How to find your product-market fit and what to do if you don’t
Every business should care about achieving and fully understanding product-market fit and how to measure it in their own company. Start-ups stand the best chance of success by prioritising product-market fit. Being able to understand your market, your product, and the relation to each other is essential.
We look at the process needed to find your product-market fit and what to do if you don’t. Pivoting the strategic direction of your business might just be the solution you need to help evolve your original product vision to better address the needs of the market.
4 steps to finding your product-market fit
- Start by lining up your product goals
- Create & prioritise product hypotheses’
- Get feedback from customers
- Look at your numbers! Evaluate market traction
When you find product-market fit, you will see exponential organic growth, high user retention, a 3:1 return on customer acquisition cost and remember the 40% rule!
Survey your customer base and if 40% of your customers will be “very disappointed” if your product was removed from the market, then you have created a product that fits the market. The greater you understand your customers, the closer you will be to finding product-market fit.
How will you know if you do not have product-market fit?
If you find yourself experiencing one or several of these obstacles, it may be time for a shift:
• The company’s progress has plateaued
• There is just too much competition
• Your perspective of the industry has changed
• Customers are not responding to your products like you thought they would
• You do not have a clear customer journey
• Free users are not using your product
• Customers are leaving straight after a trial
If you are not getting the results you need or want – patience and time could be all you need. Commit to one business strategy and give it a chance to be tested thoroughly before switching. Before pivoting, create a new business prototype and test it out first. Use your best customers and trial it with them, listening to what they have to say will be crucial to your success.
The line between perseverance and pivoting is a thin one but only you will know whether to keep going, to make tactical adjustments or to completely overhaul your business model.
Don’t Panic – Pivot!
“Pivoting is not the end of the disruption process, but the beginning of the next leg of your journey,” says former Independent Vice Chairman of Deloitte, Jay Samit.
It is imperative that companies act decisively when executing a business pivot. Deciding when to pivot your business can be the critical difference between success and failure!
APPII co-founder and Managing Director Gary McKay explains why they decided to pivot their product, sparked by COVID-19.
“In January 2020, I became interested in what was happening in Wuhan, China. When Wuhan went into lockdown, I realised that the same would happen in the U.K. Although we initially looked at this from the perspective of a safe return to the workplace, it became clear that many other industries such as travel, and tourism would need a similar form of personal verification. That gave us a chance to expand the scope of our product,” McKay explains.
The APPII platform was born as a recruitment solution, but today APPII allows 35 different types of checks, including a Digital Health Pass where users can save and verify their COVID-19 test results and vaccination records.
APPII has raised a total of $591K in their latest Seed round and McKay’s advice to founders finding product-market fit is: “To really think about why someone would want to buy a product or service that you are trying to bring to market. Talk to potential customers about how it can address challenges they have. Make sure there is a market for your product and that there is value that initially cannot be matched by your competitors.”
Pay attention to what your customers are saying!
Understanding who your customers are and what their needs are can help you understand if there needs to be a shift in your business strategy. Making a course correction or pivot doesn’t need to be as dramatic as it sounds, and it is not always a change to the entire business model that is required. Sometimes it could be something as simple as a price change. Looking at what is working and what is not can help you re-focus instead of starting from scratch. Understanding your target audience could also mean that the pivot is in fact a change to the target audience and not your product.
Entrepreneur and the author of the New York Times bestseller The Lean Startup, Eric Ries believes: “Famous pivot stories are often failures, but you don’t need to fail before you pivot. All a pivot is, is a change in strategy without a change in vision. Whenever entrepreneurs see a new way to achieve their vision – a way to be more successful – they have to remain nimble enough to take it.”
Netflix is a great example of an online business pivot. They saw a changing market and strategically pivoted to move their company in a new direction. “Companies rarely die from moving too fast, and they frequently die from moving too slowly,” says Netflix CEO, Reed Hastings.
Instagram is another example of a company strategically pivoting in response to a changing market. “Every start-up should address a real and demonstrated need in the world – if you build a solution to a problem lots of people have, it’s so easy to sell your product to the world,” says founder Kevin Systrom.
Other famous business examples of pivoting include Starbucks, Groupon, Paypal & Playdoh. These examples highlight the importance of a company’s need to remain nimble! Allow the original vision of your product to evolve or change and better address the needs of the market.
Co-founder of Materials Market, Samuel Hunt advises, “Don’t be scared to admit that something is not working and pivot if needed. Only you know your product and your sector, and ultimately, it’s your responsibility to determine your company’s future.”
Hunt explains, “The funny thing is that when we raised the pre-Seed round it was for a product that ended up not working at all. It was a great idea on paper and everyone loved it and told me it would work, and we raised £130k off the back of it. Two months in and we realised the idea that was great on paper, didn’t actually work in practice! So, we were sitting there with £100k in the bank and a product that didn’t work. What were we doing? Give it back or try and come up with something else? So, we scrapped it, rethought the model, and relaunched it with a different product. Within a month it took off.”
Materials Market recently secured a £1.5m investment in their Seed funding round to accelerate growth.
“Five years of thinking about one idea that didn’t work, then a couple of months pivoting to something that did. We were worried that investors would be concerned about our initial lack of success, but they loved it. They said, “We’re investing in your ability to make those decisions. If a year down the line we see something that isn’t working, we’ll want you to change that as well,” Hunt says.
You always need to remember that just because you have product-market fit, doesn’t mean you will always have it. It can (and will) change over time depending on your customer’s needs, making it vital for you to continually evaluate market conditions and adjust your business strategy accordingly. Understanding the changes affecting your market, your product and being open to changing the direction of your business if necessary … is the secret to long term success!
“Just because something doesn’t do what you planned it to do, doesn’t mean it’s useless.” Thomas A. Edison
About Michelle Hind
Michelle Hind is the creative director at Chillibean Creative and a freelance brand consultant. She has a special interest in how the levels of employee motivation directly impact the quality of work presented to clients and determine the success of the overall brand experience – from staff through to client.
Michelle has experience working with teams operating in a flexible work environment. Her work as a multimedia journalist has been featured across the United Kingdom and Southern Africa.
She graduated from Rhodes University with a Bachelor of Journalism, majoring in journalism, media studies and psychology.