Product/Market Fit

Earlier this year, I was doing some product consulting work at a startup. They’d been working on their app for a while, yet they essentially had no users and didn’t understand why. The new VP of Marketing and I quickly found that there was no product/market fit or path to one: product development was based on guesses for varying target audience needs, ranging from consumers to enterprise, depending on which person in leadership had the best argument that week. The CTO, who wasn’t familiar with the idea of product/market fit, believed that they had no users because they didn’t advertise the app, and if they pulled the marketing lever, everyone would flock to the app.

Now it’s true that marketing is important, and if people don’t know about your product, they can’t buy it. However, the “pull the marketing lever to solve our problems” idea is naive. Even more fundamental than marketing is the concept of product/market fit. It’s an abstract phrase, but it’s quite a straightforward concept: you have product/market fit when you’re making a product that serves the needs of a certain market, and if your product were to go away, that group of people would be disappointed. In other words, know your customers/users and their needs, build an effective solution to their actual problems, and you will reap benefits (like knowing who to market the product to!).

To give you an example, I bought an Amazon Kindle a few years ago. I bought one “airplane” book so that if I disliked the Kindle, I wouldn’t be sad about losing the book. The Kindle fit my lifestyle perfectly. I read a lot and am on the go; carrying the Kindle is much more convenient than carrying multiple books. Its size is great for reading everywhere in any position–no more “it sucks trying to read Game of Thrones in bed” problem. I’ve almost completely stopped buying physical books (I still love my art books in print), and I’ve even made a decision about what to read based on if there was a Kindle version or not. I frequently recommended the Kindle to others. If instead the Kindle had been awkward to use with limited content, I would have returned it, wouldn’t recommend it to others, and would be hesitant to try it again. (See how product/market fit can also create loyal customers, which helps with word of mouth marketing? And word of mouth marketing is incredibly powerful.)

Marc Andreesen wrote on his blog a few years ago that “the life of any startup can be divided into two parts–before product/market fit and after product/market fit.” If you don’t have product/market fit, then essentially you are a solution in search of a problem, destined to go nowhere. For example, I hear those lead tennis ball guys still don’t have anyone using their balls for a match, and they’re about to run out of funding with no good pitch to get more. If you don’t achieve product/market fit, you will fail.

Pro tip: “everyone” is not an acceptable definition for your target market, especially with a new product. You want to have a clearly-defined market, one in which you can point to multiple, real people with real needs. And ideally this target market will be large enough that you can make a sustainable business from your product, which is the next step after achieving product/market fit. Does anyone remember The Simpsons episode where Homer built The Homer? It had a great product/market fit, but with a market size of 1, it wasn’t a success.

I’m not consulting for the previously-mentioned product anymore, but when I left, we had course-shifted to be on a path towards achieving product/market fit. How did we do that? The marketing/product teams were focused on doing customer development and defining the market segment they wanted to target initially (essentially, for pragmatic reasons, could we find a group of people whose problems were close to the solution that the team had already built). Then, the team could determine those customers’ needs, which would feed specs/requirements for the product* for engineering/design to build, and understanding the customers’ needs helps with prioritization. Once a minimum viable product meeting those requirements is ready, they will hand it to customers in that target market. They will then gather feedback from those trials and repeat the process.

If everything goes correctly, they’ll get to a point where they’ve achieved product/market fit, and they can then pull the marketing lever, marketing to other potential customers within this target demographic. How will the team know when they’ve achieved product/market fit? There’s no absolute answer, but a rough guideline is that at least half of your customers would be disappointed if your product went away.

The importance of product/market fit isn’t rocket science, but it is easy to forget about when you’re deep in the forest building something or excited about a new, cool feature idea you had. But until you’ve achieved product/market fit, every decision you make needs to about moving you towards achieving that fit.

*Note that product design, especially when building something new, is more than just checking off a list of items that users request. A good product team and design team will be able to pull the real meaning behind the notes out from customer development work, even if the resulting product isn’t the obvious thing to solve people’s problems. For example, if you asked people about smartphones pre-iPhone, would anyone have asked for a virtual keyboard and touchscreen? If you used the feedback verbatim for your product planning, you’d have built another Blackberry.