life of any startup can be divided into two parts – before product/market fit and after product/market fit.”
- Marc Andreessen: “When you are BPMF, focus obsessively on getting to product/market fit. Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.”
- Paul Graham: “Make things people want.”
- Sean Ellis: "I ask existing users of a product how they would feel if they could no longer use the product."
- Steve Blank: “Customer Validation proves that you have found a set of customers and a market who react positively to the product: By relieving those customers of some of their money.”
Misinterpretations
Venture capitalists Fred Wilson and Ben Horowitz point out common misunderstandings of Product/Market Fit:[11]
- Myth #1: Product market fit is always a discrete, big bang event
- Myth #2: It’s patently obvious when you have product market fit
- Myth #3: Once you achieve product market fit, you can’t lose it.
- Myth #4: Once you have product-market fit, you don’t have to sweat the competition.
References
- ↑ Marc Andreessen. "Product/Market Fit - EE204".
- ↑ Quora. "How do you define Product-Market Fit?".
- ↑ Marc Andreessen. "The Pmarca Guide to Startups, part 4: The only thing that matters".
- ↑ Sean Ellis. "Startup Marketing".
- ↑ Steve Blank. "The Four Step to the Epiphany - 2006".
- ↑ Ash Maurya. "10 Steps To Product/Market Fit".
- ↑ Tristan Kromer. "The Four Parts of a Minimum Viable Product".
- ↑ Sean Ellis. "The Startup Pyramid".
- ↑ Venture Hacks. "How to bring a product to market / A very rare interview with Sean Ellis".
- ↑ Tristan Kromer. "False Positives & Product/Market Fit".
- ↑ Ben Horowitz. "The Revenge of the Fat Guy - March 20, 2010".
External links
See also
- Build Measure Learn
- Business Model Canvas
- Marc Andreessen
- Minimum Viable Product
- Steve Blank