How to Achieve Product Market Fit (PMF)?

Driven by strong growth objectives, many Product Managers invest heavily in growth mechanisms early in their product's lifecycle. Often, the cost is enormous for very average results. One explanation? New customers don't stay because the product hasn't reached the stage of Product-Market Fit.

What is Product-Market Fit?

• Origin of Product-Market Fit
• Definition of PMF
• Preparing for PMF with Pre-PMF
• Sustaining growth with Post-PMF

Why is Product-Market Fit Strategic in Launching a New Product?

• Ensuring product launch Success
• Developing business growth
• Optimizing product launch time

What are the 5 Steps to Achieve Product-Market Fit with a Good Market Offering?

Step 1: Identify your target in relation to your value proposition
Step 2: Identify your target's needs
Step 3: Design a MVP (Minimum Viable Product) to test
Step4: Test your MVP
Step 5: If your product fits your market, launch your offering

How to Test Your Product Market Fit?

• The prerequisite of Problem/Solution Fit
• Sean Ellis' Test

How to Measure the Success of Your PMF with the Right Indicators?

• NPS (Net Promoter Score)
• LTV (Lifetime Value)
• Retention rate
• Activation/engagement rate

What to Do in the Absence of Successful Product Market Fit? Our Recommendations

• Your target doesn't understand what you offer
• The promise is understood but the product doesn't deliver!
• Your distribution channels are not appropriate
• Pivoting your product strategy

"I don't understand! I've invested tens of thousands of euros in Google Ads; I've increased traffic to my product tenfold; and yet my revenue isn't increasing!"

Although this statement is a caricature, you wouldn't believe how often we hear it! The main reason: prospects look at your product, play with it out of curiosity, but don't buy it. In other words, your value proposition didn't convince them: you haven't achieved Product Market Fit (PMF).

🗝️ What is Product-Market Fit?

Origin of Product-Market Fit

The concept of Product-Market Fit (PMF) was popularized by Marc Andreessen, the co-founder of Netscape, who introduced it in a blog post in 2007 where he defined PMF as follows:

“Product-Market Fit happens when you are in a good market with a product capable of satisfying that market.”

This idea has become fundamental in the startup and entrepreneurship ecosystem because it emphasizes the crucial importance for a company to find the right balance between its product or service and the market it targets.

Definition of Product-Market Fit

PMF has three major characteristics that will help you recognize it:

1. Understanding: Your target understands what you do and can clearly identify you. Your value proposition is assimilated and validated by this target.
2. Purchase: Understanding translates into a purchase or recurrent use in cases where purchase is not relevant, such as for a free product.
3. Sharing: Your customers naturally talk about your product to other users, via social networks or word-of-mouth. In some cases, it even goes viral, a positive factor for PMF, though not a necessary condition. For example, virality is rare in B2B.

A product that brings these three characteristics together almost sells itself. By achieving Product-Market Fit, you will significantly reduce the effort needed to acquire new customers. Concretely, if you have found your Product-Market Fit, you will deploy fewer resources to convert the 100th customer than the 1st.

Preparing for PMF with Pre-Product-Market Fit

Pre-Product-Market Fit is a crucial phase in the development of a product or service. It represents the period during which a startup or company tests and iterates on its initial concept to validate its fit with the needs and expectations of the market.

During this phase, the focus is on validating the problem/solution fit, i.e., confirming that the product or service actually solves a significant problem for users.

The Pre-Product Market Fit phase helps reduce the risks associated with launching a product or service in a potentially unvalidated market. By better understanding user needs and behaviors from the start, companies can direct their development more effectively, avoid unnecessary investments, and maximize their chances of successfully achieving Product Market Fit.

Sustaining growth with Post-Product-Market Fit

Post-PMF refers to the period following the validation of Product Market Fit, where the product or service has found its fit with the market. This phase is marked by growth and market position consolidation.

After achieving PMF, the primary objective is to maintain this position by continually meeting user needs, improving the product or service based on feedback and market developments, and developing growth and expansion strategies.

Post-Product-Market Fit is crucial because it represents the moment when a company can capitalize on its initial success and work to sustain its long-term growth by retaining customers, developing new market segments, and constantly innovating to remain competitive.

