How Do You Know If You've Achieved Product/Market Fit?


Marc Andreessen initially introduced the concept of product/market fit in this post published in 2007. It was an incredibly helpful notion to explain why startup products were failing left & right as well as provided a guiding north star on what you ultimately needed to achieve to build a successful startup.

Marc Andreessen wrote:
Product/market fit means being in a good market with a product that can satisfy that market.

You can always feel when product/market fit isn't happening. The customers aren't quite getting value out of the product, word of mouth isn't spreading, usage isn't growing that fast, press reviews are kind of "blah", the sales cycle takes too long, and lots of deals never close.

And you can always feel product/market fit when it's happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You're hiring sales and customer support staff as fast as you can. Reporters are calling because they've heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck's.

Thus Marc defined this helpful north star on the ultimate pursuit of a startup in it's earliest stages as the pursuit of finding product/market fit. Steve Blank and Eric Ries followed this up with specific guidance on Customer Development and the Lean Startup methodologies which help to provide a process to guide the search for finding product/market fit.

However I often still get the question of how do you know if you have actually achieved product/market fit? The feelings Marc suggests above are often not easy to discern especially at the earliest stages unless you are at the extreme ends of the spectrum of either having or not having product market.

I've found the best signals for knowing whether you've found product/market fit are tests for repeatability, findability, and scaleability.

The first signal is ensuring that as you rollout your product to more users, you're seeing that your product is resonating with a subset of those users on a repeatable basis. You'll rarely find your product resonate with every user or organization you put it in front of and that's OK. But at the same time if you're not seeing that you are repeatedly finding a consistent portion of your users resonating with the solution, you don't yet have product/market fit. The precise definition of a user or organization resonating with your product will depend on the stage your startup is currently at. In the earliest stages it's evidence of willingness to join your pilot/beta. Once you have a beta product, it's cohort engagement & retention. Once you've implemented your business model, it's exhibited willingness to pay by conversion rate to the paid offering.

What typically happens in the earliest stages is you see fairly inconsistent resonance with your product. The task at hand then becomes determining whether a specific subset of users are resonating with the solution and what the attributes of that subset of users are. And then if you can then deploy the solution to just that new qualified subset of users and find that you do find repeatability on resonance of the product amongst those users, you've likely found a better target audience definition that resonates with the offering.

But this directly brings us to the second signal, which is findability of your target audience. The signal here is whether you are able to consistently find users or organizations that fall into your target audience that have high resonance with the solution. Some target audience characteristics are easy to find. For example, if you find your solution resonates with Fortune 500 companies, then you can easily detail every Fortune 500 company out there. If you find your solution works with companies in specific industries, you can find lists of companies in those industries. If you find your product resonates with users in specific roles, then you can typically advertise specifically to folks in those roles.

But if you find your product seems to be resonating with folks with specific psychographic characteristics, you may find it very difficult to repeatedly find such users. Or if the percentage of users that do resonate with the product continues to be low with each successive set of new users, you're still very low on the findability signal.

Once you have repeatability and findability of a target audience resonating with your solution, the remaining signal becomes the scaleability of that target audience. How big in fact is the findable audience? This is where you want to leverage your findable target audience attributes and then estimate the total address market based on those specific attributes. Is the audience large enough to support your ultimate goals with your startup? Sometimes there are clear ways to estimate the audience based on demographic or firmographic attributes (like age, sex, role, industry, company size, etc). Then you can leverage available data to support the estimation. Oftentimes you'll end up with target audience attributes which aren't as easily estimated. Your best bet here is to leverage comparables from other products or identifiable audiences that share those attributes.

The key to ensuring you have product/market fit is ensuring you have strong repeatability of users or organizations resonating with your product, strong findability of finding such users or organizations, as well as sufficient scaleability in the precise definition of your target audience. It's important to evaluate all three of these signals as you are evaluating product/market fit with your solution and not to treat each of these linearly, or you might end up with a very common situation: that you've found product/market fit with some small audience, but nowhere near large enough to reach your startup aspirations.
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