What is ‘Market Fit’ and Why is it Important When Developing a Product?
Do you have product market fit is a question that has become more synonymous with startups than perhaps any other question or phrase.
Whenever I stand in front of startups at events or accelerators today I always ask for a show of hands:
- Who is searching for product market fit?
- Who has a market fit and is starting to scale?
- Who is already scaling
Invariably the hands will go into the air proclaiming that a majority of the startups have market fit.
But many are stumped by the follow up…How do you know?
It is not uncommon to ask 10 startups how do they know they have market fit and to receive 10 totally different answers.
Why is this the case?
It certainly doesn’t help when a brief search for “product market fit” in Google turns up definitions such as:
“Product market fit is the degree to which a product satisfies a strong market demand”
“You can always feel when product market fit is happening”
The problem with definitions like this is that they don’t mean a great deal. Nothing is included in them that can be measured, improved upon or drives your actions. They are more about feelings and perceptions rather than hard data.
We cannot state there is a problem without offering a solution so lets take a closer look at what product market fit is and how it can be measured.
What is Product Market Fit?
To begin we must provide a definition of what product market fit is.
At Straight Talk we use:
Product market is achieved when a business and product can successfully:
- Define a problem they solve for a specific market or market segment
- Demonstrate that the market or segment will pay for the product in order to solve the problem
- You can clearly define and measure success when using the product
- You can demonstrate customers achieve this success metric
- You have sold the product to multiple people with the same pain in the same market
- You know the numbers on acquisition and selling inside out.
While this definition might not be traditional what it does provide are three clear benefits
- It provides a structured process that anyone can follow to see what they have achieved and what they need to demonstrate in order to achieve market fit
- It creates a standardised approach meaning there is no ambiguity between what one person defines as market fit vs another.
- By completing these steps it will prepare the startup for the next phase of growth which is learning to scale. This matters because no matter what definition you use a startup must have completed these steps otherwise it will fail at scaling.
Why This Matters?
We believe that providing a clear structure to market fit is important because while we talk about it as simply something the business must achieve the truth is that it does not exist in isolation.
Achieving product market fit is one of many business growth phases that all startups must pass through and do so successfully if they are to survive and thrive.
Because of this, we must ensure that when a startup passes through the market fit stage they are prepared to take the next steps and do not find themselves stuck with what to do next.
If it did not already this should matter to all startups because product market fit forms the basis of your future growth and success.