What is Product-Market Fit and why should I care?
I try to avoid lean/startup jargon when I’m talking with customers so we don’t get confused with terms that are not used consistently. Confusion over “MVP” usually gives me a headache. But if a customer is familiar with lean, agile, design thinking, etc… I will use the jargon to show my knowledge of the concept while checking to make sure we are working off the same definition.
The term “Product-Market Fit” has been popping up recently in conversations with potential customers so I wrote this to help my sales team understand it’s origins and why it’s important.
Where did the idea come from?
Marc Andressen, of Netscape and venture capital firm Andressen Horowitz fame, introduced the term in 2007. He argued that the top company-killer is lack of market and this could not be overcome by a great team or product.
“In a great market — a market with lots of real potential customers — the market pulls product out of the startup.
The market needs to be fulfilled and the market will be fulfilled, by the first viable product that comes along.
The product doesn’t need to be great; it just has to basically work. And, the market doesn’t care how good the team is, as long as the team can produce that viable product.”
What is it?
“If you have to ask whether you have product-market fit, the answer is simple; you don’t” – Eric Ries
There are different ways to define this. Sean Ellis says at least %40 of your users saying they would be “very disappointed” without your product. Marty Cagan says product-market fit is achieved when a product meets a threshold number. This could be a number of customers who buy or indicate an intent to purchase, utilization or engagement metrics
I think of it this way. A market is a collection of customers with a similar problem. When a new product meet’s the market’s minimal needs and they get excited about the product and a critical number of them open their wallets you have achieved product-market fit. Most people bring me an idea and together we go looking for a customer with a problem that we can solve in a unique and valuable way.
The annoying thing about product-market fit is that it will take rounds of experimentation and learning to get there. Anyone who tells you they know the right answer is kidding themselves.
Other good reads on the subject
Ash Maurya – The First Thing That Matters: Product/Market Fit
Ash Maurya – 10 steps to product/market fit
Eric Reis – What is customer development?
Venture Hacks – Customer Development: How to develop your customers like you develop your product
Customer Development Process: $300k More In Leads Using The Visitor Vocab Technique
Image: One of the many lovely mosaic’s at Parc Guell in Barcelona, Spain
