One of the most important marketing factors entrepreneurs must consider is product-market fit.
No matter how great your business acumen and execution is as an entrepreneur, “if the dogs don’t eat the dog food,” you will fail.
Even if your team designs the perfect product, if there is no market for it, you will fail.
If you haven’t tested your target market for product-market fit, your project may land dead on the drawing board. It doesn’t matter how excellent your teams is, or whether your product is truly revolutionary or drool-worthy.
What is Product-Market Fit?
“A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product”
The product-market fit underscores the importance of customer demand. In a given market, customers adopt products that solve problems related to their constraints or pain points.
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However, even if the product functions optimally and provides customers with an ‘AH HAH, WOW” moment, if the market lacks heavy customer interest, the product withers and fades.
Prior to gaining product-market fit, startups must also explore their problem-solution fit. Without insight into the problem the startup is trying to solve, they may never achieve their marketing goals.
Problem-solution fit implies the startup has a problem worth solving and it hits home for a potential customer.
To uncover their problem-solution fit, startups should engage in early stage interviews or sales meetings, calls, and demos. Through these organizational processes, the startup will begin to realize their product in terms of a solution to an aching problem within their target market. Then the startup will be positioned to gain market traction.
The Art of Iterating and Pivoting
In order to gain said traction, startup teams can conduct experiments to evaluate the impact of their product. One way teams can achieve this is through a/b split-testing, but by no means does achieving product-market fit depend on a/b split testing. It’s just one experimentation method that helps tease out product-market fit.
A/b split-testing is the process of design iteration. In effect, the team dons a white lab coat much in the vein of a scientist. Then they go to work designing different test-phase, minimally viable products for their markets.
If one design flops, the entrepreneur and her team tests another iteration of the product. If it also flops, the entrepreneur may pivot to discover a more healthy product or market — saving themselves from dissolution.
The entrepreneur leverages data points from analytical tools and key performance indicators (KPIs) to determine if their product is gaining market traction. They makes their calls based on such indicators as product sales, customer surveys (feedback), site bounce rates, and other measures.
Product-Market Fit and Market Psychology
At Pathfinders, we have developed a framework where we can walk you through a process of market discovery, customer orientation, and product launch. In essence, we’ll help you gain some insight into your product and determine if you have a product-market fit.
The process will also help you better understand your target market and if you need to consider pivoting. It’s imperative that new startups take the notion of product-market fit seriously, lest they suffer the consequences of releasing a product into a lackluster, unenthusiastic market.
Startups only succeed at altering the dominant paradigm and gaining sales when they have a full grasp of market psychology.