Startups usually have a notoriously small budget, which means that trying to sell your products to everyone will likely result in disaster. As startup owners, you need to keep a narrow focus on your target market, and most importantly, develop a product-market fit.
A Startup should prioritize product-market fit above all other goals because finding the PMF will dramatically increase their odds of your business success. Conversely, many startups fail because they waste money on products that no one wants to buy.
What is a product/market fit?
A product/market fit describes a startup company’s stage where they have successfully identified a target customer and serve them with the right product through the right channel. After achieving product/market fit, the next step is to scale by finding more customers within the target market.
To successfully achieve a product/market fit, a startup must follow the following steps
1. Determine your target customer
Work to identify the target customer who represents the users that will most likely benefit from your product. Use market segments to define your ideal customer. Develop prototypes for those customers, so your team will clearly understand who it is building toward.
2. Gather intelligence
Once the target customers have been identified, talk to them to determine their pain points and how much they would consider paying for a solution to those challenges. Collect a large data sample to provide meaningful feedback. Consider, too, that face-to-face conversations will often generate feedback that online surveys will not.
3. Focus on a single vertical
Start with a narrow focus and dive deep into your industry. Establish yourself in a niche and become an expert in a single domain to stimulate a viral spread.
4. Specify your value proposition
Remember that your startup cannot solve every problem and determine which customer needs you can best address your product or service. Figure out how you can outperform your competitors and surprise your customers. And set it out as your goals.
5. Measure your product-market fit
You must measure your performance to manage your success. Identify key data points that will help you track performance.
6. Avoid complacency
If you manage to achieve product-market fit, don’t assume you’ll always have it. Your customers’ needs will change over time, and you must continuously re-evaluate market conditions to continue meeting those needs.
Practical strategies that have been used by startups to achieve product-market fit
Uber: The Free Ride to achieve market fit Strategy:
Uber captured product-market fit by initially offering free rides in major cities in the country. Uber’s co-founders recognized that the taxi system was excessively expensive and outdated, and few people used it. Once the Uber app gained steam, Uber offered 50% discounts to first-time users.
Experts point to Uber’s ability to solve a problem and create a need at the same time. Consumers weren’t demanding better taxi service, but once a more convenient, more straightforward option emerged, users began to rely on the concept. The network effect kicked in, and users began sharing their social media experiences, providing social proof for the startup.
Uber Nigeria currently has over 9,000 active driver-partners and no fewer than 267,000 monthly riders.
Spotify: identifying the gap to achieve market fit
Spotify saw that people were ready to pay a small fee for unlimited access to music, legally. They didn’t go into the market trying to take on existing music streaming services like the discovery centered Pandora or the more traditional, pay-per-album structure of iTunes.
They created a platform for people who wanted to listen to any album, any time by only paying one fee. They identified a gap in the market and targeted the people in that gap.
In most cases, product-market fit doesn’t happen on the first try. You’ll likely test and adjust your product or service several times before you find the perfect combination of value proposition, customer base, and distribution.
Continually experiment based upon your audience’s feedback. Tweak your concept if your data indicates it and be prepared to pivot if necessary.