February 7, 2022
Many technology startups fail because they waste too much time and money building things no one needs. 90% of startups end up collapsing, and the majority of them do so because they lack product/market fit.
But it’s them, right? Your idea is so good that you’ll definitely make it into the 10% that succeed.
If you didn’t believe that, you probably wouldn’t invest in your product and its beautiful design. And since you decided to do so and don’t want to see your startup ship sink, you should (and you can) build something within your control. And that means looking for, measuring, and optimizing product/market fit.
It’s easy to get caught up in record revenues, new user counts, and near-constant press attention. Cliff Lerner, the founder of Are You Interested, a dating app popular between 2008 and 2012, is a good example here. In his book, Explosive Growth, Cliff recounts how he increased annual revenue by 609% between 2007 ($425k) and 2008 ($3,012k), only to slide into stagnation and grow by just 5% barely a year later ($3,171k).
Even though Cliff achieved product/market fit, new technology and growing pressure from the competition quickly took huge bites from his company’s user appeal. And basically every industry knows a story like that. Just look at this Tweet from Aaron Levie and the massive response it drew:
Building a startup is an endless loop of going from one pivot to the next, right about when the last one has finally settled in.— Aaron 📦 (@levie) February 10, 2019
Product/market fit means your product and its value proposition resonate with your target group. It means that the problem your app solves, and the way it solves it, reflect the needs of your audience.
So before I dive into ways of checking whether you’ve achieved the holy grail of all startups, there are a bunch of things that need to be taken care of first, like answering some major questions about your business, your product, and a comprehensive market and competition analysis. Tools like business canvas may be of big help to you here. Well then, on to the questions that need to be answered before you start building a product (not to mention shipping it):
You need to be honest with yourself here and really ask yourself whether the solution you’re offering has broad appeal on the market or it’s only you who finds it useful. This means that you need to figure out whether the problem you’re trying to solve also concerns other people. How? Ask people how they deal with a problem your product is supposed to solve right now. Maybe there’s already a simple solution they’re so used to that your product won’t bring any additional value. Do yourself a solid and take care of this crucial reality check before hiring devs for your startup.
Aka building buyer personas or outlining ideal customer profile. You probably already feel at least one or two of those groups. But if you know that the problem exists, the next step is cracking your audience into segments so you know exactly who your product serves. There are a lot of great guides on doing so out there.
One product may be something very different for different people. Consider Trello, for example. For a marketer like me, Trello is the simplest tool for managing my content calendar and that’s why I love it. But it will be something very different for a developer, or a student. So once you know your segments, figure out what’s the key message you want them to hear, because it will matter to them.
Without a working product, however, you will never be able to understand whether you’ve built something people on the market actually need and want to use again. So after those few initial queries, the next step will see you taking on the MVP scope question. And many others after that…
Product/market fit is tricky. To quote Marc Andreessen said:
You can always feel product/market fit when it is happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house.
Based on that definition, we could identify a handful of milestones that testify to achieving product/market fit. When it comes to specific indicators that can be put into a number, I’d highlight the following:
Those are no-brainers that any business should already be measuring.
But on their own, they won’t give you context broad enough for you to check whether your primary assumptions are true. There’s a chance that your users value your product for something different than you think. They may also have specific needs that your product doesn’t satisfy right now. And the numbers alone won’t show you that.
If you stick to a “just the numbers” approach, you may end up quickly losing your product/market fit. You may start developing your product in a very different direction that your devoted users expect. Or focus on features that don’t really matter.
So… What should you do?
To get the whole picture of how your product can fit the consumers, you need to go out there, talk to your customers, and make a reality check. You need to understand them in depth and gauge how they feel about your product. You need to own the relationship with your users and the two best ways to do so are: interviewing them or sending out a survey.
They will not just help you with your product/market fit questions, but may also be a great source of incredible case studies and testimonials, and give you a better understanding of what the real buyer’s journey actually looks like. Pro tip: it’s never the same one you came up with at the outset.
What you should learn by conducting customer research?
Check out Mike Fishbein’s list of customer development questions you can use in your research—it may be really helpful to create your own list. I also outlined my favorite ones that may be useful for this specific use case:
|The core of the problem they try to solve with your product||What are the key features of your product (and how your users talk about them)|
|Main priorities for new features or functionality||Main problems and pain points connected to your product (and how your users talk about them)|
Talk to your customers via Hangouts, Skype, or meet them in person—it's the best way to check how the product actually fits them. I always prefer to talk face-to-face, but the truth is that’s rarely possible.
When you finally manage to talk to your customer, let them talk. A good interviewer will avoid “yes,” “no” or “do you like X feature?” questions. You want to ask open-ended questions about their experience and listen to the answers without interrupting. Even if it means longer periods of semi-awkward silence from time to time.
