In 2022, CB Insights conducted a comprehensive study to analyze the reasons for startup failures. And surprisingly, they found that lack of market need is the most common reason for failure. The study looked at 101 startups that had failed between 2014 and 2021, and it found that 42% of them failed because they didn’t find a market need.
So, you need to provide services and products that the market wants them. It seems obvious right? Well, according to CB Insights’s study, it seems it has not been an easy thing to do for almost half of the failed startups!
Now it is more clear why achieving product-market fit is a crucial milestone for the success of any Ecommerce venture.
By reading this article, you will have any information you need to find a product market fit for your ecommerce business.
What is Product Market Fit?
Product market fit is a term coined by Marc Andreessen. It is a state that you can say is achieved when a product meets the existing needs of a specific market of customers.
In simpler words, product-market fit means that your product is solving a real problem for a specific group of people in a way that they are willing to pay for. Without product market fit, businesses often struggle to gain traction, leading to a high rate of failure.
Once you attain a product-market fit, you are on the right track to success. But you should always remember that product/market fit is not a goal to achieve, it is a path that you need to keep your ecommerce business on.
Here are some specific reasons why product-market fit is critical for businesses:
- Reduced Risk of Failure: A significant number of startups and businesses fail due to not finding a proper market for their products. Achieving product-market fit significantly reduces this risk by ensuring there is demand for what you’re offering.
- Sustainable Growth: When your product resonates with customers, it sets the stage for sustainable growth. Satisfied customers become loyal brand advocates, driving positive word-of-mouth and repeat business.
- Easier Competition: Businesses with product-market fit have an advantage over their competitors. The reason for this is that your product is something customers will pay for.
- Easier Funding: When you have product-market fit, it is easier to raise funding from investors or venture capitalists. Because businesses with a clear path to profitability are more likely to attract investors.
- Better team morale: Your product is solving a real customer problem, and your team’s hard work is paying off. This will increase the motivation of your team.
Product Market Fit Framework
The product market fit framework provides a structured way to approach and achieve this concept. Each framework consists of stages that gradually lead you toward achieving product-market fit. Each stage builds upon the previous one, ensuring that you are moving in the right direction. Using structured frameworks can help you achieve product/market fit more easily and help you not get lost in the path.
One of the most famous Frameworks is the Product-Market Fit Pyramid.
Product Market Fit Pyramid
The Product-Market Fit Pyramid is a framework that was developed by Dan Olsen in his book “The Lean Startup Playbook“. It is a visual representation of the Product Market Fit Framework, and it helps to illustrate the different levels of product market fit. Dan Olsen in this book provides a practical guide for entrepreneurs and startup teams to achieve product-market fit. The book is based on the Lean Startup methodology, which is a framework for iterative product development and validated learning.
Product Market Fit Stages
The four market fit stages mentioned here, are a way of understanding the journey to Product Market Fit (PMF). These stages outline the progression that a startup or business goes through as it evolves and finds its place in the market.
It is important to note that the four steps of PMF are not always linear. A startup may move back and forth between steps as they iterate on their product and business model. However, the goal is to eventually reach scale fit, where the product is able to be scaled to reach a large number of customers and generate significant revenue.
Problem/solution fit
Customers are using the product to solve their real problems. This is the initial stage where a business identifies a specific problem within a market and develops a solution that effectively addresses that problem. At this stage, the focus is on ensuring that the product or service actually solves a real pain point for a target audience. The goal is to establish that there’s a genuine demand for the solution you’re offering.
Product/market fit
Customers are willing to pay for the product. The product meets the needs of the target market in a way that is better than the competition. This means that the product is not only solving a real problem, but it is also doing so in a way that is more attractive to customers than the products of the competition
Growth fit
The product is acquiring new customers at a rapid pace. After achieving product/market fit, the focus shifts to driving significant growth. During this stage, the goal is to optimize and scale marketing and distribution efforts to attract a larger customer base. This often involves refining the business model, expanding marketing channels, and establishing strategies for acquiring and retaining customers.
Scale fit
The product is able to be scaled to reach a large number of customers. This means that the product is able to be produced and distributed efficiently and that it can be marketed and sold to a large number of people. This stage involves building infrastructure, processes, and systems that can support the increased demand and operations. It’s about maintaining the quality of the product and customer experience while handling higher volumes.
