The Basics of Product Market Fit – Part 1

A hand putting the last piece in a puzzle

Let’s talk about product market fit!

Yeah… a lot was written about it, and yet – when I look around me – it seems like this topic has yet to earn the awareness it deserves.

If we drill down to the product world – I rarely see PMs setting a clear milestone or framing part of their roadmap as ‘getting to a product market fit’. Hence, not enough product people (in my humble opinion) are understanding that this is an important milestone they need to achieve as part of their product roadmap.

And as for the product managers who do understand the importance of that – many of them, as I’ve observed, are getting lost when they need to come up with a concrete plan as for how to explore and achieve it (Heck… I’ve been struggling with it myself more than once in several of the roles I’ve served in).

Lastly – to add to the challenges above – sometimes you do understand the concept and its importance and you did come up with a plan – but you will face hard times trying to get the buy-in of the executives or even your boss for pursuing this. Why? Because they are not getting the importance of that as well.

 

Hence, the road to achieving a product market fit is full of challenges

I will try to help you understand what it is, why it’s important and I will do my best to outline a plan for achieving it. Not all of that will be covered in this post, naturally, as it’s quite heavy stuff. 

 

What is ‘product market fit’?

First things first – let’s get everyone up to speed as for what product market fit (PMF) is.

To be honest, as I’ve noted above – a lot has been written about it, and I don’t see an added value with making up a brand new definition.

I strongly recommend that you (later) Google the term and visit several articles from the first page of the results. Most of them are quite decent.

The bottom line is that PMF can be described as the point where you stop struggling selling your product. The great majority of your prospects get it, or even heard about it before and just want to buy it. The existing users/customers are highly engaged and satisfied.

If it sounds too good to be true – I understand, but it’s not an urban legend. I’ve seen and worked in several companies who have reached PMF. Most of them have lost it since (and this is why I don’t mention their names)… which also teaches you that it’s not a permanent state and you need to work hard to maintain it once you’ve reached it.

 

How do I know my product has reached PMF?

This is a very frequent question, which has also been addressed countless times on the web.

I’ve gathered here the most frequent answers:

  1. At least 40% of your customers said they’ll be ‘very disappointed’ if they could no longer use your product
  2. When your users/customers stop churning. (I tried hard but I can’t find the reference for this one for some reason. Pity as it was a great article.)
  3. Getting a ‘New Promoter Score’ of 40 or higher on your customers’ survey (Andy Rachleff, who coined the term PMF. See relevant article here)
  4. For B2B – if you are running a pilot and the pilot term has ended and the contract is not yet signed – you must not extend it, but rather simply shut it down. If you are not getting a call from the customer within a couple of hours – you don’t have a PMF just yet.. (same guy, but on a podcast now)
  5. For B2C – an exponential organic growth (same reference).
  6. I know it when I see it’ – funny, I know, but I guess the intention here is to describe the dynamics of the business once it hits the PMF milestone. It’s the general vibe around your product, the customers knocking on your door, your infrastructure not being unable to sustain the demand and so forth…

 

All of the above show that figuring whether you’ve reached PMF or not is not necessarily an exact science. Different people have different opinions. Nevertheless, if you’ve achieved any of the above (well… number 6 is a bit too vague so let’s focus on 1-5) – then you are certainly in a very promising spot. Choose the one which you believe in and that you can measure.

 

Should I always aim to reach PMF?

Generally yes, unless you are a product manager who still doesn’t own their ‘full product end-2-end’. For example – if you are responsible only for the reporting dashboards of a bigger product – then this effort is not on you. 

However, you should, of course, keep an eye on other metrics which measure the engagement with your sub-product and have a set of well defined KPIs to measure this. Your work, if done right, will contribute to the overall attempt to reach PMF with the main product.

In addition, and as always, you should ask to be part of any such PMF effort as it’d be a great learning journey for you.

 

When should I start pursuing PMF?

The short answer is ‘as soon as possible, until reached’.

The longer answer is more complicated.

First, as you understand by now – this is an iterative process, which may require pivoting but almost certainly a lot of experimentation.

I do know of a couple of cases where a company achieved PMF with its version 1.0, but those cases are a mixture of pure luck and strong intuition. Those cases are also extremely rare, so don’t rely on that.

Until recently I was convinced that in order to start experimenting with the goal of reaching PMF you must have some product in the market, even if it’s just an MVP.

However, I then read this article, by Gigi Levy (a well known Israeli investor and part of the NFX investment firm), where he claims that the search for a PMF can start even before writing a single line of code

In essence he recommends testing the waters using a Facebook ads (or a similar ads platform with high targeting) and try various messages and ‘promises’ about the value your (not yet worked on) product delivers. You then measure the performance of each of the variants and see what type of message and value proposition gets the most traction, and whether this traction is high enough.

I think this approach can work quite well if you are an entrepreneur which aims to evaluate a market and an opportunity. It can also work for product people in the evaluation/discovery phase.

It’s good for verifying the opportunity and the direction you want to take your product to. You can also use this technique if you already have a product out there, but you are in a junction where the product can take different paths and you want to make sure you proceed on the most promising path.

At the end of the day, though – after passing the value proposition and market validation – you’ll need to put some product out there. Again, it can be an MVP, a beta or whatever – but it needs to hold the minimal feature set which you believe delivers the main essence of your product.

 

Ok, but how do I start working my way towards PMF?

An awesome question that I will address in the next part of this series, because otherwise this post will become just too long… 🙂

 

That wraps up the post for today.

If you found this post/series useful – please let me know in the comments. If you think others can benefit from it – feel free to share it with them.

 

Thank you, and until next time 🙂

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