Product Market Fit in a Global Pandemic

Product market fit, also known as “product/market” or “product-market” fit, is an essential component of profitable marketing and sales for all types of businesses. It occurs when the company- let’s imagine that’s you- can successfully identify their customer base and target them with the most fitting product. 

The idea of product-market fit was popularized by Marc Andreessen (who credits Andy Rachleff, co-founder of Benchmark Capital). Andreessen defines it as follows: 

“The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can.”

Essentially, this is the end goal of a product-market fit strategy; you want to be overwhelmed with orders. Achievement is reaching a point where one successful product becomes the main focus of your business at that moment, and you aren’t able to make major changes to it because you’re hustling to keep up with the demand.

In this article, we will discuss how to find the right product to fit a certain market. Furthermore, in the context of the global pandemic, we will consider the implications and necessary changes in business strategy.

How do you strategize to find product market fit?

Some good news: it shouldn’t take very long for the company’s founders to decide which products do or do not have potential. Primarily, to have a successful startup, you must not spend funds without first performing an in-depth analysis to understand if the customers actually want the product in question.

Premature scaling is detrimental to businesses at the beginning stage. Also, when strategizing to find product market fit, it’s important to keep in mind that flexibility is key. You must have the ability to pivot quickly on the startup ideas and re-evaluate your business model based on customer feedback.

As cited in a uxplanet article, “Dan Olsen, a product management expert, has proposed a six-step framework called the Lean Product Process, which allows you to go through the right process of measuring the product/market fit.”

1. Identify Your Target Customer

• First, perform market research and more specifically market segmentation to clearly identify your target customer. Segmentation refers to dividing the broader market into segments of people with similar needs and behavior. 

2. Select Underserved Customer Needs

• Next, determine the most significant and urgent needs which potential customers might have. Finding everyday, specific, and especially underserved needs can create an excellent market opportunity. If there is a large demand or need for the product, your target market will expand quickly. This provides your startup with a huge opportunity for growth.

3. Define Product Value Proposition

• Defining the value proposition has to do with your strategy to outperform the competition. Most likely, the potential market already has companies marketing similar products. As a result, a product should be more efficient, complete, or distinct from the competition’s product in some way in order to succeed. Testing something utterly innovative and ground-breaking is another promising way to win potential customers and their dollars.

4. Specify Your Minimum Viable Product (MVP) Feature Set

• Every large project has to begin somewhere, and reducing the scope will greatly help your team select the best possible features for the product. As youexec outlines, to create a Minimum Viable Product, the team will brainstorm possible feature ideas for each customer benefit. Then, for each benefit, the top five features will be identified and consequently scoped down to the most important aspects of the product. These will make up the priorities of an MVP feature set. It should be apparent to customers from the MVP why it is worth buying, and superior to competitors. For example, one standard MVP is that if users have to create an account with your product, then they should be able to delete it at some point too. 

5. Create Your Minimum Viable Product Prototype

• Keep it simple; don’t code until you have the prototype readily at hand. Hundreds of prototyping and mockup tools exist, such as UXPin, Sketch, and InVision, just to name a few. Use any of these to model your product and then you can start testing it.

6. Test the MVP Prototype With Potential Customers

• Once the MVP prototype is ready for release, the next step is to receive feedback from the target audience. An important piece to remember is to exclude friends and family from this data gathering unless they are a potential customer. You want the most accurate comments, questions, and information on this preliminary test, so that you have better chances of finding product market fit.

Furthermore, testing the product market fit consists of six major steps. We will go through each step separately, as shown on uxplanet.

The 40% Rule: One extremely simple metric used to test product market fit is the so-called 40% rule. If 40% of the surveyed customers say that they would be very disappointed to no longer access your product or service, then you are doing well. Additionally, if 40% of them say that they consider your product a “must-have,” you are also seeing success.

Bounce Rate: “The bounce rate is the percentage of users who visit a page on your website and then leave it before taking any action. In some instances, around 60% bounce rate is considered high. This can mean that your website is not giving the right first impression to its visitors.”

Time on Site: This is yet another tool you can use to test product market fit, and it’s even simpler than the bounce rate. The more time people spend on your website, the more they are engaged and likely to buy your product.

Pages Per Visit: The average number of pages a user navigates through on your site during a single visit is important because if the user visits more than 4-5 pages, you can take that as positive feedback. This indicates that the user/site visitor is interested in what they see on your website.

