306: How to Find Product Market Fit
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In today’s episode of The Startup Chat, Steli and Hiten talk about Product-Market Fit. They guide you on the path to identifying if your product is well placed to succeed in its target market and how to define what it means for you and your business.
Perfect Product-Market Fit is the dream of every startup, imagine your product flying off the shelves and into the arms of a crowd of satisfied customers. To define and achieve Product-Market Fit you have to have a deep understanding of your audience. Integrating the compelling value triggers to solve a key pain point for your target market.
Tune into this week’s episode of The Startup Chat to learn how to develop your own perfect Product-Market Fit for your startup and how to do it the right way so that your customers cannot get enough of your products. Steli and Hiten also share their top tips to getting you started on the path to successful product placement.
Time Stamped Show Notes:
01:12 Product-Market Fit defined.
01:34 How can you achieve Product-Market Fit?
02:04 Three ways to find Product-Market Fit.
03:41 Important things you must be aware of.
04:54 Being honest about product performance.
06:00 The difference between growth and Product-Market Fit.
07:18 The difference between marketing and Product-Market Fit.
07:33 Product-Market Fit equation.
09:10 Top tips for finding Product-Market Fit.
10:16 Top strategy to get genuine confirmation from your market.
3 Key Points:
- If a customer gives lots of their time, money and if they can not stop talking about the product. Chances are you have found Product-Market Fit.
- When you think about your product, what will cause them to keep coming back?
- Go out and try to prove yourself wrong.
Steli Efti: Hey everybody. This is Steli Efti.
Hiten Shah: And this is Hiten Shah. Today I think we’re going to talk about one of my favorite topics, which is How to Get to Product Market Fit. I think there’s lots of different ways. Steli, what’s your deal with this topic? Do you like this topic?
Steli Efti: I love this topic. You know why?
Hiten Shah: All right. Yeah.
Steli Efti: You know why? I was talking to somebody, I think it was even an email exchange of a listener sending us an email asking us about how to prioritize certain things, and product market fit, and then not being sure they have it and all that and that clicked. That made me realize, “Is it possible that we’ve never, in 300 episodes we’ve never talked about product market fit as the topic of the episode?” I did a bit of a search and boom. I was like, “Oh shit.” I mean we’ve talked about it many, many times within another episode but we’ve never gotten a full episode dedicated to it. So it was like, “Fuck. We need to talk about this.”
Hiten Shah: All right. Product market fit, let me start by defining it. It’s when your product fits in a market. What that means is that people love your product and they want to use it and they’re telling everybody they know about it. I know that might set a really high bar, but that’s product market fit.
Steli Efti: I love it. I wish I could disagree, but I won’t. All right?
Hiten Shah: Oh shit. How do you get to product market fit? Well you build something people absolutely love and love so much that they want to share it with other people. Love so much that when you’re on a sales call with them … Again I’m preempting your answer probably, they’re just like, “Where can I sign,” like, “Let me just pay you.” That means that you could have a verbal product market fit where you’re on a sales call and people are just ready to buy it based on how you’re describing it to them.
Steli Efti: Yeah. To me, I love this framework but to me it’s like, there’s three things that I’m thinking about instantly when I think about a product market fit. One thing is what you just mentioned, which is urgency. Like when I talk to potential customers of this, how urgent are they in wanting to use or purchase the product? Like how big of a problem it is that they have and solution seems to be what I have that they are driving the urgency. I don’t have to. So urgency is a big sign that I’m looking for. Money is a big sign that I’m looking for. How much money do they want to give me? Right? Or if it’s an end-consumer product maybe it’s like how much usage, how much of their time would they want to give me every day using my product or using my app or software? Then this is the thing that you mentioned, how loud or passionate are they going to be about it? Like how much do they feel the urge to share my product with the rest of the market because they’re so happy, they’re so successful, they’re so fulfilled, they’re so excited about what I’ve given them or what we’ve built for them that they can’t shut up about it? Right? That they need to keep talking about it. If those three things are really strong, if they’re really urgent to act, and use, and purchase, if they want to give me lots of their time and lots of their money, and if they can’t shut up about it, chances are that you’ve built something really fucking awesome that people love and you’ve found product market fit.
Hiten Shah: Yeah. I couldn’t agree more. I think that urgency is such a key, key point. Right? People all are just ready to buy, ready to use, or sharing it with people. I mean the thing is I don’t think you get to product market fit without actually figuring out what your product actually is and figuring out the product and is needing a product that people love a problem that really … You know you’re solving a problem that they really care about, and that’s the nuance in how to get to product market fit in my opinion. That’s what I mean when I say, “Look. Even on a sales call, if you’re nailing their problem, you will get to product market fit just on the sales call because you’re nailing their problem and you’re able to tell them how your solution’s going to solve it for them.” So to me the fundamental of how to get to product market fit is nailing the problem that you’re looking to solve for your target market.
Steli Efti: So why is it then … Let me ask you this. There’s people I think that clearly realize or founders and sort of that clearly realize that they don’t have product market fit. Right?
