What is a product-market fit?

34. Online Marketing

Product-Market fit is when a startup has found its market and can build a product that satisfies the needs of that market.

Product-Market fit is one of the most critical elements to building a successful startup and any new venture. It relates specifically to customer acquisition and retention in startups or growth in the case of established companies. Product-Market fit is also called market validation, and I have heard some say that “consumers are voting with their dollars” when discussing it.

Marc Andreessenexplained it really well in a recent WSJ article [4]:

“The only thing that matters is getting to product-market fit.”

In his 2007 blog post Product/market fit, Marc Andreessen, co-founder of prominent Silicon Valley venture capital firm Andreessen Horowitz, defined the phrase as “being in a good market with a product that can fulfil that market.”

All startups are looking for product-market fit (PMF). Any startup that doesn’t have PMF will fail. Unfortunately, the most common reason startups fail is that they can’t reach PMF.

How To Measure Product-Market Fit

There are several ways to measure PMF. We’ll cover the two main ones, which include both quantitative and qualitative data points.

Signs of Product-Market Fit

Here are three key indications I consider when determining product-market fit:

Explosive growth in terms of users or revenue

75. Aim for the Stars

Nothing is better than explosive growth when it comes to validating product-market fit. This metric indicates that a company is building something that users love and are willing to pay for it.

It’s the best way to measure whether there is a product-market fit.

Even if a company has an initial spike in growth, this is not guaranteed to hold. But, for companies with the product-market fit, it will result in sustained growth over time.

Always take conversions, user engagement and sales as an indicator of PMF.

Example of early signs of Product-Market fit traction

If you’re retaining at least 40 per cent of your users within the first month and 70 per cent after a year, that is a strong indicator of a product-market fit.

In addition, user loyalty is a key indicator of product-market fit because it shows that people love your product enough to want to return after trying it.

Do your Customers Recommend you to Friends?

309. Friends

You have to ask yourself this question about your product. Are those users pleased with your product, and would they recommend it to a friend if you’re acquiring users?

Ask yourself: Would I buy again or recommend this service to my friends?

If the answer is yes, then there’s a good chance that you have a product-market fit. If not, it may be worth assessing the following metrics to determine if you are on the right track.

If users rave about your consumer product, it means they love what you’re building, and it’s adding tremendous value to their lives. That translates into loyalty, word-of-mouth referrals and sustainable growth over time.

Do customers care if your company died tomorrow?

It is a sign of product-market fit when at least 40 per cent of your customers care so much about your service that they’d be upset if it died.

If your potential customers felt handicapped due to the removal of your product from the market, it would mean you have a product-market fit.

Get feedback from your customers by doing a website survey asking them how they would feel if your product was removed from the marketplace.

If 40% answers ‘very disappointed’, then you have signs of Product-Market fit.

When you don’t have Product-Market fit

It’s OK not to have a product-market fit, and it doesn’t mean you’ve failed. Instead, it may indicate a need to pivot or build new features that users ask for, but they don’t have a critical mass yet.

If you can’t raise enough funds to keep going, consider doing more customer development and launching a Minimum Viable Product (MVP) before taking too much risk.

Is there anything your customers are telling you that “no one has ever built something like this, and I’ll pay for it?” If not, you’ll want to rethink everything.

If you fail, it’s not the end of the world; it’s just a new beginning to keep moving forward. In the startup world, failure is not an option but a way of life.

There will be time to recover and adjust your strategy or market. However, if you keep running after one market with no Product-Market fit, it can lead to a year or two wasted – so don’t do that.

Look for a market that would most likely be interested in your product. If no market is interested in your product, then you should pivot. A market can be defined as a group of people with common needs and pain points (or if they don’t have any problems that you can solve).

We’ll get more into this right now.

How to find your product-market-fit

A market consists of 2 parts: the problem and its solution. You need to identify both to find your market. Your market doesn’t end where you stop drawing customers because more people are always coming into an existing market.

1. Determine your target customer

345 Talking to customer service

What market do you want to serve? Who is your primary market segment? Why are they buying a product like yours? Do you need to know where the market is geographically located?

Look at the market size: ask others what they think about it or do market research yourself.

Market size is the total market size of your target market segment that you can serve with a product like yours.

Understanding your target demographic is important because it will determine how you market your product.

Determine whether you want to focus on a market segment that is broad or narrow and how much of the market share you’d like to capture.

– If your product is for children (younger tech-savvy), then your target market would be parents with children who own mobile devices – or at least have access to one.

– If you’re offering an enterprise product, market size is more than the market potential. For example, market size would be bigger for businesses and enterprises because they have a bigger budget. Since market size will affect your pricing, you might want to invest in non-revenue-generating activities that will increase market exposure before spending on sales and marketing.

2. Identify the market pain point or need

Once you’ve identified the target market, it’s important to look at the market pain points.

What market need are you solving? Why do they want to solve that problem?

Usually, when customers buy something from a market competitor, it’s because they don’t perceive any better solution than the one offered by the market leader.

They’re not aware of other markets alternatives and market needs. So if you’re starting a company, it’s your job to find market opportunities they didn’t know about before – market opportunities that address their market pain points.

– Define the market need: What are the challenges or problems of your market segments? How can you solve market needs by offering them a solution that they deem better than your competitors’ products?

Alternatively, how can you make their life easier by using your product (because it’s not easy to keep up with market expectations)?

A market need is how you aim to solve a market problem and provide value. You can make customers’ lives easier by addressing market needs.

3. Validate your market assumptions.

Validating your market details will take time, but it’s worth spending the time to get a clear picture of what you’re up against. You should validate market needs, size, and pain points to know how big your market is.

Step 4: Define your value proposition.

90. Podium

Define your value proposition before entering the market. What will set you apart from the competition, and what do you have to offer that is unique? How will your product be perceived by customers? What is it about your product that will set it apart from its rivals in the market? How do you communicate the uniqueness of your product in a market that doesn’t have much differentiation between competitors?

– Why should customers buy from you instead of someone like you?

How can you differentiate yourself from the competition with market offerings, such as pricing, packaging, services and warranties (more on these later)?

Step 5: Specify your MVP feature set.

MVP stands for a minimum viable product. It refers to the marketable features of a product that will allow you to test market demand.

The goal is to develop your minimal feature set and get it in front of market as early as possible, even before completing the development of all the product features. So, how much does it cost? What type of market feedback are you looking for? And how can you best market the MVP to your market segment?

– The market doesn’t care about what’s in the product or whether it meets all requirements. Customers will either buy or not based on how well your product solves their problem. If market adoption for new technology isn’t there, then market pain points/dissatisfaction is not there.

A minimal viable product means that you should not please everyone: be honest and open about your product roadmap.

If there’s no market need for your product, then your product will fail even if it’s well designed and priced right- because market demand doesn’t exist for the features you’re offering.

Step 6: Create your MVP prototype

– Create an MVP prototype: Build a version of the product that has all the major functions and key features of what you want it to be.

– It should be market viable, not market-perfect. This means that it will offer market validation by identifying market pain points (if any), and market adoption based on market needs for the features you offer.

As long as your MVP prototype has the basic features of the concept of the product, you can start testing it out in the marketplace.




Your market validation should continue throughout the product life cycle. Until market adoption meets market demands, your product-market fit will not be complete.

The key is to listen to the market about what they want/need from your product before launching it- and once you launch it, try to gather more feedback by using customer feedback channels such as surveys (hotjar is a cool app for this)

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