Returning Visitors: Users who have been to your website once and have decided to come back are another great indicator of a successful website and product market fit. The percentage of returning visitors can vary based on your industry. For this reason, compare industry average values. Also, compare the number or percentage of visitors returning weekly and monthly to your website for better data. A large number of returning visitors reflects a product’s lasting impact. If the return rate for potential customers is below 25%, the product market fit is not there yet.

Customer Lifetime Value: “The customer lifetime value can be defined as the average profit from each customer during the entire time they remain your client. If you want a sustainable business, you need to have repeat users who are eager to pay.”

Keep in mind that these strategies and processes came before the COVID-19 pandemic, so you should adjust your plan of attack accordingly; we’ll get into that in a later section! However, they are a fantastic guideline for your early-stage company to follow. Continue reading to see what you should do once your startup business achieves product market fit.

What step comes next when you find product market fit?

“After achieving product market fit, the next step is to scale by finding more customers within your target market through research (user feedback and interviews),” according to Hotjar. Let’s dive into details about how to measure and understand product market fit, owning customer relationships, and best data collection practices.

Theoretically, you can measure product market fit with surveys to find out what percentage of your users are very interested in your product. However, it is often better to steer away from hypothetical percentages and lean more towards a tangible, deep understanding of your customer base, their feelings about the product, and the ethos they perceive from you.

“Is it creating organic growth, where people spread the word on their own? Are people willing to pay for your product? If they are, you have product market fit. The road to product market fit is often driven by finding customers via word-of-mouth, before you build a marketing engine to scale user acquisition” (Hotjar).

A startup or early-stage company’s product or service will probably satisfy a small part of the market. However, as you grow and expand, so will your ideas and understanding of how to provide for your customers and potential customers. It is crucial to establish a good relationship with your customers and receive their feedback many times, in order to develop an understanding of the market fit and needs in the first place.

One-on-one interviews with your customers are a very effective way to spot problems, brainstorm ideas, upgrade your product, and build key relationships. They will also form your basis to understand customer segmentation. It can be awkward and difficult to reach out directly at the beginning but take your time.

These interviews can take place over the phone, over Zoom or a Hangout chat, or in person. Regardless of what you are trying to investigate (which you should have a specific question template for), always feel free to improvise and elaborate as the conversation continues. You’ll generally need informational questions like:

One winning idea to collect data is through your company’s internal team members, especially customer staff. If you currently have a small team, you will have to provide the customer support yourself; when you grow, it’s a smart idea to keep customer support staff in-house and not extend outwards.

Customer support is the backbone of your startup’s data collection, because it is the front line where people can visit, talk, and feel their concerns and requests being met. This can easily drive your understanding of the target market, current demand, and help you strategize for the future.

It can also be extremely beneficial to set up a system where your product team can receive and report customer feedback. When you receive feature requests and complaints about products or the website, it will be documented and they can be used as a learning opportunity.

Having conversations about why the product is or is not working will lead to useful solutions, maybe similar to the changes your customers had suggested. This tracked information will help in building a marketing strategy that ultimately accomplishes product market fit.

“The context for customer feedback is always crucial. A piece of feedback that does not look relevant today might be good six months down the line if you switch focus to different markets or business goals. For example, if your next quarterly goal is to reduce churn (the percentage of subscribers who cancel their recurring revenue subscription), you can then specifically look for feedback submitted by churned users.

Also, usage frequency affects the value of someone’s feedback: feedback from customers who rarely use your SaaS can be weighted differently from those who use it daily. The type of user—free vs. lead vs. paying—also affects their feedback value to your business” (Hotjar).

What should you do when you’re not finding product/market fit?

“Probably the biggest cause of failure is not making something people want. The biggest reason people do that is that they don’t pay enough attention to the user,” says Paul Graham.

If you feel that your product will not achieve product market fit (and you’ll probably have a strong feeling either way), the best solution is to pay more attention to your customers and their needs. Really analyze your data, and be sure to receive as much feedback as possible in order to facilitate the re-evaluation process.

Startups can often get caught up and want to stick to a certain initial product or service, without catering to the market trends and customer.

Avoid premature scaling of any product, especially at the start. If the product isn’t performing well, or your customers aren’t engaged and providing feedback, try something else! Additionally, build on the customer feedback you do have, positive or negative. Use creative brainstorming. Remember, flexibility is a key to success and you have to be willing to change plans if the previous ideas aren’t working.

