‘Product Market Fit’ has been a frequently-used, yet a fairly vague term in the startup ecosystem. The idea, though powerful, is used differently in different contexts. So what exactly does ‘product-market fit’ mean and why do we keep hearing about it in our day to day lives?
What is Product-Market Fit?
According to research conducted on the reasons as to why startups fail, it was found that 42% failed because there was no market for their product. That’s an astonishing number- a number big enough to motivate us to get the ball rolling and talk about more in detail
Ever heard of Google Glass or Snapchat’s Spectacles? Although considered to be disruptive technological innovations, they failed. Why? Because they forgot to answer the most critical question that contributes to the success of such products- they failed to resonate with the market needs, hence lacking the appeal.
Gaurav Kumbhat, Product Manager at Intuit talks about multiple reasons why a product could fail to appeal to the market in this edition of the Founders’ Guide to Thrive. He has 8+ years of experience in building and scaling products in Fintech, Agriculture, Pharma, and Retail.
The market isn’t ready
Fabmart.com (later branded as Indiaplaza) is considered to be the father of e-Commerce in India. It was started by K. Vaitheeswaran in 1999, much before the dot-com bubble.
Today, people hardly remember it as an e-Commerce portal. So what went wrong? Did the pain point not exist then? Of course, it did- this was proven by the increasing market shares of online retail giants such as Amazon and Flipkart. The biggest problem fabmart.com faced was that internet penetration was so low that the market was barely prepared and ready to buy online.
The product does not solve the pain point of the market
ViewSonic Airpanel Smart Display V110 was a tablet that could only work when attached to a desktop. Needless to say, we might have never heard of it because it was a product that didn’t solve the customer’s needs at that time.
Better alternatives exist in the market
If the market already has better alternatives than what your product offers, chances are that you are going to find it tough to find the perfect product-market fit. Microsoft’s Zune as a response to an iPod is one such example. Robbie Bach, the former leader of Microsoft’s home entertainment and mobile business, gave an explanation as to why-
“The portable music market is gone and it was already leaving when we started. We just weren’t brave enough, honestly, and we ended up chasing Apple with a product that actually wasn’t a bad product, but it was still a chasing product, and there wasn’t a reason for somebody to say, oh, I have to go out and get that thing.”
How do you know if you have achieved the product-market fit?
In the simplest way, a product that has achieved a product-market fit would be lucrative enough to bring back customers on itself. In other words, if customers are not coming back to the product on their own, the product-market fit is probably still away from reality.
Paul Graham’s startup curve diagram explains it very neatly:
While initial enthusiasm could be driven by marketing, the steady rise in traffic only happens once the product/market fit has been achieved and can be used as a guiding principle on whatever metrics you deem to consider important for your goals.
How can you achieve the product-market fit?
Great products focus on the problems, not the solutions and the best way to understand customer problems is by talking to them. Hence, any process that thrives to achieve the product-market fit has to start from the market itself. Below is one such simple iterative exercise towards achieving a better product-market fit:
Talk to customers and define a target market segment
Understand the market by talking to the customers and their pains. Market research may not be the best alternative here since it may not focus on customers problems that they are themselves unaware of.
Listen to their problems, not the solutions
Try to understand the problems of your customers by listening to them. Ask them about their day to day activities and try to note down problems not even known to customers.
Rapid prototyping and User testing
Focus on building a functional prototype that you can get out in front of customers to test. Do not invest in building the entire solution but rather into rapid prototyping.
Build solution to customers problems
Derive hypothesis, build solutions that cater to the problems of your customers and are well accepted during prototype testing.
Test the solution with customers
Take the solution back to the customers for further testing to see if they see/use the product the same way as you intended it to be used.
Repeat steps until the solution works for them
This is just one way to achieve product-market fit and while there could be multiple other ways of doing it, the underlying concepts are the same in all such approaches.
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Thank you so much for reading! With that, we’ll see you next Thursday as Sowmya Murthy, Senior Product Manager, Intuit India talks about Customer Development! To learn more about how to Effectively manage your Working Capital, click here!
You can reach out to Gaurav on LinkedIn here.