🚀 Why is Product-Market Fit strategic in launching a new product?

Ensuring product launch success

An imperative for any company wanting to establish itself in the market, Product-Market Fit plays a crucial role because it ensures that the product meets the specific needs of the targeted customers.

By validating the relevance and appeal of the product from the start, companies can minimize the risk of failure during the launch by ensuring that their offering truly matches what consumers are looking for.

Develop business growth

PMF is an essential growth driver because it offers the opportunity to build a solid base of satisfied customers.

A product that perfectly meets market needs has the potential to generate sustainable revenues and attract new customers, contributing to the long-term expansion and sustainability of the company: the Product Marketing growth.

Optimizing product launch time

PMF is a strategic approach to remain competitive in a rapidly evolving environment and reach business objectives faster.

PMF helps reduce development time by validating market needs from the start. By quickly understanding what customers are looking for, companies can accelerate the development and market introduction process, minimizing delays and costs associated with later adjustments.

🎯 What are the 5 steps to achieve Product-Market Fit with a good market offering?

Step 1: Identify your target in relation to your value proposition

Before even developing a product, it is crucial to have a clear understanding of who your target audience will be and what value proposition your product will offer them.

For example, if you are developing a task and project management app for freelancers, your target might be professionals looking for an efficient way to organize their projects and schedules. By precisely identifying this target, you can better understand their needs and refine your value proposition to better meet their expectations.

Step 2: Identify your target's needs

Once you have identified your target audience, you need to dive into an in-depth analysis of their needs, desires, and unresolved problems. This can involve interviews, surveys, or direct observations to gather valuable information.

For instance, if you are developing a fitness app, you might discover that your target audience is looking for a convenient way to continuously track their progress and receive personalized and adapted advice to achieve their goals.

Step 3: Design a MVP (Minimum Viable Product) to test

Once you have a clear understanding of your audience and their needs, it is time to design a MVP - a minimal but functional product that tests your market hypotheses with minimal investment.

If you want to develop a mobile meal delivery app, your MVP could be a simple app allowing users to send a request to a few selected local restaurants in the city of London.

Step 4: Test your MVP

Before starting to develop your MVP, verify your hypotheses with tests on prototypes to check the fit between the solution you offer and the needs of your target users.

Once your MVP is developed, you need to put it in the hands of your target audience to gather valuable feedback. This can be done through usability tests, for example. By observing how users interact with your product, you can validate or adjust your initial hypotheses.

For example, if you find that only 1 tester out of 8 completes the order process on your meal delivery app, ask yourself why.

Step 5: If your product fits your market, launch your offering

Finally, if feedback on your MVP confirms a fit between your product and the market, you are ready to launch your official offering. This can involve a broader rollout and stronger marketing and commercial efforts to expand your user base.

With an established match between your product and your market, you can be confident that your product meets a real need and that you are well-positioned to succeed in the market.

If feedback on your MVP is positive and users widely adopt your app, you can launch a marketing campaign to attract more users and expand your service to new regions.

⛳ How to test your Product-Market Fit?

The prerequisite of Problem/Solution Fit

The preliminary stage to PMF in the product lifecycle is the “Problem/Solution Fit.” It involves validating the relevance of the “problem” and “solution” boxes of your Lean Canvas (or any other document that materializes your product vision).

We recommend conducting a qualitative study where you directly interview your potential early adopters to understand if the identified problem is worth solving and if your proposal provides a satisfactory solution.

If you have validated that you are working on a problem worth spending months on developing its solution, you can now evaluate the way your product fits your market..

Sean Ellis' Test

Sean Ellis, founder and CEO of GrowthHackers.com, was the first to be interested in measuring PMF and proposing a concrete indicator for it. To measure if a product has achieved PMF, he conducts a qualitative survey on a sample of users with the following key question:

"How would you feel if you could no longer use this product?"

• Very disappointed
• Somewhat disappointed
• Not disappointed (it’s not really useful)
• N/A – I no longer use this product

After conducting this test at hundreds of startups, Sean Ellis concluded that if 40% of your users say they would be "very disappointed," then you have a good chance of achieving Product-Market Fit.

This method has the advantage of concretely measuring the impact of your product on your users and can be implemented quickly and at a low cost (Sean Ellis even created a model you can reuse). However, due to the sample size, this test does not have robust statistical significance and only indicates a trend.

