If you think your startup has found product market fit (PMF) because you have customers, revenue, and profit to show for it, think again.
Contrary to what some business owners believe, finding PMF is more than just proving that someone wants to buy your product. Achieving PMF is defined by Product Plan as a scenario in which your company’s target customers are buying, using, and telling others about your product in numbers large enough to sustain that product’s growth and profitability. Or as the founder behind the concept of PMF and co-founder of Benchmark Capital, Andy Rachleff, defines it, “Product market fit means being in a good market with a product that can satisfy the market.”
To examine how vital PMF is to the long-term success of any product, my co-host, Tam, and I recently recorded an episode on The Drops Podcast about what real PMF looks like, what you can learn from the rise and fall of Peloton, and the importance of pivoting.
But if there’s one main takeaway from the podcast, it’s that even though Peloton was acquiring customers and growing like crazy during the pandemic, they never actually achieved PMF, aka sustainable growth. If they had, they wouldn’t be laying off hundreds of people, halting production, and trading well below the IPO price of $29 per share.
What’s equally important to mention is the importance of pivoting to a different idea when you aren’t seeing good retention for your product or service (even if engagement and growth are up).
So, now that you understand what PMF is and why it matters to the success of any product startup, here are 5 tips to help you find it.
5 Tips to Help Your Product Startup Find PMF
- Determine your target customer — if you haven’t already, make sure you take the time to identify the target customer who represents the user that will most likely benefit from your product.
- Get to know your customers — once you have a better idea of your target audience, take the time to connect with them to understand their pain points and how much they would consider paying for a solution to the various challenges they expressed.
- Specify your unique value proposition (UVP) — the best way to define your UVP is to think about what’s something your customers value that also happens to make your product stand out from other competitors in the marketplace.
- Measure product desirability early on — before you waste too much time and money on perfecting or marketing your product, ensure it’s genuinely desirable to your target customer by conducting interviews, monitoring customer churn or rate of attrition, etc.
- Ready, set, pivot — don’t make the mistake Peloton and countless other companies made. If you’re seeing growth or engagement but not great retention, be prepared to pivot by shifting your existing marketing, repositioning your product, or shifting to a different market or industry altogether.
Lastly, if you achieve PMF, whatever you do, don’t assume it will last forever. Just like your needs change over time, so do the needs of your customers and the market. So, do your due diligence to re-evaluate what matters most to your customers and what’s happening in the marketplace.