A strong product-market fit proves that you’ve designed a valuable product, and it is crucial for your company’s success. This guide will show you how to reach it.
Plan, measure, and improve
Today, we’ll be talking about product-market fit (PM fit from now), that elusive yet crucial ingredient for success. Achieve it, and your business or design will thrive. Disregard it, and you’ll be just another one of many to bite the dust.
PM fit is super important for all kinds of designers, as it means that your design serves a specific purpose and is not just an interesting idea that materialized inside someone’s head.
Luckily, PM fit is not necessarily something that some people have and others don’t. It’s something that you can plan for, measure and improve. This guide will tell you exactly how to do it. Ready for the ride? Fantastic.
Here we gooo.
What is product-market fit?
Marc Andreessen is credited with coining the phrase in 2007 and he defined PM fit as follows:
“Product-market fit means being in a good market with a product that can satisfy that market.”
That’s a pretty dry definition. Luckily, he expands more vividly on how it feels to achieve PM fit:
“You can always feel product/market fit when it is happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house.”
Whoa, that escalated quickly! Although this may be slightly exaggerated, I’m sure that you’re getting the general point.
You see, PM fit is not a binary thing. It’s not either 0% or 100%, as suggested in the example above; it varies for different user groups. You can have a super strong fit with one segment and a weaker fit with another, but it still exists. Or you can have an okay fit right now, but it will continue to get stronger as you progress. My point is, don’t be discouraged if users don’t go crazy from the get-go – PM fit doesn’t usually happen with a big bang.
However, if there’s no PM fit, then you need to rethink your product, market, approach and more.
How do you know when to start reevaluating your project?
When the fit isn’t there.
Marc Andreessen helps us out once again:
“You can always feel when product/market fit is not happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah,’ the sales cycle takes too long, and lots of deals never close.”
It’s usually quite obvious. You’ll feel it. But how does it come to that, especially when you’ve done some planning beforehand?
The thing is, founders, designers and other creators tend to confuse a general desire for a solution with a need for their specific product or service. Misinterpreting a general desire for a specific need can be a result of wishful thinking – a false positive. If this happens, it will eventually kill the product.
Let me give you an example. I worked on a project where a company, Experts3000 (a made-up name, of course), wanted to provide an online marketplace for various experts and handymen to solve various problems.
There certainly was a general desire for experts to reach new customers, as well as a desire for users to find reliable experts. All good so far.
But Experts3000 was the middleman, and the company had no control mechanism in place to prevent their user from calling the expert directly after their initial meeting. Their specific service wasn’t needed once the first contact had been made, and they didn’t offer anything valuable enough to accomplish true PM fit. However, the company misinterpreted the general desire as a need for their product, meaning that they continued to look for problems elsewhere until the very end.
That’s why I’d strongly advise you to avoid pushing for growth until you’re sure that you’ve achieved PM fit. If you try to grow prematurely, it’s very possible that your product or service will end up as an expensive disaster.
To avoid this, let’s look at how PM fit can be measured and achieved at different stages of the product or business lifecycle.
How to achieve and improve PM fit
How to plan for PM fit before launch
Okay, you can’t really achieve PM fit before you have the product on the market, but you can certainly plan for it.
By far the most important thing you can do is user research. Only once you truly understand your market can you design a product, service or feature that’s a perfect fit for it.
Here’s my step-by-step guide that will enable you to build solid foundations before you start bringing your ideas to life.
It’s a really good sign if you get at least some users who desperately want what you’re making. Rather than just saying that they can see themselves using it one day, they’ll also become visibly excited and might even start pestering you about the progress of the product!
If they want updates, you can send them a link to a website where they can leave their email address (don’t actively take their address!). If you get some addresses, then you’re on the right path.
You should include these people (and other users) in your product testing during the development stage. That way, you’ll maximize your chances of getting a solid PM fit with your first users right out of the gate.
These two steps are really important whenever you decide to design or develop something new. Never neglect them. They will help you to connect and empathize with your users, or even rethink what you’re creating while costs are still low enough to change or abandon the project.
How to measure and improve PM fit early on
It can be tough to measure PM fit right after you launch your product. Sure, if it explodes and goes viral then you’ll know that you’ve got a fit, but that doesn’t happen very often.
I suggest that you use the Sean Ellis Test, which revolves around the question:
“How would you feel if you could no longer use the product?”
Now don’t get me wrong – the Sean Ellis Test is suitable for all stages of your product’s lifecycle, but it succeeds in giving you valid and actionable results with as few as 40 respondents. If you can get more, that’s even better – it will provide data for a stronger analysis.
Let’s go through the process.
The questionnaire you’re going to use is simple:
1️⃣How would you feel if you could no longer use [product’s name]?
2️⃣What type of people do you think would most benefit from [product’s name]
3️⃣What is the main benefit you receive from [product’s name]?
4️⃣How can we improve [product’s name]?
Ellis says that you’ve achieved a good PM fit when at least 40% of the respondents say that they would be “very disappointed” if your product suddenly disappeared. That’s the magic number you’re after.
Let’s see how you can reach it… or even raise it.
