Product market fit. Do you have it? It’s a critical question for any company, but especially those early in their development. With it, customers will beat a path to your door. Without it, you’ll spend most of your time convincing customers that they need to buy your product. Think about productivity tools like Slack or Trello. Did anyone have to justify the spend on those tools? The answer is “No” because they have excellent product/market fit. But what about that tool that helps your team choose which place to go for lunch this week? It’s one of the first subscriptions to be cut when trying to manage your cashflow.
So how do you know whether you have product/market fit, because as be seen from the examples above, it can literally be the difference between being classified as “mission-critical” or classified as a “nice-to-have”.
There are lots of high-profile discussions regarding “product/market fit”, including Marc Andreessen defining it as being in a good market with a product that can satisfy that market (which, with all due respect, doesn’t really help a company figure out whether it has it or not). Sean Ellis developed a heuristic that says, “if at least 40% percent of surveyed customers indicate that they would be "very disappointed" if they no longer have access to a particular product or service” or said alternatively “at least 40% of surveyed customers considering the product or service as "must have". This was validated by Rahul Vohra of Superhuman in his survey-based approach.
Surveys can be done qualitatively or quantitatively, with prospective customers or existing customers. And it can be done relatively easily and quickly. Obviously, the more in-depth you go, the more confidence you can have in the data. If you’re looking for quick validation, a quick survey of a sample set of prospect and current customers would be sufficient. But if you need to determine product/market fit to show investors, or to help make large strategic decisions about the direction of the company, a more robust analysis would be recommended. However, the approach, you’ll learn whether your customers will fight to keep your product, or whether you could be collateral damage in the next round of budget cuts.
If you’d like to do a Product/Market fit analysis, but don’t have the resources or expertise, or would like it done by an independent 3rd party, please contact Nagree Consulting. We have 20+ years of helping businesses make sound strategic decisions and executing and scaling against those decisions. To learn more, please visit www.nagreeconsulting.com or email us at email@example.com
Azim Nagree is an ex-Bain consultant with 20+ years in leading strategy, growth and operations transformations.