The next step is to validate your users' statements with rigorous measurement.

🧐 How to measure the success of your Product-Market Fit with the right indicators?

NPS (Net Promoter Score)

By measuring the number of customers willing to recommend your product to others, you get a valuable indication of your Product-Market Fit (PMF) quality. A high NPS indicates that your product effectively meets market needs and expectations, which is essential for ensuring the long-term success and growth of your business.

LTV (Lifetime Value)

Lifetime Value (LTV) is another essential indicator for measuring the success of your Product-Market Fit. By analyzing the monetary value of customers over their lifetime with your product, you can assess their loyalty and contribution to your business growth. A high LTV indicates that your customers find continuous value in your product, which is a positive sign of PMF and a driver of sustainable growth for your business.

Retention rate

This indicator measures the recurrence of product use by users. Therefore, in the case of a product intended for frequent use, retention is the most relevant metric to ensure that you have achieved PMF.

Before studying your retention, specify the expected usage frequency:

• Daily (Facebook)
• Weekly (Uber)
• Monthly (Airbnb)

Once you have identified the expected frequency, measure retention, i.e., the actual usage frequency of the product. The difference between the expected frequency and the actual frequency will allow you to determine if your product truly interests users and if it can become indispensable in their eyes.

Activation/engagement rate

In the case where your product is intended for single use, the most relevant indicator to verify the achievement of PMF is the activation rate. Depending on the nature of your product, activation will represent a purchase, a registration, or the achievement of another objective you have set beforehand. If the conversion rate is deemed satisfactory given your business model, you have likely achieved PMF!

🤔 What to do in the absence of successful Product-Market Fit? Our recommendations

The path to PMF is fraught with obstacles. Some products achieve it almost immediately, others after three years (Airbnb, BlaBlaCar). And many products will never reach it.

Your goal is to achieve it before exhausting your resources, so a question naturally arises: what to do in the absence of Product-Market Fit? There is no magic recipe, but here are concrete actions to implement depending on the encountered situation.

Your target doesn't understand what you offer

This scenario is quite common, especially during your product launch. Two reasons can explain it:

1. Your value proposition is not understandable by your target

Take time to specify it better, regularly conduct user interviews so that the promise best meets your target's expectations.

1. Your target is not sufficiently segmented

Without segmentation, your target will never grasp the value of your product because it doesn't solve their problem. Don't hesitate to address a niche audience initially by targeting users based on very specific criteria. To do this, organize a persona workshop, analyze the results of your first campaigns by segmenting users, and identify those who understand, buy, and talk about your product to make them the core of your target.

The promise is understood but the product doesn't deliver!

Here, despite identifying a target that understands and validates your value proposition, users do not sufficiently buy your product and/or quickly abandon it (i.e., retention is low).

The priority is then to identify pain points that will guide you towards major optimizations of your product. To do this, use the quantitative and qualitative data at your disposal; it may be valuable to complement them by conducting user interviews.

For the best techniques to evolve your product, we invite you to read or reread Volume 1 of the Product Academy - The Guide for Elite Product Managers and Product Owners.

Your distribution channels are not appropriate

Even a relevant response to a proven problem will not reach PMF if you use the wrong distribution channels. Here are the scenarios that may arise:

• The channels you use generate a lot of traffic, but it converts poorly (low-quality leads).
• Selling certain products (especially in B2B) requires the intervention of a sales force, whose performance strongly conditions the achievement of PMF. Ensure that the sales team masters your product perfectly, knows your target, and has an effective and well-developed sales pitch.

Pivoting your product strategy

If PMF still eludes you despite the lessons learned and various iterations on the product, it may be time to pivot. The pivot concept, popularized by Eric Ries, involves radically modifying your product while keeping the same team. Executing a pivot has contributed to the success of many products, as in the famous case of Instagram, which started as Burbn, a social network based on geolocation, before becoming the photo-sharing app that made it successful.

Once Product-Market Fit is achieved, you are ready to seek growth drivers for your product. However, never forget that establishing PMF is a long-term process: the market and your product are constantly evolving, and PMF is therefore never definitively acquired.

For more information: download our Product Management Toolkit