What does product market fit mean in a global pandemic?

Finding product market fit can often be a difficult, time-consuming task, if not performed correctly. Success in this endeavor is usually a result of focusing on the market first. This piece is especially principal in the context of a global pandemic. As ycombinator says:

Founders often hold too tightly onto solutions and too loosely onto problems. The problem, i.e. the market, is the real opportunity. Your unique and special v1 idea on how to solve that problem is usually wrong and only through launching, talking to customers, and iterating will you actually find a product that reaches product market fit. Founder genius is most often expressed in choosing the right problem to solve. As Andreessen wrote, “the market pulls product out of the startup”.

Product market fit in a global pandemic could mean many things. There are infinite possible new products and more specific needs that people have as a result of the pandemic. Find a niche and go with it! Use the tools that weren’t widely available or invented in the past to your advantage.

Moving with the time is the only way to stay superior to your competition. And again, study the market before you assume what people need. A successful product market fit in the pandemic could be exemplified by something you’ve never even thought of. Be creative.

What are some ways to change methods to suit the current climate?

We currently find ourselves in a very different global situation compared to even a few years ago, in a myriad of ways. For one thing, the pandemic has largely changed how business is performed; a high percentage of meetings, tasks, and even entire jobs are being performed remotely, not in person.

This shift in the world suggests that diverse, up-to-date business strategies and templates are necessary to keep up with the current time. Teams and companies across the world have had to totally revamp and redesign their plans.

As Gray Matters Capital and coLabs observes:

In COVID circumstances, startups have been forced to reinvent tech-and-touch models and shift to totally digital methods. In many countries, they have been fortunate to encounter growing smartphone penetration and acceptance of social media platforms, particularly WhatsApp, to be able to reach and engage customers.

In particular, with WhatsApp Business, startups can interact with their customers in a direct and personal way. It enables them to operate remotely while providing them with a convenient option to engage with their users/customers in a responsive manner.

Just as it upturned every aspect of life, COVID has created a shift in how startups communicate with their customers, collect feedback, etc.

“These ways of working in person are out of the question, effectively precluding the wide range of human-centered design tools and lean experimentation that have come to define best practice.”

In the place of previous methods, startups are having to rely on low-touch methods such as phone and web surveys, video calls, and data analysis to gather the necessary vision to develop superior products.

Information from case studies of startups performed by Gray Matters Capital and coLABS provides some insight for others attempting to fit remote methods into their product market research plans. For example, responses to web surveys are showing very low rates (<15% in emerging markets). This reflects peoples’ busy schedules, low digital literacy, and their underlying feelings about providers.

Interestingly, users who show more activity in relation to the product, and probably benefit from it more, are more likely to respond to surveys. This skews results towards those who are content. Moreover, web surveys are more useful to understand a product’s active users and what the product could be doing well, not the customers lost.

Additionally, incentives are powerful in eliciting responses, but giving out airtime rewards isn’t straightforward. Startups are not always able to legally or logistically credit accounts or deposit rewards into customers’ wallets, so this data-soliciting tactic may not be right for you.

One major aspect to consider in today’s world is the prevalence of spam and the tendency of certain people to completely block out some digital information or advertising.

As the article by  Gray Matters Capital and coLABS says, “An effective engagement plan to drive communication is key to avoid the perception of “spamming” and to deliver a superior user experience.” Nobody likes receiving spam, so make sure that your questionnaires don’t seem that way. When it comes to experiments, lean experiments are a great way to test ideas. Still, interrogating usage data gives the most results when deciding what to test and under what conditions. Startups should use these data insights to come up with strong hypotheses which will serve as the company’s foundation for lean experiments and quick iterations. “

Data analysis is a good way to confirm or reject hypotheses about value propositions and product market fit, often better than fieldwork as what people say doesn’t always match what they do” (Gray Matters Capital and coLABS).

Apart from the pandemic and its implications, venture capital is also a resource quickly gaining popularity and creating opportunities, ones that startups should take advantage of. Going the venture capitalist route will often result in forfeiting a large share of the company (think Shark Tank). As all startups nowadays know, development without financial help and means of publicity can be downright impossible.

However, use the technological and social tools available to you that weren’t available 10 years ago. We guarantee that your competition is trying them out. By keeping a flexible attitude, seeing problems worth solving, and focusing on the market first, product-market fit in the global pandemic is all yours for the finding.

At M Accelerator, our startup cohorts focus on Product-Market Fit.