What Does Product Market Fit Look Like?

Product Market Fit is the holy grail that every startup in Silicon Valley is trying to find. The term, introduced by investor Andy Rachleff, is a binary measure of whether a product is able to satisfy a market. In writing, this concept may seem pretty simple, but in practice, it can be much less straightforward. So, why is Product Market Fit so important, and how do you know whether you’ve found it for your product?

First, why it matters.

Product Market Fit is important because it is usually the tipping point for a startup. After finding Product Market Fit, startups can then focus on scaling their product in that market, knowing demand exists. This makes it both the primary goal for all early stage startups as well as a key milestone. Scaling an organization around a product that doesn’t have Product Market Fit can be devastating to the company. Steve Blank warns of “premature scaling” of startups as one of the most common ways of startups failing. Startup Genome’s study on why startups fail confirms this: “In our dataset we found that 70% of startups scaled prematurely along some dimension.”

So it’s important, but what does it look like?

Pull Not Push #

A distinguishing characteristic of when a product satisfies the market is that the market can’t get enough of it. This means that you don’t have to do a lot for people to want to use your product — minimal marketing and sales. Word of mouth by passionate users will be enough to grow your user base. Marc Andreessen describes it: “In a great market — a market with lots of real potential customers — the market pulls product out of the startup.”

When I was at my first job at a large consulting company, I was frustrated by the way new consultants were matched with their first project roles. I built a web app that gave managers a way to match project roles with new consultants by filling out some information and seeing a list of candidates that were a best fit for their team. Initially, I was glad that my side project was adopted and used in our office, but then something weird started happening. After a few weeks I was getting phone calls from colleagues all over the world asking if I could give them an instance of my app. It was baffling at the time because my app was built for a very specific use case, but in building my product I had indirectly found a fit for a set of problems nobody was solving at the company. So the phone calls kept coming.

Customers Act #

In the early stages of a product before any meaningful volume of users are using the product, customer feedback and conversations are the best way to figure out if you’re on track in building the right thing. In this situation, it’s common to have users be polite and say “that’s great” at everything you show them. The main thing to look for is user action that’s beyond what you’ve asked of them: asking to be an early user, attempting to use a broken product, paying early to access the product.

Peter Reinhardt from Segment gives a great example in his Startup School presentation where he describes sharing a list of features he has in the backlog with a user to determine what to prioritize. During the discussion the user is positive and indicates polite excitement for the features, but then one feature comes up that’s a game changer to him. His whole demeanor shifts. He hones in, asks when he can start using the feature, and tries to get a colleague on the phone to share the news. Not every product is going to get the same reaction, but when your target users start going above and beyond to use your product, you’re onto something.

Early Adopters Stick Around #

Do people that use your product keep using your product? A sticky product is one that keeps its users coming back. This is one question that can be answered with metrics, and valuing retention related metrics above other vanity metrics like acquisition and active user count is very important. A product that doesn’t retain users over the long run (caveating some markets that have deliberate churn, i.e. dating apps) is unlikely to survive regardless of how many current users it has today. It will end up churning all those users in the future. This is where premature growth is dangerous. Retaining users means your product is able to deliver sustained value beyond the initial sales pitch. Of course if people don’t keep using your product, it’s likely that they won’t be recommending it to their friends and coworkers either.

Product Market Fit is not easy to achieve and not always easy to identify, but it’s very important to make sure that you’re at Product Market Fit before scaling. Oftentimes Product Market Fit is described like love — you just kind of know when you’ve found it. I hope that this post sheds some light on what that might look like for your product.