Talking regularly with app users is the duty of all entrepreneurs, but if you want to get meaningful results and insights, you will need a wave of 6-8 interviews to work with. If you match them up with a well-designed survey, you’ll be more likely to get pretty much the whole picture of your market.
There are two most important groups you should talk to:
“But what if they don’t want to talk to me,” you ask? Well, make sure that your enquiry clearly communicates that it’s an opportunity to directly influence the roadmap for your app. They will be flattered and happy to help. Also, make sure the email comes from a real person. You can use the template below:
Subject line: Help us make a better product experience for you
Hey <user's name>,
it's <your name> here. I am a <job title> at <company>.
Thanks for using <product name>. Our team is constantly working to make it exactly what you need for <value>. And since you've been with us for a while now, I'd like to ask you for your feedback. Your opinion will help us decide which features to build and understand what you value about <product name> the most.
Would you have time for a 30-minute-long call on <date> or <alternative date>?
You should organize your interviews in a spreadsheet, to facilitate analysis and comparison. It may look something like this:
|Core problem||Key features||Pain points||Expectations||Testimonial quote|
|Problem they were trying to solve with your product||Their favorite features and qualities of the product||What bugs them in the product/service||What features they'd like to see||Memorable quote to use on your website|
While five interviews can be a goldmine of insights and testimonials, you will need more than a hundred surveys to draw some worthwhile conclusions.
The cool thing about online surveys is that you can ask quantitative questions that help you measure product/market fit. The two metrics you should be interested in most are net promoter score (NPS) and the “disappointment metric” from Sean Ellis—I will talk about the second one in the case study below.
Having those questions in your survey along with inquiries about problems pain points, benefits, and features will allow you to understand what your evangelists say about your product, and what makes people abandon it.
When drafting your survey, think about how to segment your audience. Here’s a few good ways to slice and dice your results:
Sean Ellis is a big name in the startup world—he’s worked with giants like Dropbox and Eventbrite, and is widely credited with coining the term “growth hacker.” In his book Hacking Growth, Sean mentioned one particular question you should ask your customers, as it may be critical for any startup: “How would you feel if you could no longer use our app?” And the answers to choose from are:
According to Sean Ellis’ method, if at least 40% of survey respondents say they’d be very disappointed if they couldn’t use your app, there’s a great chance you’ve created the right product for the right people—which means you have achieved product/market fit. This is brilliant: it gives you a quantitative answer to the product/market fit question.
Probably the best case study featuring Sean’s method comes from Superhuman. The CEO of the company, Rahul Vohra, broke down the whole process in a piece for First Round, creating one of the best frameworks out there to learn if your product sticks.
Rahul and his team’s enquiry was based on a simple Typeform survey with just four questions:
Looking over preliminary results, they realized that only 22% of all users would be very disappointed if Superhuman no longer existed. That’s a long way off from Sean’s 40%!
But Rahul knew that their user base was full of people who did not exactly match their ideal customer profile and didn’t exactly draw the real value that their email inbox app offered. So he and his team decided to segment their group using three follow-up questions. This led them to discover that the “very disappointed” group consisted primarily of founders, managers, executives, and business development representatives, so they decided to cut out all the other roles from the survey results as, clearly, the product wasn't a right fit for this group. This gave them a 32% score.
Source: First Round Review
Using the question about the type of people who would benefit Superhuman the most, they built their high-expectation customer. Again, they looked at the answers from the “very disappointed group” used them to outline a detailed persona.
Having a specific HXC allowed them to focus on serving this narrow group and becoming a go-to solution for them. What a great use of qualitative data!
The third question simply explains what people love about a product. Once again, Superhuman decided to segment their users and focus on feedback from the “very disappointed” group. That means they decided to omit suggestions from other groups, as they didn’t want to develop their strategy around people who wouldn’t mind whether their product was around or not.
Now this question is a goldmine if you’re interested in improving your product and boosting the “very disappointed” numbers. To understand what keeps the “somehow disappointed” group from falling in love with Superhuman, Rahul and his team focused primarily on this group. Armed with that information, they could prioritize next features, build a better product, and convert them into loyal advocates.
Repeating such research on a regular basis (but never surveying the same users twice), you can optimize the product/market fit score and get a clear vision of where to move next. Building a strategy based on what your loyal users love and what advocates-to-be miss can help you build a great product and get the right users on board. Superhuman optimized their metrics from 33% to 58% doing just that, proving they indeed achieved product/market fit. Make sure to read Rahul’s entire article—it’s super-detailed and easy to follow.
Never finish looking for product/market fit. Even if you think you have it.
Product/market fit doesn’t just happen—and then you’re done. You’re never done for good. If you managed to achieve it—congratulations! But now you have to work hard to keep it, calibrate it, and adjust your product to the changing needs of the market. And change they will—as technology develops, competing apps appear, and as people themselves change.
You’ll have to account for that with your messaging, marketing, and product development to retain your customers and reduce churn. So commit to ongoing multichannel research and adjust as you go.