28 July 2020

Why you need product/customer fit, not product/market fit

Many businesses will never reach product/market fit because their markets are too big. Segmenting and achieving product/customer fit is the way to go.

Today I'd like to talk about product/market fit.

It's the goal to achieve for early-stage startups, and there's a lot of information on the subject.

But there are misunderstandings that could make startups think they have it when they don't.

Start with product/customer fit

The general idea behind product/market fit is to create a minimum viable product and tweak it to reach product/market fit.

In the real world, though, you will probably need a good long time to reach product/market fit, and at that point, you don't have a minimum viable product anymore.

If you want early validation, you just listen to your customers and see if they fit your ideal customer profile and if their desired outcome is fulfilled.

I use product/customer fit in that case. Do you like this term?

Measuring product/market fit

One way to measure it that has gained traction these past few years is through a survey asking the question, "How would you feel if you could no longer use [Product Name]!?".

If at least 40% of the respondents are "very disappointed", then you have a strong signal that you have product/market fit.

I've used it, and I think it's a pretty good metric for retention. But it's just one signal that needs to be supplemented by others.

That's why you can't definitely say you have product/market fit with only this question.

If you don't have an adequate acquisition experience, the growth rate will be slow even if the churn rate is low and CLTV is high.

Before thinking of scaling your business, you need to have consistent messaging throughout the customer journey.

How to know if messaging is clear?

To make sure you have product/market fit, you need to be sure your customers understand your value proposition correctly. Customer interviews are great to get this information, and surveys are also pretty good.

I am a fan of Jobs-To-Be-Done (more on that in another newsletter), and I use the following questions to understand the series of progress that led a customer to a product.

  • Before [Product Name], what tools were you using to do [Job-To-Be-Done]?

  • When did you realize you needed a tool like ours? What was going on in your world that caused you to start looking for one?

  • How did you find out about [Product Name], and what stood out / made you interested in trying us?

  • When you tried [Product Name], what happened that made you feel certain it was the right choice?

  • Now that you're using [Product Name] regularly, what's the #1 thing you're able to do that you weren't before?

When I get enough responses, I see if the positioning and strategic messaging include the elements that seem the most important to the customers and update them accordingly.

There are other questions you could use; I have 2 in mind right now:

  • What type of person do you think would benefit most from [Product Name]!?

  • How would you explain [Product Name] to a friend?

The first one is to make sure customers understand who the ideal customers are and the second to see if their explanation is similar to the value proposition.

Measure 1 segment at a time

As we saw in "Why You Need A Better Ideal Customer Profile", you might have a low churn with some customers and a high churn with others. Maybe you have product/market fit with 1 segment but not with another.

If you try to measure product/market fit by sending a survey to everyone, your results will be all over the place.

Pick just 1 specific type of customer and measure product/market fit. Then move on to the next segment.

Finally, if you have a freemium product, you should make free customers into a distinct segment. They often have different needs than paying customers.

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