Product-Market Fit | 6 steps to develop your success in the market

  

Product-market fit is defined as the ability of a product or a service to satisfy customers' demands and commonly meet the market's needs. You found a good market when a target customer is persuaded to use and buy the product you offer. This decision means that your value proposition satisfies a market's and potential customers' needs and pain points in depth.  

An example of such a company is Netflix. Netflix is ​​a platform that offers on-demand movies and series, is constantly evolving with new additions almost every month, and has now launched its productions.  

  

Where does Netflix's success rest? 

  

First of all, everyone watches what they enjoy on any day. In addition, during the pandemic, the platform's usage increased as it offered ideal content to spend those days. While, now it makes its productions, thus shaping pop culture. So Netflix provides a combination of movies and series at a reasonably affordable cost for the variety it shows.  

Netflix, which initially focused on online movie rental, whether DVD or Blu-ray, saw the needs and shortcomings of the market and adapted by launching its current platform like everyone knows today.  

 Shortly, Netflix comprehended the strong market demand and increased its customer lifetime value proposition by developing a service with many returning visitors and fans. 

Netflix product-market fit succeeded. Why not does your company achieve product-market fit too? 

  

What is a product-market fit? 

As mentioned, the ability to fully understand the market's needs and offer a product or a service as a solution to these needs and give public satisfaction is a product-market fit. 

By achieving product-market fit, success is inevitable. Potential customers will search for your company to overcome their problems. So inevitably, turn to your company, as you will solve an actual problem for them, and your success will be motivated by word of mouth. 

Your sales statistics will skyrocket, and you will no longer even need to advertise your product, as customers will come to you on their own. 

All the above are described as a market fraction. But to achieve market traction, your business model has to have a high or extremely high degree of product-market fit. 

In more detail, the product-market fit is:  

 1. The way you understand and categorize the market's needs, and you know that it is time to endorse your product. You have to have at least a minimum viable product prototype within your target market to start. 

2. The way you deliver a product that consumers desire to buy. Due to numerous goods today, this is tricky, and it is the absolute achieving product-market fit when it comes true. 

3. The search of issues in the market and their classification into essential and insignificant. It is your final decision on what you will deal with. A critical point since it will judge your last approach and final development. 

4. As mentioned above, the mouth-to-mouth advertising of your product is one of the most noteworthy results of the product-market fit process. People operate your development, suggest it, and unintentionally advertise it mainly on social media. So, your marketing department has less to do with the promotion part. 

5. Your product must be exactly what consumers and the market need. It must be something necessary, something that will enhance and change consumers' lives, and something innovative that will push consumers in the market or pay a subscription and prefer it continuously. 

You do not have to alarm or get anxious about the product-market fit; your customer support staff can take straightforward steps to initiate the procedure. Here you can find a complete framework and 6 ways to increase your product-market fit's value proposition.

 Your steps: 

Step 1: Keep track of your product purposes 

Which product do you want to promote in the market and why? Do you release it to build a brand name or solely increase financial earnings? How many budgets are you willing to spend on product development and promotion? Which is the target audience? How many customers do you want to attract? 

The acquisition of users will not happen overnight. You must have specific goals, which many startups lack, and appropriate market research. 

The development and recording of the above goals must be done with absolute attention and cooperation by many additional departments of your company.  

For instance, the Manager Director would cooperate with the CEO's department to develop a strategy of product goals and financial goals. 

Then financial goals are subdivided into Product Team Goals. The Product Team Goals will shape the Product Hypotheses that the product team will design. 

  

Step 2: Research your target customers 

Investigate the market and the public thoroughly once you have recorded the goals and purposes of the company. 

What are the market's weaknesses? How will you strengthen and be a solution for them? What complaints do consumers have from competitors? 

Conduct audience surveys, market research, read texts, get customer feedback through sampling, inform and discuss through social media. All the above offer you a global picture of what is happening in the market. 

Through these, you will reach and communicate with a specific target audience, on which you will rely and advance your strategy to achieve product-market fit. 

In conclusion, the overhead results are related to your product's original idea and purpose. So, at this point, you can reshape your product and your goal, make modifications or even reject your idea regarding your target audience.  

Whatever happens, you will often benefit since you are still in the initial stage of preparation, understand helpful information about user acquisition, and have not invested many funds from your budget yet. 

  

Once you organize to launch a new product in the market, contact your existing users and discuss with them in detail the possibility of launching. Customer development is all about letting them tell you their opinion and impressions to record and make the necessary modifications if necessary.  

