Do Your Products Have Product-Market Fit (PMF)?
Achieving a product-market fit is an important milestone for every company. To be successful in business, you must understand how your products fit into the market. Who are your customers? Is there a market need? Does your product offer something unique? How much will people pay for it? These questions are critical for success in any business.
Product-market fit means having a product that can meet a market need at a price people are willing to pay.
When There is Product-Market Fit:
- The customers are buying your product and responding to your marketing efforts.
- Usage is growing as customers find value in the sale.
- Money is flowing, and you begin to see the results on your balance sheet.
- You’re hiring sales and customer support staff to support demand.
- Word is spreading, and people are taking notice.
When There is No Product-Market Fit:
- The customers aren’t seeing the value of your product.
- Usage isn’t growing, and there’s an increase in attrition.
- Many of deals never close as prospects select a competitor’s offering.
- The sales cycle takes too long, and the product isn’t “selling itself.”
- Mixed product reviews or negative reviews.
- You’re failing to develop customer advocates.
Why Do You Need Product-Market Fit?
According to CB Insights, 70% of start-ups failed because there is no market need for their product. So, if you want to build a successful company, you need to build products that fulfill a market need. Finding the right product-market fit builds market influence and brand power. The right product at the right price can gain momentum. When done right, your business can gain a competitive advantage in the marketplace. The key is a product that delivers value and keeps users coming back. Eventually, it builds customer advocates. These advocates, in turn, help sell your products and grow your business.
Meeting a Market Need?
- There are two general ways to know if your product has a product-market fit. First is desirability. A product desired by the market is a solution to a problem. Remember, a solution without a problem doesn’t meet a need in the market. Second is the feasibility. A company must have the capability to meet a need and deliver a product to the market while making a profit.
- The 40% rule is a great way to discover if your product is a fit for the market. It involves getting feedback from existing customers or prospects. Ask them how they would feel if they could no longer access your offering. When 40% reply they will be very disappointed, you have good product-market fit. If other solutions could fill the gap, your product doesn’t have the differentiators to be successful.
- When you have high repeat purchases, your customers understand your product value. This builds word of mouth. They are an effective and efficient way of attracting more customers. If you get good reviews and positive feedback, your product is showing a strong fit in the market.
- Your sales cycle is also a good indicator. If the effort to sell your product is minimal, there is a clear market need. This helps deals close fast and often results in a shorter sales cycle.
- Last, a company with a good product-market fit can grow faster. It’s a real competitive advantage when you do your homework and design products to meet a market need.
It doesn’t matter how innovative your idea is or your personal feelings on the value of your product. It’s about whether anyone needs it and whether anyone is willing to pay for it. The business world is full of examples where innovative products failed. Failure could be the result of external factors or poor execution. But often, it’s because there was no product-market fit.
Know your buyer and what they need. Understand the competition and how their products fit into the market. What are the limits of price, and how should you price your product to sell and make a profit? When you understand all the factors, only then are you ready to build your product and go to market.