#1 Segment your respondents to pinpoint your market
The first thing that you should do is assign a basic persona to each respondent, e.g. design manager, developer, founder, designer, executive, etc.
Now, take a look at personas in the “very disappointed” group. These are the markets in which your product resonates very strongly, so it makes sense to focus on them.
That’s why you’ll remove all personas where no one claimed they would be “very disappointed”.
This might look like you’re hedging the numbers, but it actually doubles down on the markets that matter the most and shows you how well you’re doing in these areas. Segmentation ensures that you won’t be wasting time with user groups that would be impossible to please.
Next, analyze how “very disappointed” users answered your second question:
“What type of people do you think would most benefit from [product’s name]?”
Happy users will very often just describe themselves and they’ll use words that matter to them.
These answers should provide important details about who exactly the product is working for. This will really help you out in terms of your communication, the language you’ll be using, marketing copy and more.
You’ll gain valuable insights into what resonates with users and you’ll be able to use these golden nuggets of info to make a strong first impression when targeting new potential users from the same group.
After you segment your users, it’s time to decide which ones you’re going to ‘convert’ in order to improve your PM fit.
#2 Find the undecided users who can be converted into ambassadors
In an ideal world, we could convince all of the “somewhat disappointed” and “not disappointed” users to love our product. But if you try to please everyone, you’ll please no one.
That’s why you should disregard the “not disappointed” group completely and carefully split the “somewhat disappointed” group. This will give you the best chance of convincing specific users to fall in love with your product.
First, take a look at the answers to the third question:
What is the main benefit you receive from [product’s name]?
See what the “very disappointed” people had to say and extract one or two main benefits. Creating a word cloud is a good idea at this stage.
These main benefits are at the core of your product. Keep them in mind as you analyze the answers of the “somewhat disappointed” users. Divide them into two groups.
A) Your main benefits did not resonate – disregard this group, as it’d be much harder to make them fall in love with your product.
B) Your main benefits did resonate – that’s the group you want to focus on. They already value the core of your product, so there’s an opening. It might be something small that is holding these users back and you should look into that.
You now know who you are targeting, so let’s see how they answered the fourth question:
How can we improve [product’s name]?
You’ll probably find some obvious things, but there may also be a few obscure and interesting requests.
Look at the feedback, see what the most common requests are and sort them into a table or a word cloud. This will help you to create your roadmap, which is the next step on the stairway to PM fit.
#3 Build your roadmap to solidify and grow your PM fit
I suggest making a roadmap that consists of two parts.
The first part should be dedicated to continuous improvement of your main benefit(s).
It’s what your most dedicated users value the most and it’s also something your “somewhat disappointed” group enjoys.
This all might sound a bit counterintuitive, as you’ve already got your users to love the benefits of your product. So that should be it, right? Nope. If you rest on your laurels, some other company is bound to surpass you and amaze your market segment. Don’t allow it. Amaze your users yourself and watch as they become more vocal online about your fantastic product and how much it helps them.
The second part of your roadmap should focus on requests that were expressed by the “somewhat disappointed” users in the previous step.
Rank each request as low/medium/high impact – this metric is directly connected to how often the request popped up in relevant answers. Additionally, label each improvement project as low/medium/high cost.
This should help you to decide what your next step should be on the path to turning dubious users into advocates of your products.
If you employ this method and follow all of the steps, you should be able to increase your PM fit and learn more about your users at the same time.
However, the “very disappointed” metric is not static. If you decide to use it, you should track it on a regular basis.
As you grow, your “very disappointed” percentage may drop as you expand your user base. That’s normal. Just remember to survey your new users after a while and adapt your roadmap so that it fits with new learnings and requests.
Following this process should also result in a vocal community and strong word-of-mouth ‘marketing’, which is the dream for most businesses.
You can read a detailed case study on how Rahul Vohra grew his company Superhuman by using this method here.
What to measure to ensure that you’ve achieved PM fit
The Sean Ellis method tells you what people claim they would feel and do. That’s good enough for the early stages, but you should definitely support these statements with data about what they are actually doing as soon as you can.
These two methods are usually most effective once your product has gained some traction and has been used for a few months, although it’s possible to analyze some aspects even sooner.
First of all, you want to take a look at…
User Engagement Data
Engagement data will tell you how often users are interacting with your product and consequently, if they’re getting any value out of it.
It’s crucial that the data you are measuring aligns with events and actual actions, not just views and the core purpose of the product.
For a messaging app, that could be the number of users who are sending messages and how many they are sending each day. For an online game, it could be the time spent playing the game or the number of in-game purchases, if that’s your business model.
This kind of data is easier to measure for certain products (especially digital) than it is for others, and measuring at a small scale can be problematic.
For this reason, it’s helpful to use the data as a potential indication of PM fit but not as conclusive proof – unless you see tremendous results, like when Snapchat users were sending a million pictures every day just a few months after the app’s launch.
When gathering and presenting this data, be as objective as possible. It’s easy to rationalize the numbers you get and present them in a way that supports your desired goal, but doing this can be harmful in the long run.