Hiten Shah: Yup.
Steli Efti: But then there’s this other bucket of people that in my opinion, don’t realize that they don’t have product market fit, and they’re trying to grow the business ahead of having really built something people truly love. What are some of the reasons why you think people or startups will misdiagnose themselves as having achieved product market fit although they have not yet truly done that?
Hiten Shah: They’re not measuring it. They’re not looking for that customer love. They’re not looking for that high net promoter score. They’re not looking for, “What can I do to make sure that people love this product? What can I do to make sure that I’m building the right thing for people,” and so they tend to build a product, put it in the market and wonder why people aren’t buying it. Then they try doing all this marketing stuff, to be honest. Maybe it kind of gets them some signups or something but nobody ends up wanting their product or using it very actively. Then you know. You don’t have product market fit. It’s cool. Like it’s totally fine. That’s like one of the hardest things to get to anyway but yeah. I think they just don’t realize that they need a product people love. Nothing else will solve that problem of getting to product market fit and being able to grow a business.
Steli Efti: Yeah. In my observation, people confuse growth with product market fit. Right?
Hiten Shah: Interesting. Okay.
Steli Efti: So some teams, they’re not able to acquire any customers or any users at any significant numbers so they’re struggling even to get any kind of attention for what they’re doing and then it’s very obvious to them. The struggle is so immediate and so early, “We’re not getting any traction. We’re probably not having product market fit.” But then there’s people and teams that are actually pretty strong on the growth hacking and marketing side of things where they’re all on the sales side of things, where they’re able to get 20, 30, 40 customers or 100 customers or they’re able to get 20,000 downloads in the first week of being in the App Store. Whatever the fuck it is. They equate that early surface level growth with product market fit. “Well, we already have a hundred customers in the first three months. We know we have product market fit.” Wait a second. Customer growth or usage itself, user growth, does not equal product market fit. It could just be that you’ve found some really cool way to market your product or that you are misleading people in the way that you advertise or market what you do. If you give me 100 million I could get a lot of people to download my app, if I spend that money in advertising. It doesn’t mean I have product market fit. Right? Product market fit to me like a part of it is can you acquire a customer’s attention usage? Right? That’s a part of the equation but the other part of the equation, which is even more important in the early days in my opinion, is the retention side of things. Once people then use the product or have become customers, or have downloaded the app, or whatever the hell it is, are they keep coming back? Are they keep paying me? Are they successful and are they rating the product really highly in the NPS Survey three months, six months down the line? Like what’s the retention and success numbers versus just the acquisition numbers? I feel like a lot of times startups are confused because they think, “If we’re able to acquire users or customers early, that means we have product market fit. We’ve built something people truly love. Otherwise, they wouldn’t use it, or they wouldn’t purchase it, or they wouldn’t download it.” But I don’t think that that’s enough. You need both acquisition and retention. The biggest confusion I’ve seen startups have when it comes to product market fit is that they see some early success on the acquisition side and they instantly jump to the conclusion that retention is not important since they have acquisition they have found product market fit and that’s just not true.
Hiten Shah: No, not at all. It’s an important piece of the puzzle but you need a product people love or any growth thing you do or marketing thing you do won’t really help you build a business. That retention thing is more important than ever. People have such less attention span when they use a product than ever before too.
Steli Efti: Absolutely. Let’s round this episode up with the tip at the very end before we say goodbye to people. So what’s the final tip you want to leave the audience with when it comes to finding product market fit?
Hiten Shah: Yeah. My tip would be just think about, when you think about your product, what’s actually going to get people ? What’s going to cause them to keep coming back? What’s going to cause them to keep using it? What’s going to cause them to be sticky? It’s not about them loving it at first, it’s about them actually coming back repeatedly and using the product. That will cause them to love it. So many companies I talk to don’t really think about that when they think about their product in the future.
Steli Efti: I love that. I’ll give people a tip that I actually learned from you and you learned it from a friend of ours, , his lead sort of methodology. I remember hearing you say a lot of times founders are so optimistic that we go out there and if we want to kind of do customer development and prove our hypothesis right, we might look at the world in a way that desires to prove ourselves right so we might look at very weak signals that people like what we do and translate that into very strong signals that this is working or that there’s product market fit. So a hack to counteract that tendency from a founder, or entrepreneurial perspective is to go out there and try to prove yourself wrong. Like try to prove that you don’t have product market fit. So talk to customers or potential customers and ask them questions of like, “Why wouldn’t you use this? Would this be too expensive? Is this nice to have?” Actually push them to confirm to you that this isn’t awesome. Then if they disagree with you, that’s a much stronger signal than if you go and you’re trying to put words in their mouth and proving, telling them, “This is awesome. Right? You’ll really love this. This is something you guys could need, right?” Then pushing them and nudging them in a direction of them just confirming what you want them to say.
Hiten Shah: Yup. Couldn’t agree more.
Steli Efti: All right. That’s it from us for this episode. We’ll hear you soon.
Hiten Shah: See ya.