How to achieve Product-Market Fit: Tips and Best Practices
- Martin Anev
- Jun 5, 2024
- 4 min read
Many startups face the challenge of launching a product only to find it doesn’t meet customers’ needs or expectations, despite being in a market segmentation with a lot of real potential users. What tends to happen next is the development of new features or investing a lot of capital in marketing strategies with little to no success.
For many founders, it is hard to understand and discover why a product is not taking off. Even if you have a market segment that you believe is solid, your product, or service might not be market-fit for that particular group. It is not enough to find an untapped market or to develop a product in a market with competitors that do not satisfy the needs if your product itself is not aligned either.
Let’s define first what product-market fit is. The term was coined by Marc Andreessen in a 2007 blog post; he defines it as being in a good market with a product that can satisfy that market. Not to be confused with Market Validation, as this is the process to determine whether there is a need or demand for a product or service in the target market.
The Product-Market Fit Pyramid
It refers to a framework mentioned in The Lean Product Playbook. This model is made out of five key components, forming layers of a pyramid, each directly influencing the levels above and below.
Target customer
The customer's underserved needs
Value proposition
Feature set
User experience (UX).
This process helps with articulating, testing, and revising key hypotheses, therefore enhancing the product-market fit progressively. The lean methodology is particularly useful for early-stage startups, since it focuses on creating needed value with fewer resources and less waste.
Before we continue, it is important to have selected a market segmentation and validated said market. If you have yet to do either one or both, you can read our articles on how to select the right market segment and market validation.
Achieving Market Fitness
The Lean Product Process consists of six steps:
Determine your target customer
Start by defining the users, who will ultimately decide how well the product meets their needs. Market segmentation is a great way to narrow down the target customer and learn more about them. Likewise, personas help you to visualize and better define the user characteristics and keep the team aligned on who they are building for.
Identify underserved customer needs
Gather feedback from target users using surveys and 1:1 interviews to identify and ground hypotheses about needs, usage, and product perception. Remember to go back to your user personas to update them with the data collected at this stage.
Define your value proposition
Your value proposition is the way your product will address the market's needs better than the current alternatives. An important question you want to answer is: which, of all the potential user needs, is your product going to meet and focus on?
Specify your MVP feature set
Using your unique value proposition, specify what functionalities will be part of the minimum viable product. Remember that the MVP approach focuses on building only the needed features for your target customers to find value and validate further that you are headed in the right direction.
Create your MVP prototype
In order to gather feedback specifically about your idea, you need to show end users a version of the product they can use. UX, or product designers, are key players in this step as they bring the prototype to life and conduct the research.
Test your MVP with customers
Once the prototype is ready, is time to gather customer feedback directly from the target users. Using personas, ensure that the research participants are in your target market to guarantee the insights are relevant and reliable to iterate on.
By ensuring product-market fitness, you avoid the significant risk of investing substantial resources into developing a product that ultimately fails in the market due to a lack of demand. Without this step, companies might spend large amounts of time, money, and effort creating features and capabilities that potential customers do not value and use. This misalignment can lead to low sales, poor market reception, and eventual financial losses that can lead to bankruptcy.
Confirming the viability of the marketplace and focusing on prospects who genuinely need and want your product can result in higher conversion rates, escalating sales, and a broader market presence. This strategic approach not only enhances profitability but also builds a loyal customer base, contributing to long-term business success and allowing you to identify and capitalize on market opportunities more effectively, driving faster growth and scalability.
The Challenge!
Making informed decisions is challenging, but crucial for making progress. It's especially difficult when faced with multiple options and criteria. A simple canvas can be an effective tool for setting priorities to test with users before defining the final version of your MVP.
Using our Product-Market Fit Canvas, we challenge you to sit with your team and come together to workshop each step. This enhances problem-solving by offering different viewpoints and reducing blind spots. It helps identify potential issues and opportunities that a single person might overlook.