Product-market-fit is a fairly well-known term in Product circles, but its definition varies wildly and widely. For some, it’s simply the creation of a minimum viable product (MVP) that solves a problem. And while this is a good starting point, product-market-fit is both more complex and less binary.
There are a number of factors that determine if and when it has been achieved. And like many things in life, product-market-fit should be seen as a spectrum, a continuum, rather than a yes/no 0-1 definition.
Factor 1: There is a good market
One of the key factors in achieving product-market-fit, and in turn achieving success with a product, is the one most often missed when products are first pitched.
Before you even conceive your product idea, it’s crucial to establish that you are entering a worthwhile market. What does a good/worthwhile market look like?
- Size matters - the size of the market needs to be worth the time and effort (and money) you will put into building your product. Business is all about return on investment (ROI) and that means you need a market large enough before you should begin
- It is poorly served - even if it’s the biggest market you could hope to find, if it’s already well-served by existing products that yours is not improving on, then you will struggle to achieve any kind of traction
Factor 2: You have understood the need
A great market will be of little use if your product doesn’t satisfy it. You need to understand what the market wants - what are your customers trying to do that they can’t, or at least can’t do easily?
There are some great tools to use to establish this, but the key thing is to speak to your customers. They know their need - even if you have a hypothesis of what the need is, make sure to verify it with customers.
Only with a product that meets the need of the market can you achieve product-market-fit.
Factor 3: Your product is in use in the market for the need it was designed
Assuming factors 1 and 2 are covered, the next question is whether your product is being used in the market you’ve identified, for the need it was designed.
This is a fairly simple, maybe even obvious, factor. But you can’t claim product-market-fit without traction.
Factor 4: You are achieving your KPIs for the stage you are at
You should now be able to quantify the product-market-fit of your product. But this will look completely different at different stages in the product lifecycle.
Product-market-fit, when quantified as say a number of users or an amount of revenue, should have different targets as time goes by. You’d be very ambitious to expect your MVP to achieve the same level of revenue as something you have iterated on over time. So you should set goals which are dependent on the stage your product is at - these goals/key performance indicators (KPIs) are quantifiable measurements of how much product-market-fit you have.
This takes us back to the non-binary nature of product-market-fit. It’s not a one-time thing that you don’t have one day and do have the next. The level of product-market-fit will change over time (increasing, hopefully).
So it follows that the question you should ask yourself when evaluating product-market-fit is not “Have we achieved it?” but rather “Are we set up to achieve it?” and “At what level have we achieved it?”.
Find out more about product-market-fit in our Online Product Management Training Course.