How to Determine Product Market Fit

Anyone can have a good idea, but not every brand can transform it into a sold-out product. Companies salivate for the next big thing in their market—the next hot item that'll turn heads and lead to a big payoff. Now, focusing on market research industry trends can help, but you can't force a perfect match between consumer and product. The answer—focusing on how to determine product market fit (PMF).

What do you need to have a product market fit?

PMF incorporates careful planning, relies on calculated risks, and leverages a keen eye for what your target market wants. This killer combo leads to fresh products that your customers can't live without.

So, before you start your next venture, let's discuss how to determine product market fit and how to achieve it.

What is Product Market Fit (PMF)?

"Don't find customers for your products—find products for your customers."

Seth Godin, American author and former dot com business executive

Coined by Netscape co-founder and investor Marc Andreessen, product market fit means that your product is in sync with the current market needs. It's the winning combination of the right target customer, the perfect solution to a pain point, and ideal market timing.

What is not product market fit?

Forcing a product into the market or convincing customers your product is the right one for them. PMF is led by your customers' wants and delivers the answer they've been looking for.

Why is learning how to determine Product Market Fit Important?

When you develop a product, do you want it flying off the shelves or sitting back gathering dust? Whether your latest release is a raving success or a terrible flop, figuring out how to determine product market fit is a critical part of the equation.

For many failed startups, ignoring the market can have disastrous effects. A recent report reveals that major reasons startups crumble are related to lack of a product need or poor product timing. Ultimately, if your product doesn't solve a real problem for real people, in real time—there's no point in developing it.

Prioritizing product market fit guarantees people actually need what you're selling before investing in and creating it. And, let's face it, that's what every brand wants.

Key Steps on How to Determine Product Market Fit

Before you even start spinning the wheels on your next product or service, you should always begin with achieving PMF. Market research companies can be invaluable partners in this journey. Here are the six steps to help determine product market fit.

01—Determine Your Target Market

Pinpointing the right customers means understanding exactly, "Who will buy the product?" and "Will it meet a customer's need?" This step is all about diving deep into the type of customer your product is meant for. Some of the best ways to dig into this better are through—

• Conducting brand positioning market research.

• Developing customer personas.

• Analyzing past customers.

• Performing user research.

Through consumer and market research, you can gain valuable insights into your target customer and visualize the types of products that would be helpful to them.

02—Identify Ignored Consumer Needs

If a market is already saturated with one type of product, then introducing another one of the same type isn't going to cut it. But if there's an underserved customer need, you have an opportunity to swoop in and provide a helpful solution.

For many customers, there's a clinching problem that no product or service can solve. Whether it's longer battery power on their phones or a faster way to get food, figure out what your target market wants and needs—but hasn't been able to find. To nail down ignored customer wants, you’ll need careful market research and to listen to your customers' frustrations and desires. Conduct surveys, engage in social listening, and analyze feedback to uncover those hidden pain points and unmet needs. Once you understand them, you can develop a product that addresses those gaps in the market. If you can do that, you have the makings of achieving product market fit. If you can do that, you're well on your way to understanding how to determine product market fit.

03—Develop a Unique Value Proposition

Many brands confuse a value proposition with a list of the features and benefits of their product. But your value proposition is not about you, it's about showcasing how your product stands out from competitors through customer-centric messaging.

Remember—customers buy solutions, not product features.

It's up to you to single out the problem your product solves and communicate that in a clear message that connects with customers. The more clear and compelling your message, the better chance it has of winning over customers.

04—Define & Create Your Minimum Viable Product (MVP)

What's your MVP? Your minimum viable product is the one you plan on launching. But, it doesn't need all the bells and whistles from the idea creation period, only the key features necessary to solve the problem you've uncovered. Keep it simple. If you've created a product that's too complex, potential customers won't be able to figure out how to use it. Creating a minimum viable product allows you to test your product in the market and collect feedback from early users.

05—Beta Test Your MVP

Once your MVP is packed and ready to go—test that prototype in the market. Collect feedback from early users and make necessary adjustments before scaling the product to the wider market.

Ask questions to users, have individual conversations with early adopters to really get to the bottom of their problems and how your product stacks up.

06—Analyze the Feedback & Make Adjustments

After you've tested your product, take the insights you've revealed and make changes to your minimum viable product. This feedback loop is essential in the product market fit process.

How to Measure Product Market Fit

Achieving product market fit involves more than just luck—it requires careful research and a deep understanding of your target audience. Trying to determine if you've achieved PMF? These key signs offer a more defined set of qualitative and quantitative metrics to help you nail product market fit.

• Organic growth through word of mouth—People are talking about your product and sharing it with their friends.

• Media and industry interest—Industry publications and influencers are raving about your product to their audiences and referring them to you.

• High customer retention rates—Your existing users keep returning and are satisfied with even an unfinished version.

• Increased growth rate—You're steadily gaining users over time without additional marketing efforts.

• Increased sales—Product market fit will help you align your offering with customer needs, leading to higher sales and revenue.

• High NPS score—Your Net Promoter Score is higher than your competitors, indicating how loyal and satisfied customers are with your product.

Real-World Cases of Product Market Fit

To illustrate the power of product market fit, let's look at some real-world examples.

AirBnB

Couch surfing doesn't seem like a billion-dollar idea. But with Airbnb's unique spin on the concept, they were able to tap into a large market of people looking for cheaper and more convenient sleeping accommodations.

Originally AirBnB had trouble getting off the ground. The team positioned AirBnB as an alternative to fully booked hotels. This wasn't resonating with customers and didn't attract VC funding. By refocusing its messaging and learning more about its target user, AirBnB adjusted its product and synced up with Craiglist to list bookings on both platforms. This shift in focus was a success, opening the door to a larger consumer market.

Why a Craiglist collaboration?

With a shift in marketing and product strategy, instead of competing with high-end hotels, AirBnB started to target budget travelers. This helped them hone in on their market and craft a clearer message that connected with customers. Craigslist was where their target audience was spending their time, and this helped them connect with the right people (and lots of them).

Dropbox

Before Dropbox, people had to rely on clunky external hard drives or email themselves files to access them on different devices. Files got lost, emails got deleted, and it was a mess. Dropbox made file sharing simple, and it was an instant hit.

The company focused on solving one problem for customers—the ability to easily access and share documents across devices. Every feature they added to their product was directly related to this core mission. The end result was a cloud storage platform that allows users to access their files from any device, anywhere in the world.

They knew they'd hit a perfect PMF when their beta queue skyrocketed from 5,000 to 75,000 people. Everyone wanted to try it.

Dropbox's success is based on solving one problem for customers and providing them with a clean, intuitive solution. Once you nail that, you've achieved product market fit.

Become Fit

Every brand wants customers to line up around the block to buy their product. But it's not easy—there's a lot of tweaking and strategizing behind the scenes that must be done before you launch your new product.

To increase your chances of achieving product market fit, focus on understanding your customers and the problems they're facing. Dive into their pain points and tailor your new product launch strategy to meet their needs. When you give them an intuitive, easy-to-use solution that offers real value, you'll know you're on the right track for product market fit.

Need help with how to determine product market fit? Rebel is a product market fit consulting agency. We work alongside you to create thoughtful, cohesive market research strategies to reach target consumers. Discover why ambitious brands choose us.