Last editedOct 20202 min read
Achieving a product-market fit is an enormously important goal for start-ups, but there are lots of misconceptions that may hinder your understanding of this critical business concept. What is product-market fit? Find out everything you need to know about how to achieve product-market fit, starting with our product-market fit definition.
Product-market fit definition
Product-market fit is a relatively new concept, and as such, there are many different product-market fit definitions in use, many of which overlap. Put simply, product-market fit is the degree to which your product satisfies market demand. In other words, it’s the ultimate goal for a start-up: developing a product that meets a real customer need and does so in a way that is markedly superior to the alternatives. It’s when your value proposition, your distribution channels, and your customers are in perfect alignment, and as such, developing B2C or B2B product-market fit should be one of your company’s key goals.
How to achieve product-market fit
Learning how to achieve product-market fit is easier said than done. Although there’s a unique path for every company that reaches product-market fit, there are a couple of common steps that should be covered – in some way, shape, or form – by your roadmap. Here’s an essential guide to achieving B2C or B2B product-market fit:
Establish your target customer – Firstly, you’ll need to define your target customer, i.e., the users who will benefit the most from your product. Market segmentation is an excellent way of determining which customers to target. Begin with a high-level hypothesis of who you imagine your target customer to be. Then revise and tweak your target users as you refine the product (a process referred to as “iteration”).
Identify the needs of your customers – After you’ve got a solid understanding of your target customers, you need to conduct product-market fit research to find out more about their underserved needs. It’s crucial to identify needs that correspond with substantial market opportunities. “Good markets” are defined by a couple of key characteristics, including large numbers of potential users, ease of user acquisition, and high growth in potential users.
Determine your value proposition – Next, you’ll need to define your company’s value proposition, i.e., the plan for how your product will meet the needs of customers better than your competitors. Think about the unique features of your product and make sure that you don’t forget about your product roadmap. After all, you don’t need to address every possible challenge to achieve product-market fit.
Create and test your product – “Minimum viable product” is an important term to understand when planning your product-market fit strategy. Essentially, it refers to the version of the product that can satisfy early customers and prove that your business is going in the right direction. Create a prototype for the minimum viable product and get critical feedback from your target customers. You can use this testing phase to gain insights into what works and what doesn’t before refining the initial prototype. At the end of the testing and refinement phase, you should have developed a product that can help you achieve product-market fit.
Measure your product-market fit – Now, you’ll need to measure your success rate to determine whether your product-market fit strategy has been successful. There are a few different data points that can help you track performance. You should work out your total addressable market (TAM) before determining what percentage of the TAM are your customers. This will help you to understand whether you’ve been able to achieve product-market fit.
Be vigilant – Finally, it’s important not to become complacent. One of the biggest misconceptions is the idea that once you’ve attained product-market fit, you can’t lose it. You can, and as such, it’s important to re-evaluate the market regularly to ensure that you’re still meeting the needs of your target customers.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.