How to Measure Product Market Fit?
Measuring product-market fit usually involves a combination of quantitative and qualitative Key Performance Indicators (KPIs). It is good to remember that there is no single metric that can definitively measure PMF. The best way to measure PMF is to use a combination of metrics and to track your progress over time.
Quantitative KPIs
These are data-driven metrics that indicate the level of customer engagement and satisfaction. Examples include:
- Net Promoter Score (NPS)
- Customer retention rate
- Conversion rate
- Number of active users
Qualitative KPIs
Qualitative indicators provide insights into customer perceptions and experiences. This includes:
- Feedback through surveys and interviews
- Social media interactions
What is the Best Indicator of Product Market Fit?
While a combination of indicators provides a comprehensive picture, the North Star Metric is often considered the best indicator of product-market fit. This is the one metric that most accurately reflects the core value your product delivers to customers. But here is the bummer, there is no single best indicator of product market fit. Choosing the best metric depends on your business. But here are some indicators that can show you are on the right track:
- Strong demand for the product
- Rapid customer growth
- High customer satisfaction
- Positive customer feedback
- Low customer churn
Product Market Fit Survey
A product-market fit survey can help you gather valuable insights directly from your customers. It can include questions about the value they derive from your product, their likelihood to recommend it, and suggestions for improvement.
Here are some tips to help you create a more suitable survey with more realistic answers:
- Keep it short and sweet. People are more likely to complete a short survey than a long one.
- Use clear and concise language. Avoid jargon and technical terms.
- Ask open-ended questions that allow people to share their thoughts and feelings.
- Personalize the survey to your target market. Tailor the questions to the specific problems and needs of your target audience.
- Thank people for their time and feedback.
To give you further help, we gathered two examples of product market fit surveys:
Product market fit survey example 1:
- What problem are you trying to solve with our product?
- How did you hear about our product?
- How satisfied are you with our product overall?
- What features do you like the most about our product?
- What features would you like to see added to our product?
- How likely are you to recommend our product to others?
- On a scale of 1 to 10, how would you rate our product?
Product market fit survey example 2:
- What are your biggest pain points with the current solutions available?
- How would you describe our product in one sentence?
- What features would make our product more valuable to you?
- How likely are you to use our product regularly?
- How much would you be willing to pay for our product?
- On a scale of 1 to 10, how likely are you to recommend our product to others?
2 Product Market Fit Examples
Observatoire
One notable example of achieving product market fit is Observatoire, a creative product that revolutionized the E-commerce nation due to its alignment with customers’ needs. It is a personizable e-commerce competitive analysis tool tailored to the needs of E-commerce businesses. This platform offers data analytics to assist e-commerce players in making informed decisions. This unique service will provide the companies with information about their competitors or other companies they want to look at. IT technologies, business models, e-commerce services they used, and many other useful information.
To learn more about how they accomplished this feat, contact us
From the introduction of the beta version, the demand was so high that we are confident about the market fit of this product.
Another success story is that of Superhuman, a company that achieved remarkable product-market fit. Their journey can provide valuable insights into the process of aligning a product with market demand.
Superhuman product market fit
Superhuman is an email client app that was launched in 2017. The app was created by Rahul Vohra, who is a serial entrepreneur and the former CEO of Loop. It was initially launched as an invite-only beta, and it quickly gained a following among early adopters. The app was praised for its sleek design and powerful features.
Due to the successful methodology that he used for his own businesses, Rahul Vohra, founder/CEO of Superhuman, developed a 5-step framework to optimize and improve product/market fit.
The engine consists of the following steps:
- Set up your survey to ask your users “How would you feel if you could no longer use your product/service?”
- Segment your audience to find supporters and paint a picture of high-expectation customers.
- Analyze feedback to convert on-the-fence users into fanatics.
- Roadmap your improvements by doubling down on what users love and addressing what holds others back.
- Track product/market fit over time as your most important metric.
How to Find Product Market Fit?
While the steps to finding product-market fit are conceptually simple, their execution is often challenging:
Collect Early Feedback: Release the MVP to a select group of users and gather feedback for improvements.
Iterate and Refine: Continuously iterate on your product based on user feedback and evolving market trends.
Validation and Scaling: Validate that your product solves a real problem and has a scalable market.
