understand the concept and learn to apply it in your business – WAU
Product Market Fit is used to evaluate the performance of a product within a given market. Consumer loyalty, competitor qualifications and the ability to offer value are some of the variables included in this equation.
In the effort to stabilize itself in a competitive environment, a company needs to pay attention to several factors, ranging from the training of its staff to the satisfaction of customers. With so many variables, it is common for managers to find obstacles to define their own situation in the market.
An excellent way to facilitate this understanding is with the application of Product Market Fit (PMF). Created by Marc Andreessen, founder of Netscape and an active investor in Silicon Valley, this concept assesses the level of satisfaction achieved by a product in a given market.
In today’s article, we will delve into the subject. In addition to bringing a clear definition of this idea, we will detail its importance for companies and indicate the best techniques for you to define your own Product Market Fit. Continue reading and check it out!
What is Product Market Fit?
To better understand the concept created by Andreessen, we will understand the meaning of the term. Product Market Fit, in a free translation into London, can be understood as “suitability of the product in the market”. Looking at it that way, it gets easier what is intended with that idea, do you agree?
According to the concept’s creator, having a good PMF means being inserted in a strong market and, at the same time, offering products that satisfy this niche. In other words, the solution offered by your brand needs to solve the persona’s problems.
Naturally, this level can only be achieved through a deep understanding of the motivations and needs of the consuming public. Account must also be taken of the ability of its competitors to offer value to customers. The higher the quality of competing products, the higher your product must be.
Therefore, we can understand the Product Market Fit as a tool that makes it possible to map your position in the market. In the end, it is possible to draw a parallel between the degree of consumer need and the suitability of the product offered by your company.
How important is it to companies?
Regardless of the way it directs its operations, every enterprise has the objective of obtaining profit. Although there is no secret formula for this, the basic conditions for achieving this goal are quite clear: offering solutions to solve the persona’s pains.
Thus, the concept of Product Market Fit is essential for direct the company on the right path, in addition to enabling changes in case of disappointing results. You know that product that had everything to burst, but was it a disappointment in sales? Often, the reason for this phenomenon is simple.
It is not enough to develop a qualified item, it is necessary to ensure that it is inserted in the correct market. Therefore, symptoms such as low frequency of use by consumers, the difficulty of making sales or the loss of audience competition can be signs of a inexistence of the PMF.
On the other hand, if you are providing the right solution, in the right market and to the right audience, your Product Market Fit is on the rise. In that case, customer satisfaction will become a fuel for the generation of new business opportunities.
How to define your Product Market Fit?
Understanding the meaning of the concept and its importance in the commercial world, you must be asking yourself how you can know if your company has a satisfactory PMF. To begin, it is essential to have a thorough knowledge of the characteristics of the audience you are dealing with.
Only from this information, it is possible to create products and services that reach an acceptable level of adequacy in the market. If you already have a well-defined persona and understand your needs and preferences, pay attention to the following tips to define your Product Market Fit.
Identify needs that have not yet been met
The key to long-term success is to establish lasting connections with the consumer. For this reason, we use metrics such as Customer Lifetime Value, which refers to the average profitability that your company observed while doing business with a certain individual.
To achieve a satisfactory number in this regard, it is essential that your company is always attentive to the behavior of the public. This is because even the most loyal of buyers of a product can be seduced by alternatives that offer more value.
Therefore, your objective in the market is to make your brand is seen as the best cost-benefit for customers. Therefore, do not be satisfied with the success of a product. Conduct research and testing to improve functionality and ensure the best possible experience for the persona.
It is worth remembering that these improvements do not necessarily need to be focused on the item. If you have an e-commerce or make deliveries, making shipping more agile and affordable can be enough to optimize your business relationships.
Ensure a value proposition
During the development phase of a product or service, planning takes place that seeks to predict the best way to introduce it into the market. Throughout this process, establish a minimum value that the item must add to the consumer.
In other words, determine which persona pains will be resolved by the merchandise and how it differs from other available options.
Understanding this is essential for you to position the product correctly. If the focus is on the top of the market, it is important to ensure that the benefits offered by competitors will not be greater than those granted by your brand.
Create a prototype focusing on the basic features of the product
Before offering an experience to the market, define the basic characteristics that will make it different. This is an interesting approach, as it structures the service around its differential, and not the other way around.
So, if you notice, for example, that the niche you are in lacks more efficient shipping options, have this as the ground zero of the strategy. In this case, agile and cheap delivery will be your guarantee of value offer.
From that, guide your approach to marketing to make this benefit clear to stakeholders. At the same time, work to ensure that other aspects of the service will follow the same quality standard.
Make room for feedback from potential customers
If it is important to establish a zero mark for the offer of value, it is even more crucial to improve this aspect. There are many ways to create improvements for a product or service in development. The most efficient is, without a doubt, presenting it to a select audience of consumers.
Let the group make use of what you are developing and observe their behavior. It is important that the responsible managers are always close, asking questions that influence users to prepare their analyzes, which makes them an excellent source of feedback.
Make use of the 40% rule
Once the product has been developed, improved and launched, the process continues. It is vital that you continue to monitor your public acceptance and market stability. Thus, when you notice a step outside the line, it is possible to take corrective actions.
One of the techniques used for this type of analysis is the 40% rule. A positive result in this assessment indicates that you are on the right track and that your product enjoys a great Product Market Fit.
The test consists of a very simple questionnaire. It can consist of one or more questions, but it is essential that they are easy to understand and provide clear answers. Let’s imagine, for example, that the question is: do you consider product X a purchase need?
If at least 40% of respondents choose “yes”, it is a good sign for your PMF. In another type of logic, the question can ask how the consumer would feel if his product was discontinued, offering three alternatives:
- very disappointed;
- a little disappointed;
In this case, if 40% or more indicate that they would be very disappointed, your product has an excellent adherence in the market.
Understanding what your PMF is means gaining one more tool to analyze your company’s performance in a competitive environment. With the application of this concept, you can, with greater security, measure the stability of a product in the market and evaluate its acceptance before the public.
The definition of Product Market Fit depends directly on a clear understanding of the persona’s needs. With this knowledge, one should guide the company’s strategy to satisfy consumer pains and create value offers. The natural result is customer loyalty and the success of the enterprise.
So, now that you know what Product Market Fit is, how do you evaluate your company’s? Do you want to continue your learning and improve your brand management? In this e-book, we talked in detail about the concept and application of Branding.