A business finds its product-market fit when its product meets its target customer’s needs, whether it is by filling a gap or solving a problem.
Startups generally begin with a vision to solve an existing problem. Studying the problem and developing a possible solution does not guarantee success. A great product is one which helps the customer. A startup achieves product-market fit only when its product satisfies the customer.
How to achieve product-market fit
Understanding the market demand and matching it to the product would be the first step towards attaining the fit.
i) Understanding the target customer
Make sure that your product is reaching the set of customers who need it. For instance, if a startup is offering an online matchmaking platform, its target audience should be those who are single and looking for a partner.
It is crucial to understand the pain points of the existing solutions and understand what is missing to address customer demand. Extensive market research will help you understand the customer's needs and design the exact solution.
ii) Value proposition of the product
Your product should have a unique value proposition that will give it a competitive advantage and will retain your customers.
For first movers and early entrants, reaching out to target users and educating them about your product is essential for achieving product-market fit.
For example, Bengaluru-based bike taxi startup Rapido had to pivot from their core business in 2020, as there was little demand for local commuting during the pandemic. Instead, it joined hands with Big Basket, Big Bazaar, and Spencer’s Retail to help them deliver essential goods.
iii) Building and testing the MVP
Building a Minimum Viable Product (MVP) allows you to come up with a basic version of your solution. It can be then tested by a small group of customers who can give feedback for further improvements in the product.
Listening to the customers helps understand the consumer standpoint and validate your product. Their inputs will eventually help in building the later versions.
iv) Be agile
Market dynamics and consumer demands are constantly evolving. Thus, your product or service stands the chance of becoming outdated if it doesn’t move along with the market demands. Updating your product, or even pivoting at the right time, is crucial for survival.
For instance, several startups pivoted from their main product during COVID-19 to help fight the crisis.
v) Measure metrics
Startups must have clarity on the metrics that help measure their product-market fit. Monitoring the length of the sales cycle, the number of returning customers, Customer Lifetime Value, and organic traffic will tell you if the product is still in demand with the users.
Collecting regular customer feedback will help identify the changes in consumer behaviour. Thus you can understand the challenges in the current product and update accordingly.
References
i) A Handy Playbook for Understanding and Achieving Product-Market Fit
ii) Busting the Myths Around Product-Market Fit and How to Achieve It
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