The number one reason startups fail is that they run out of money before they hit Product Market Fit . Once you have the Product Market Fit, financing is almost a piece of cake.
There are many different definitions of Product Market Fit, but at their core, they all revolve around understanding who uses your product or service; and that your product is valuable to these people, in a market large enough to justify the business.
How to create the Product Market Fit
Product management expert Dan Olsen proposed a six-step methodology or framework called the Lean Product Process to create the Product Market Fit:
- Determine your target customer
- Identify the needs of underserved customers
- Define your value proposition
- Specify the feature set of your Minimum Viable Product (MVP)
- Create your prototype of MVP
- Test your MVP with clients
EYE! Important. The entire Product Market Fit process is a living and iterative process. You may have to rethink things and pivot at any of the steps as you gather information. You must be flexible (and brave) enough to pivot; but it must be a decision justified by the results you are getting.
Steps of Lean Product Market Fit
Step 1: Define your target customer / buyer persona
The buyer persona is the individual who ultimately decides whether to use your product or not. Therefore, it makes sense to do market research and, more specifically, market segmentation to define your customer.
Segmentation consists of dividing the market into segments that are similar in needs and behavior.
In this phase it is crucial to define our buyer persona or target customer, and carry out market research consisting of a questionnaire to collect information from your buyer persona. It then summarizes the findings into manageable conclusions.
It is possible that at first you do not have a precise definition of your target client: nothing happens. You just need to start with an open hypothesis and then revise it as you learn and iterate.
Step 2: Identify the needs of underserved customers
After hypothesizing about your target customer, the next step is to understand their needs . As you try to create value for customers, you must also identify specific needs that could be answered by a good market opportunity.
For example, it’s probably not a good idea to enter a market where customers are happy with existing solutions.
When you develop a new product or improve an existing product, it doesn’t make sense for you to satisfy the same needs; you have to focus on those “neglected” needs. Customers stay with those products that satisfy unmet needs.
To do this, talk to potential customers to determine their needs/pain points and how much money they would be willing to pay to fix them.
Collect a data sample large enough to extract meaningful feedback.
Another option is to meet face to face. Although an online survey allows you to have interesting and clarifying quantitative insights , the personal interview gives you the incredible opportunity to cross-examine and generate qualitative and enriching answers.
Step 3: Define the value proposition
The market is overcrowded: there is something for everyone, even products similar to yours. Therefore, you must come up with something completely innovative that will outperform your competitors . The value proposition is mainly about how you are going to stand up to the competition.
You need to figure out how your product will differ from the competition’s products . How will your product outperform others? What unique features will impress customers? Why will they decide to buy your product and not the competition?
Step 4: Define the feature set of your MVP
You already have the value proposition . Now is the time to define (precisely) what functionalities your Minimum Viable Product (MVP) will have .
Make sure you have a complete list of things you want your MVP to have. For example, if the user has to create an account with your product, then they should also be able to delete it.
EYE! Do not get carried away by the emotion of the moment. Includes only the most important features. It is not about launching a finished product, it is about including only the essential functionalities to create enough value in the eyes of your target customer, which will allow you to validate that you are on the right track.
The goal is to iterate until you have an MVP that customers agree is viable.
Step 5: Create the MVP prototype
Don’t start coding until you have a prototype of your MVP. While you can create a working, live version of your MVP, it’s usually quicker and more prudent to prototype your MVP.
A prototype is a representation of your product without actually building your actual product.
Prototypes can vary in fidelity (the level of detail in which they resemble the final product) and interactivity (the degree to which the user can interact with the prototype compared to the final product).
A hand sketch of the product would be low fidelity and interactivity. For web and mobile products, medium fidelity wireframes and high fidelity mockups are frequently used.
Prototyping and mockup tools (UXPin, Sketch, InVision, Adobe XD), can simulate the user experience of the end product with enough fidelity and interactivity to elicit qualitative feedback from users. Prototypes are a powerful way to check for water before you jump in the pool.
And it is that, the prototyping tools provide enough interactivity to obtain critical and qualitative feedback from potential customers.
Step 6: Test your MVP with customers for feedback
You already have the prototype MVP. It’s time for customers to try it. The goal is to collect as much feedback as possible from everyone in your target market.
EYE! Don’t go to your friends or family unless they are potential customers. If you do, you run the risk of receiving feedback that might cause you to iterate in the wrong direction.
Remember that you want objective and quality feedback . Make sure to observe the potential customer during their interaction with the prototype. Watch what he says while using it; ask questions to clarify doubts; try to drill down to get more information. For this, it is important that you avoid closed questions in which the answers are yes or no. You are interested in depth of answers and details.
Instead, it encourages participation and brainstorming . Listen carefully, identify similar feedback patterns, and then look for ways to improve the product.
Product Market Fit Benefits
Product Market Fit is important (almost critical) because until then you don’t know for sure if what you’re building solves a real problem that has a big enough market.
If you are not clear, you could continue to invest in something that is not commercially viable. And what’s worse, you could be burning money on sales or marketing, scaling up prematurely, and not getting the expected return.
Thanks to Product Market Fit, your company will distribute its products/services with a constant demand. You will know that you have a product with a clear place in the market and that it responds to specific market needs.