Perhaps some of the most quoted and famous words from the “trial of the century” are: “If the glove does not fit, you must acquit.” It’s a silly untruth, but one that has stuck with the legal world. But what about startups, and a little something called Product Market Fit? To coin a new saying, “If the product doesn’t fit the market, you must pivot.”
Much like the trial of the century, startups are looking for the right fit, but without a lot of trial and error. Besides cash flow, not understanding product market fit is one of the top reasons a business might fail. This lack of understanding almost always means your startup will become a statistic: one of the dozens of businesses that won’t make it past their fifth birthday. And you certainly won’t be raising the capital you will need for growth.
What is product market fit, and how do you find it? Here’s what you need to know.
If You Build it, Will They Come?
Let’s put finding market fit in the simplest terms possible: you find out what people want, and you build it for them. This works for anything from a Software as a Service (SaaS) like Zoom or an actual service like Uber. It has even worked for startups selling masks featuring everything from Star Wars to Hannibal Lecter masks.
This simple statement defines product market fit, but it is much harder to execute than you might think. Having a great idea and then putting it out there, only to have it fail because it wasn’t really what people wanted. Ever heard of Tab Clear? The short-lived diet soda? No? There’s a reason for that.
Even big companies have product failures. But they can be avoided by following some simple steps.
Too Close for Missiles
The first step in finding product market fit is to locate a target audience. Your target audience should be narrow and defined. You’re not aiming with a missile; you need to be close enough to switch to guns.
This is how you build your marketing persona. Picture your ideal buyer/customer but understand you could be wrong. Also, your product may appeal to a broader audience than you initially thought.
Let’s take Zoom as our current example: the video platform was built really for business to business chat. The reason they had security issues early during the pandemic? Their original idea was to appeal to enterprise-level companies who had their own IT security. It worked. Even pre-COVID, Zoom was a growing concern.
Truth be told, large enterprise-level companies and Zoom’s original targets are still their biggest fans and a great source of revenue. But now the company’s appeal has spread to schools, small businesses, other small groups, and they have nearly become a household name.
Of course, we could also go back to the infamous Tab Clear. Turns out there was no audience clamoring for a less than tasty diet soda that was clear rather than the usual cola-color. Likely, it reminded would-be dieters of water, which was better for them anyway.
Houston, We Have a Problem
Once you have your target audience defined, you need to determine either a need or a want they have that no one else is solving. The problem with entrepreneurs? We often want to solve all of the problems in a single swoop. When you are just starting out, work on solving one problem at a time.
For example, the SEO tool MOZ, a commonly used software. Initially, the tool was designed to simply analyze search results from Google and started as a simple (but large) index of the web with a few analysis tools. By the time the company started releasing peripheral tools to assist SEO companies, they’d already established a reputation as SEO experts.
Start with one problem. Dive deep rather than wide, and then look at what other problems you may be able to solve for your customers.
My Milkshake is Better Than Yours
There are milkshakes everywhere, but if you ask someone in any given town where to find the best milkshake, you will often hear common answers. That is because a particular brand probably offers a unique value proposition, and that is what you are looking for.
What sets you apart from your competition? It can be tempting to fall back on tried and true (and therefore overused) platitudes. Don’t do it! Don’t say:
· Our honesty sets us apart. (Your competition will never say, “Yeah, we’re the dishonest ones.”)
· We work harder for you. (Harder than what or whom?)
· Our product is the best/offers the best value/etc.
How do you know what sets you apart? Talk to your target audience and find out what they have used in the past that did not work. Ask them why the product or service did not meet their expectations. This not only helps you set yourself apart, but it also helps you refine your product or service.
Your product does not have to be completely different in every way, but have one or two things that set it apart and make it a “must-have.” For example, “single ingredient, organic dog food” sends a specific message to dog owners who might purchase your pet food.
Pepsi, No Coke
The next step is to take that original idea and build a minimal viable product known as an MVP. This is the product you start with, and it solves the first problem you have isolated in your research above. Likely, it does not have all the bells and whistles you will add later on: the key is to make sure it works.
What needs to work:
· It needs to actually solve the problem your target audience has.
· It must be packaged to appeal to them, and affordable.
· It needs to have the unique value proposition you have said will set it apart.
· Remember this is a prototype, not the final product.
Now get others to test your product either online or in-person and collect their feedback. Test, refine test again. Use the data you gather to add features that help your customers solve their problems in the way they want.
A tip here: not every tip from a user of your MVP is a viable one. Make sure before you change something that several people agree that the new feature would add value. Execute this stage of determining product market fit well, and you will leave your competition far behind.
The Real Thing
Finally, once your MVP has been tested and refined, test with real users. Start with focus groups, one on one sessions, and surveys. This will help shape your final product and ensure a good product market fit.
Ideally, this stage will shape your product for the market. But what if it doesn’t? The answer is that you must pivot. You may find that your product:
· Can’t beat the competition.
· Doesn’t solve the right problem.
· Is too expensive to be viable.
· Is too similar to another product that has recently entered the market.
Remember, plenty of entrepreneurs have had to pivot and even scrap entire ideas and products before they hit on the right one. Remember some common rules:
· The 40% rule says that if 40% of your customers can’t live without what you are creating, you have a potential winner.
· Timing is everything. Make sure the market is ready for your product. Remember Google Glass? It failed, but after the popularity of other wearables rose, new companies are exploring “smart glasses” again.
· The Sharing Rule: Are people telling their friends about your product? Are their friends responding positively? If word of mouth is working, that means you have a great product.
· Data: Data-driven decisions are the best. Establish key metrics for your product and monitor them. Analyze them. If initial indicators look promising, keep working.
Product market fit is essential for startup success. You must find the target audience for your idea, ensure you are solving a problem or problems for them, and in a unique way. Determine what sets you apart, and test, refine, and test again.
Determining a good product market fit will take time, but the return on that investment is often the difference between profitability and failure. If you don’t have a product market fit, you must pivot.