This post is the first of our seven-part series explaining the reasons for product failure.
Product-Market Fit is a concept most revered by high growth startups, yet it is less popular in other areas of business. Understanding and nailing the product-market fit helps companies grow and create value for customers.
What is Product-Market Fit?
The term was coined by Marc Andreesen, founder of the Silicon Valley VC firm Andreessen Horowitz in 2007 in a blog post. Product-market fit means “being in the right market with a product that satisfies customer needs”. Achieving the right product-market fit is one of the key contributing factors to product success and revenue growth. Creating a state where customers love your product and become recurring and referring customers is the state of product-market nirvana. But achieving this state where your customers become your salespeople is a difficult one to achieve.
How to nail it?
In our previous post, we discussed how offering a weak product to a market that is not ready, or too small, or over-saturated causes product failure. In this post, we share our ideas on how to find that sweet spot in achieving product-market fit. While there is no one magic answer, we believe that the following three steps can help.
Start with your customer
Identify your target customer using market segmentation techniques, understand those customers’ pain points, and make sure your product addresses them. Based on the segmentation results, create a target customer persona and make sure everyone in the company understands that persona.
Early-on identify the gaps in customer needs and address them to create value. Hear it from the horse’s mouth; meet with a section of target customers to get an in-depth understanding of their needs. Get feedback from surveys if a physical meeting is not possible, it’s less effective, but a good place to start.
Stellar value proposition
Once you have ironed out the details of your target customer and their specific needs, it’s time to put it into writing. Creating an impressive value proposition helps your customer to
a) know you and product exist and
b) compels them to buy your product to fulfill their underserved needs.
A value proposition, simply put, is your product offering in less than 300 words. It should grab your customer’s attention. A great value proposition should be a statement outlining your target audience, the problem solved, the benefits gained, and the unique way of acquiring the product.
However, writing a compelling value proposition is not always that straightforward or easy. At Veratempo, we love crafting value propositions. It gives us a chance to work closely with our clients’ team and helps us understand company objectives.
Minimum viable product
Once you have that impressive value proposition outlined, you should focus on building a product that provides great value to your target market. This step ideally should be taken before you create your actual product, it is more of a test-phase of sorts. The idea behind this is to show your minimum value product to a small target customer group and get feedback from them. Then integrate that feedback back into product development. Create a prototype based on the initial feedback, go back to that customer group and ask for more in-depth feedback during face-to-face interviews. Dan Olsen, product management expert and author of The Lean Product Playbook, states that it is best to conduct user tests in a group of five to eight customers.
Plenty of start-ups fail because they never achieve the product-market fit. They may have the best product in the worst market (or vice-versa) which can cause product failure and shunted comatose growth.
Companies that go the extra mile to nail the product-market fit sometimes go through many shifts like team changes, product iterations, market shifts, and value proposition retakes. If the above steps are implemented from the outset, companies see a higher chance of creating a “must-have” product.
We’d love to hear how your team works on bridging the product-market gap. Please feel free to comment below…