- Identify a real pain point: What pain point are you addressing? Who is experiencing this pain point? How big is the market for your solution? You can conduct in-depth market research and interviews to make sure this pain point really matters to your target market.
- Build a minimum viable product (MVP): An MVP is the simplest version of your product that can be used to validate your assumptions. It is an easy-to-build and test version of your product or service. Your main value proposition should be included in your MVP.
- Get feedback early and often: Take this step seriously. You can not produce something your market wants unless they tell you what they want. Talk to your customers and ask them what they like and dislike about your product. What features would they like to see added? How can you make your product more valuable to them?
- Improve your product based on feedback Iteratively: Use the feedback you get from customers to improve your product. Make changes to the features, functionality, and design of your product until you find something that customers love.
- Be patient: It takes time to find product-market fit. Don’t expect to achieve it overnight. Be persistent and keep iterating until you find a product that customers love.
In addition to the provided steps, you can use the following tips to increase your chance of achieving product market fit.
- Target a specific market: Don’t try to be everything to everyone. Instead, focus on solving a specific problem for a specific group of people.
- Be data-driven: Use data to measure the success of your product. Track metrics such as user engagement, churn rate, and NPS to see how your product is performing.
- Be willing to pivot: If your initial product is not resonating with customers, be willing to pivot. This means changing your product, target market, or business model.
- Don’t give up: Finding product-market fit can be challenging, but it’s important to stay persistent. Keep iterating and improving your product until you find something that customers love.
Product Market Fit Canvas
The Product Market Fit Canvas is a dynamic tool designed to provide comprehensive insights into the alignment between your product and the target market. Going beyond the conventional business canvas, this enhanced version comprises various sections that collectively offer a deeper understanding of customer needs, product attributes, and market dynamics. By utilizing this canvas, you can gain a more profound insight into the fit between your product and your intended audience, setting the stage for strategic success. Here we explain each element of this canvas:
Product Market Fit Canvas elements
Characteristics and Job to Be Done
In this section, delve into the customer’s needs and the fundamental job they are trying to accomplish. Identify the core challenges they face and the aspirations they seek to fulfill, laying the groundwork for developing a solution that truly resonates.
Problems & Needs
Uncover the pain points that your customers encounter and outline the specific features and benefits they seek in a product. By addressing these needs, you can design a solution that caters precisely to their requirements.
Channel
Explore how your product will be distributed and the strategies that will enable it to reach your target market effectively. Consider various channels and touchpoints that will amplify your product’s accessibility.
User Experience
From the initial interaction to task completion, paint a vivid picture of the user experience your product offers. Understand how your customers engage with your solution and create an experience that keeps them engaged and satisfied.
Alternative
Acknowledge the alternative solutions available to your customers and illuminate how your product outshines these alternatives. Highlight the unique value proposition that sets your product apart.
Key Features
List the pivotal features of your product that directly align with customer needs. Detail how these features provide tangible solutions to the problems your customers face.
Value for the Channel
Examine the value that your product brings to the distribution channels. Whether it’s heightened sales or improved customer satisfaction, understand how your product benefits both the customer and the channel.
Key Metrics
Include any additional information that bolsters the understanding of your product-market fit. This could encompass market size data, competitive analysis insights, or other metrics that contribute to your strategic decision-making.
Benefits of Product Market Fit Canvas
This product market fit canvas is a more comprehensive version of the traditional product market fit canvas. It includes more information about the customer, the product, and the market, which can help you to get a better understanding of the fit between your product and your target market. Here are some of the major benefits:
- Gain a deep comprehension of customer needs and pain points.
- Identify key features that resonate with your audience.
- Understand your product’s competitive edge against alternatives.
- Effectively communicate your product’s value to the market.
- Continuously assess product success and facilitate improvements.
Key Insights
- Lack of market need is a prime factor in startup failure, with 42% failing due to a lack of demand.
- Product market fit is achieved when your solution effectively meets specific market needs and garners willingness to pay.
- Product market fit is an ongoing journey, demanding continuous adaptation to customer requirements.
- Attaining product market fit not only reduces failure risks but also fuels sustainable growth through customer advocacy.
- Businesses with product market fit gain a competitive edge and find it easier to secure investor funding.
- The Product Market Fit Pyramid offers a systematic framework for advancing through stages to reach alignment.
- Successful measurement of product-market fit blends quantitative and qualitative metrics, while iterative refinement and persistence drive success.