The other thing you should create is…
The Retention Curve
The retention curve will tell you whether people are still using your product after the initial curiosity wears off. If they are, it means that they find it valuable and you’ve achieved PM fit with these users.
In order to get the retention curve, measure the % of active users over time – at least 6 months, but ideally a year. You’ll see a drop-off in the first few months, which is completely normal. What you’re looking for is where (and if) the curve flattens out.
If the curve levels off, it means that you’ve achieved PM fit with at least some of the users. You’re job now is to see how big the market is and who the retained users are.
If you don’t know the difference between those who remained and those who didn’t, then you don’t truly know your audience and market.
You can segment your retained users by key demographics, user source, or by sending them a survey. Once you have done this, compare the data with your target market so far and see if anything stands out.
Another interesting retention curve is one showing how many users remained after a free trial period of the product. If the curve doesn’t flatten out, it means that users didn’t find the product valuable enough to pay for. You can create this curve earlier on in the process and it should still indicate whether you’ve got a problem with getting users to pay for your product.
We’ve now come to the question that all businesses and products face at some point.
When should you push for growth?
When do you know that your PM fit is strong enough to start focusing on growth?
We’ll assume that you didn’t just create the next Snapchat or Instagram. If you did, you’ll know you have PM fit because all of the metrics will go nuts. If this is the case, go for it and push for growth with all your might.
Otherwise, I suggest waiting until you’ve achieved most of the following:
The percentage of users who would be very disappointed if your product disappeared reaches 40%.
Your retention curve flattens and you still have a significant number of active ‘older’ users.
People are using your product daily and in the way that it was intended – they are performing meaningful actions.
You start experiencing exponential organic growth, driven by word of mouth.
These checkpoints are in some ways connected, so they often happen one after the other within a short period of time. That’s when you know that you’ve achieved PM fit and can start growing your business.
As a designer or design manager, you should also monitor these milestones. Once you’ve reached them, they can serve as a strong argument for increased resources or a new design initiative in a similar market space. Don’t let your leverage go to waste. 😉
But why should you wait? Why not push for growth earlier on and adapt your PM fit as you go?
Why is PM fit crucial for sustainable growth?
The mistake made by many businesses is that they prioritize short-term conversions. But maximizing clicks and signups won’t help you if your product doesn’t deliver on your promise. You’ll lose these people if they don’t find your product to be beneficial over an extended period of time.
That’s why it’s better to convert fewer people, but offer them a product that they’ll soon consider a ‘must have’. These users won’t only stick around, they’re also more likely to recommend your product and fuel your organic growth.
Let me share another example of a company – let’s call it Streamer – that pushed for growth before achieving any PM fit.
Streamer was pitched to investors as YouTube v2, but it claimed to offer more benefits for the user and a friendlier, more lucrative system for content creators. It was a train wreck.
- They didn’t have a clear focus or a main benefit. Instead of doing a Sean Ellis Test and actually asking existing users, the departments fought among themselves.
- Their usability tests weren’t really objective and included a lot of wishful thinking around who their main users should be. As a result, they didn’t know what the most meaningful actions were that the users wanted to make, and confused general desire with a need for their product.
- The lack of a clear focus meant that their features didn’t work as intended, or even at all. If a content creator wanted to upload a video, they had to send it to the company first and TouYoube would upload it to their channel… after a while. Such bottlenecks limit meaningful interaction, which is almost always a bad idea.
Steamer did almost nothing to achieve PM fit and it cost them the opportunity of creating a valuable product. They spent time and resources to get some users onto their platform and got nothing in return.
Having a strong PM fit and truly understanding it enables you to attain users with high user lifetime value. If you don’t, you’ll end up spending more on acquiring new users than they are actually worth, which is not a sustainable business model.
That’s why even when you do achieve PM fit, you can’t stop working on it.
A never-ending process
You should strive to continuously improve your PM fit. Your market doesn’t sit still and you must adapt your fit to its movements.
It’s likely that you’ll also expand your target audience to new segments, which will require you to go through the whole process again if you want to do it the right way.
A lot of companies lose sight of continuous PM fit improvement. They don’t adapt when the market evolves, or they assume that they already have a PM fit with their new audience. This is what creates opportunities for new companies to cause disruption in a specific industry.
If you’re a smaller or newer company, seize the chance when the big fish are slacking and charm their users with your PM fit. If you’re an established business, don’t get lazy and don’t take your users for granted. 😉
Don’t forget: if you’re a designer, PM fit is something that you should strive for, as it means you’ve created something meaningful that impacts many lives. That’s something you should be proud of!
About the author
Oh hey, I’m Romina Kavcic, Design strategist
I am a Design Strategist who holds a Master of Business Administration. I have 14+ years of career experience in design work and consulting across both tech startups and several marquee tech unicorns such as Stellar.org, Outfit7, Databox, Xamarin, Chipolo, Singularity.NET, etc. I currently advise, coach and consult with companies on design strategy & management, visual design and user experience. My work has been published on Forbes, Hackernoon, Blockgeeks, Newsbtc, Bizjournals, and featured on Apple iTunes Store.