We can understand the Product Market Fit as a match between the product / service and the market. That is, it is that moment in which the company or start-up manages to create the product or service that its audience really needs.
In the words of Steve Blank, this fit "(...) proves that you have found a group of customers and a market that reacts positively to your product: you solve a problem and get paid for it."
When do we find the Product Market Fit?
Normally everyone who has an idea in which they believe considers having a product market fit already; however, a good idea is only part of the way. This idea actually needs to be polished and go through a lot of readjustments before it really becomes what your audience really needs.
We will have found the Product Market fit when the following three points are met:
- The customer will be willing to pay for the product or service.
- The cost of getting a customer (CAC) will be less than what the customer pays for the product or service.
- There will be evidence to indicate that the market is large enough to support the business.
In addition, when we find the Product Market Fit we will not only have found the deepest need for the product, but we will have managed to turn this into an efficient, replicable and scalable business model.
And how do we achieve the Product Market Fit?
How whenever we are creating and developing a business, we arrive at the finding through experimentation and trial and error methodology.
Thanks to the Lean StartUp methodology, nowadays it is not necessary to make a large cost investment in the creation of a product before knowing if it meets a market need; actually, that's a risk worth avoiding at all costs.
The Lean methodology proposes to create the product or service step by step and test with each of the variables and stage by stage until the most successful and defined product is found. This is where the MVP (minimum viable product) is so important, which serves precisely to make the minimum possible investment and this is the reason why today we can easily meet people who launch a digital product that has not even been created or of which only a small part has been created.
What steps should we follow to ensure we achieve the Product Market Fit?
A predefined system that we can follow to know that we have found the Product Market Fit is to do trial and error based on client testing in the validation stage.
To better define what this consists of, let's establish the four basic phases to develop a business:
- The first is the client discovery phase: In it we define well the profile of the client we are going to address and what solution we are going to offer.
- The second phase is the validation phase: In this we make the necessary adjustments to the MVP until we have the product well defined.
- The third phase is the creation of the product: Once the MVP has been validated, we proceed to the official production of the product.
- The fourth phase is the creation of the business: In this we officially founded the company and began to structure, hire and grow.
The first two phases make up the search stage and the second two make up the execution stage.
Thus, to find the Product Market Fit, we must stay in the validation stage, making continuous changes and adjustments to the product and continually testing it with customers until we finally see that the MVP fully adjusts to a real market need.
We can thus see that the Product Market Fit is a key moment that will define the success or failure of the business since, if we do not find a fit between the product and the market, we will not be able to offer a value proposition for which people are willing to pay.
The Product Market Fit is the holy grail that marks the starting gun since once found we can safely begin to run and build a business that we know has a place in the market and will work.
That is why it is extremely important to stay as long as necessary in the validation stage until we find it; otherwise, moving forward will only be to take missteps and we will probably crash.