If you want to make money, you need to sell something with good product-market fit. There is no way around this. It is an essential truth of business.
If you searched through our entire blog for the phrase “product-market fit”, you’d find it in at least 70% of our articles. That’s how important it is. It is the bedrock upon which all marketing plans are built.
What is Product-Market Fit?
First, let’s define product-market fit. According to Marc Andreessen, creator of Netscape, “product-market fit means being in a good market with a product that can satisfy that market.”
We know that sounds broad, but this is so important. The most essential, basic purpose of a business is to meet needs by creating products or services and selling them to people who need them at a profit. This is so obvious that people seldom actually explicitly say this.
To expand a bit on the prior definition, allow me to borrow a quote from Eric Jorgenson on Medium, who in turn, quotes Marc Andreessen again:
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.Product/Market Fit: What it really means, How to Measure it, and Where to find it, Eric Jorgenson, Medium
Why Product-Market Fit Matters
Thinking in terms of product-market fit really refocuses your attention on what matters: the customer.
Look, the market doesn’t care about you. It’s not personal – it’s just not that into you. To quote UX Planet, “most startups fail because they blow away cash without first carefully considering whether customers actually want what they are selling.”
Of course, this gives you plenty of negative reasons why product-market fit matters. There are plenty of positive reasons to pursue great product-market fit as well.
- Good product-market fit dramatically increases your overall revenue potential.
- Every dollar you spend on marketing will go much further. Your product or service will speak for itself because it truly meets a need.
- Your product lifecycle will be extended far beyond what it otherwise would be. In other words, you’re likely to make money for a much longer time.
Target Markets, Consumer Behavior, and Finding Your Niche
The most important thing to remember about product-market fit is that value is in the eye of the beholder. That is to say, to improve your odds of achieving a good product-market fit, you need to be extra clear about your target market and about their needs.
Defining your target market
We talked about target markets in length a couple of weeks ago on this blog. To reiterate, a target market is a group of potential customers to whom you wish to sell products or services.
You can define your target market in terms of demographics and pscyhographics. Demographics include information such as age, gender, location, and income. Psychographics include personality, values, interests, and opinions.
When defining your target market, you want to see them as individuals. You can even create fictitious personalities known as customer personas to help you imagine them more vividly.
In short, you want to understand the people you are selling to. You want to know them so well that you could write a book about them.
Consider consumer behavior
One of the most important areas in the field of marketing is consumer behavior. It’s the study of why and how people buy things.
If you’re not familiar with the fundamentals of consumer behavior, you might find its many lessons unintuitive. Consider the following passage from our prior article on consumer behavior. It will help you to understand how we use the word “needs” in a marketing context.
In first world countries, the people who have the disposable income to buy your products or services largely have their basic needs met. If you’ve taken a basic psychology course, you may be familiar with Maslow’s Hierarchy of Needs, posted below. Once basic needs are met, your mind – looking for a problem to solve – turns toward more abstract needs.
You have food and enough money to get by, so now it’s time to find love. You have a wife, so now it’s time to achieve something worthwhile. You’re an achiever, so now it’s time to really push yourself to your creative limits.
To a small business marketer who is studying consumer behavior, this is a really valuable framework. When you’re creating products, you want to address a specific need your customers have, in a way they would like for it to be addressed. Those of us with the great fortune of living in the USA, the UK, Western Europe, and other wealthy countries often spend our days chasing abstract needs (or, really, wants). Marketers need to remember this!
Find your niche by meeting the needs of your target market
Your company has finite resources, be it time, money, or something else. That means that you need to start as small as you possibly can, meeting the unmet needs of a market that is willing to spend money.
Your niche is how you can uniquely meet the needs of specific people. This is an absolute necessity in our noisy world. People are so bombarded by useless messaging that only the really tailored and relevant messages manage to break through.
The upshot of all this is that it is far easier to achieve and maintain product-market fit if you have a specific niche.
How to Find Product-Market Fit
At this point, we would absolutely love to give you a simple, repeatable 10-step guide to finding product-market fit. (It would be great for our SEO, if nothing else.)
Unfortunately, like many things in life, it’s just not that simple. Product-market fit is so important and so valuable largely because of just how difficult it is to achieve.
Trial and error
Three little words that sum up so much pain, frustration, missteps, recalculations, recalibrations, lost months, and lost years. We’re not being glib, though. It’s the truth.
You can only find your product-market fit by observation and analysis. If you want to craft the perfect product or prepare for a product launch, you have to make a prototype and share it with people. This same principle applies to services, as well.
In sharing your product or service with people, you will receive feedback. From there, you can implement the feedback and inch ever-closer to having a product or service which perfectly meet the needs of your target market through the niche you wish to pursue.
Second, but better
I’ve always admired the pioneers of the world. That is, the people who were playing with electricity in the late nineteenth century or learning how to use synthesizers to make music in the 1960s. Our culture, at large, has a fascination with people doing brand new things.
Too bad you couldn’t tell by the way people shop! As a general rule, pioneers see less financial success than the people who enter a market second (or third, fourth, fifth…) and improve upon what has already been built. This is because it’s much harder to convince customers that a brand new product or service will meet actual needs.
People love watching and honoring novelty. However, when it comes to making purchasing decisions, people become considerably more risk-averse. Being able to say, my product is “like X but with Y difference” makes it much easier to demonstrate product-market fit.
Achieving product-market fit takes a journey…and then you have to fight to maintain it
It is a long winding journey to achieve product-market fit. Things don’t just spontaneously come together. When they finally do, though, it can be tempting to milk the cash cow and otherwise take it easy.
Markets move on and needs evolve. Once you achieve prdouct-market fit, running your business will become easier. However, the challenges won’t stop there. You have to continually update your product or service to make sure you keep meeting needs.
At the same time, you must realize that eventually your product or service will no longer be relevant. That means once you achieve product-market fit in one area, it’s time to start looking in another!
Product-market fit is essential to success in business. Having it improves revenue potential and the effectiveness of marketing. Finding it requires empathizing with your customers along with the patience and persistence to slowly zero in on the best way to meet their needs.
As many others have said, product-market fit is something you can “feel” when it’s there. Are people passionate about what you’re selling? If so, you’re in a good place. If not, keep trying until you get to that point!