  

Step 3: Write down the product ideas          

This part will record all the ideas according to the product you want to release or re-release in the market as detailed and targeted as possible. For example, how did you come up with the idea? How will you introduce the product to the target buyers?  

First, get ideas by talking to your existing customers, seeing more statistics about running a start-up, conducting surveys, and getting statistics on the market's needs. Next, talk to your employees, constantly brainstorming for a long time. Finally, once you have recorded all your ideas, write them down on a piece of paper or digital document and proceed to step 4. 

  

Step 4: Prioritize the products theses 

It is time to check and categorize the ideas depending on your goal and purpose. Set priorities and discuss with colleagues in the sales, marketing, and production departments (Tech Leads and Designers). 

Try to limit your ideas and focus on handling a few since the fewer ideas you have to operate, the more focused you are on getting the slightest detail done. Finally, evaluate all the data, the technology you have in your possession, your budget, and your workforce to develop your product. 

  

Step 5: Use metrics and tracking 

Once you have clarified your goals, found your target group, and recorded your ideas for promotion and release, you can proceed to step 5. 

To succeed in the product-market fit, you must fully understand the market you address through accurate metrics to show you desired results. Check the market dynamics you are targeting and whether your product is decisive enough to withstand the competition. 

The first step is defining your Total Addressable Market (TAM) and identifying the size of the market you can reach. Your TAM should be the consumers with the underserved requirements you are targeting. 

Specifically, examine if the product satisfies their needs, ads new features, provides for their underserved needs and eliminates the risk that leads to most startups fail 

Other significant factors are SAM & SOM. Service Addressable Market (SAM) is the geographical zone you serve with your product. At the same time, Service Obtainable Market (SOM) is the number of audiences you can obtain regarding your SAM. 

  

To find a final number, multiply your SOM number by your Average Revenue per User (ARPU), which will estimate the entire probable income for your company.  

  

But how will you evaluate this income? According to the SaaS rule of 40, this is a declaration that development rate and earnings are inversely affiliated and will usually add up to 40. 

  

Step 6: Measure product/market fit with NPS and PMF 

  

Providing that your development rate is lower than 40%, your product didn't find the product-market fit. So, the Net Promoter Score (NPS) can change this situation by requesting your audience a specific question: "How possible is it to recommend our product to a friend or colleague?". In a nutshell, "how possible is it to make a mouth-to-mouth advertisement?"  

  

Your consumers can pick a number 0-10 where zero is "never," and ten is "absolutely probable." Then, you can categorize responses and audiences into three categories. 

  

• Those who answer with nine or ten are Promoters.  
• Those who reply to you with seven or eight are Passives.  
• Those who answer you with six or less are Detractors. 

  

The first category is pleased with your product and will promote it. The second one is moderately happy and will probably not boost it, and the third one is not satisfied. Therefore, it will not encourage you; on the contrary, it makes a mouth-to-mouth slander. 

  

  

The more people you ask, the higher the percentage of answers, and you will be able to reach a final result regarding the Promoters, Passives, and Detractors. 

  

To get to the NPS, divide the percentage of Detractors by that of Promoters. 

  

In addition to NPS, there is a PMF survey (Product-Market Fit), in which participants answer on a scale of 1-3. (Not disappointed, Mildly disappointed, and Very disappointed) about how they would feel if they could no longer use your product. If more than 40% reply "Very disappointed," you've dealt with product-market fit.  

  

The more consumers respond "Very disappointed," the more influential your creation is, and the closer you meet the market's needs. 

  

Until your product is established, all these percentages will change frequently. If the initial rate does not exceed 40%, do not be disappointed, as it can change immediately with participants' modifications, research, and feedback. 

  

  

In addition to the 40% rate at NPS and PMF, other indicators and data that show that your outcome gains and will continue to be successful are: 

  

1. Product ratings, ad data, social media ratings, clicks on your copywriting, and other forms of engagement related to product promotion. 

When rates are high, the product and market are well-matched. 

2. When the amount to gain potential users is three times less than the lifetime value, you have signs of product-market fit. 

  

No business deals with product-market fit right away, but with proper planning and intentional research, you can get pretty close and see the success that exceeds the 40% rule of SaaS and achieved in NPS and PMF. 

  

Do not hesitate to contact us if you want to boost your business performance and learn all the secrets of the marketing world. Our approved team is here to assist you with anything you require!