Product Market Fit: is your product what the market is looking for?
There is nothing new about saying that customers need to be at the center of the strategy and this requires deeper analysis.
So, let’s start with a very important truth that you need to keep in mind throughout this reading:
Understanding what your customers think is critical to the success of your business.
It also seems obvious, we know. But the big gap here is to answer: how to understand the customer?
In the era of consumer obsession, companies are turning to research methods that offer a deeper understanding of customers’ consumption habits in order to offer the right solutions.
The first step we will offer you: end the guesswork . Truly understand your customers’ consumption motivations through the right approach. Decipher your user once and for all!
What is Product Market Fit?
Companies need to answer the following question: “How can I differentiate myself?” The source of competitive advantage is disruption, and whoever manages to survive it will differentiate themselves within the invisible hand of the market.
And how to survive the disruption? By gaining and maintaining customer obsession. Customer Obsession is about creating a connection by understanding, connecting, and delighting your customers.
It’s time to let the barriers go a little bit and think about how to keep consumers obsessed with your brand.
It is in this obsession, in this quest to understand the customer and try to offer him something better, that one often finds an insight, a drive for an invention – an innovation.
That’s where Product Market Fit comes in. Created by Marc Andreessen, founder of Netscape and an active investor in Silicon Valley, the concept is directly about creating something – a product or a service – that consumers really want, that truly meets their needs.
Understanding what your PMF is means gaining one more tool to analyze your company’s performance in a competitive environment. It will provide you with inputs to assess the level of satisfaction achieved by a product or service in a given market. From that, it becomes much easier – and more effective – to make changes and adjustments.
With the application of the PMF, you can, with greater security, measure the stability of a product in the market and evaluate its acceptance by consumers. However, see, here we are not talking about the perfect product or service. Thinking that you’re going to get to this place right away can be very frustrating – because it hardly ever happens.
Often, managers encounter difficulties and obstacles to define their own situation in the market. Another common mistake is to design for yourself, based on your opinion and your consumption habit. How to get around this? Checking the “suitability of the product for the market” – that is, the Product Market Fit.
PMF’s definition is directly linked to a clear understanding of the persona’s needs (Wow! Does anyone here remember Design Thinking?). With this knowledge, one can guide the company’s strategy to best satisfy consumer pains and create value offers. What is the impact of this? Customer loyalty and the success of the enterprise.
A good PMF means being inserted in a strong market and, at the same time, offering products and services that truly satisfy your niche. You have nowhere to run: your solution needs to resolve the persona’s pain.
However, we have an iconic phrase spoken by Jeff Bezos, CEO of Amazon, which says the following:
“Customers are always wonderfully dissatisfied, even when they report being happy and business is doing very well. Even when they don’t know it yet, customers want something better, and our desire to delight customers will lead to invention on their behalf. ”
This phrase demonstrates how Amazon’s obsession with the consumer translates into a differentiator for the company. A good PMF will only be achieved through a deep understanding of the motivations and needs of the consuming public. Directing all their strategy, energy and investment to the consumer allows Amazon to invent solutions that differentiate them in the market.
How to identify the Product Market Fit?
It is clear here that we are talking about Consumer Analysis, right? There is no other way to truly know someone or something without looking at them.
And, well, we can’t talk about Consumer Analysis without talking about Analytics. Of the things we produce the most in the world, data is certainly among them. And that is available and available to companies.
We imagine that if you got here you already know that Google is a huge supplier of tools for measuring data, right? Analytics is very useful for any business, presenting a series of metrics that can be transformed into adjustments and insights.
If we had to recommend just one step to get to know your audience, it would certainly be this: turn your attention to the data that Analytics is showing you. It is through these metrics and analyses that you can truly understand your customer, understand where they are going wrong, adjust your offerings, and gain valuable insights!
- Constant real-time monitoring of consumer behavior is one of the ways in which we can perceive changing trends in order to investigate better.
This is how you will be prepared to face transformations and get the most out of the opportunities they offer. Consumer Analytics is relatively new ground, but it is certainly here to stay. There is no other way to go if you’re not monitoring the data that your customers produce.
Later on, we will discuss some important metrics to do this. For now, we want to talk about how listening to your customer is key – and help you do this simply and objectively.
You see, if the goal is gaining this deeper understanding, the shortest way is to ask for customer opinions, right? The Rule of 40 will help you do just that!
The Rule of 40: how is the market adhering?
And where will the data end up? What destination should you give them? Data doesn’t say anything if it doesn’t tell a story, right? That’s where your customer’s monitoring and analysis comes in.
This process needs to be continuous. It is the customer who will guarantee public acceptance, adhesion, and the stability of your business in the market. Monitoring and analysis will give you inputs to, when you notice a step outside the line, take corrective actions quickly – without wasting time and money.
A good tool for this type of analysis is the Rule of 40. It basically consists of doing a quick test, a very simple questionnaire – preferably that the consumer can answer with “yes” or “no”.
Some sample questions:
Do you consider this service an essential need?
Would you recommend this product to a friend?
Would you mind if the marketing of this product was interrupted?
- If more than 40% of the answers are positive, it indicates that you are on the right track – and that your product or service has a good Product Market Fit.
How do data and design help you reach Product Market Fit?
According to the Data Never Sleeps survey of 2020, in just one minute of the internet, we had:
- more than 69.4 million applications on Linkedin
- 347 thousand stories posted on Instagram
- $1 million spent online
- 1.3 million voice and video calls made
- 404,000 hours watched on Netflix
We realize that, over time, our routine has been to spend more and more hours traveling on the network. This amount of data being transported every minute by the network carries striking features of this new normal that is already in full operation.
This scenario marks an important fact: the enormous opportunity to use this data to better understand its user. As promised, we’ve listed some metrics you should look at. Check them out!
1- HEART Framework
Google HEART is a Google user experience ROI measurement framework, which proposes a way to create metrics that quantify the return of a given project. The acronym takes into account 5 points to assess usability.
2- Sentiment analysis
Very efficient in the context of social listening, sentiment analysis serves to monitor what is being said about a product or service on social media. Sentiment metrics are reflected in users’ attitudes towards a brand.
And what’s the secret? If you can track changes in user sentiment, you can gauge the correlation with financial metrics and predict what impact this might have on your business’ profitability. Check out each of the metrics.
3- Financial metrics
Financial return is the best parameter of success for a for-profit product. Depending on the stage of the company’s life cycle, which determines a product’s business model and strategy, you can measure investment, expenses and profit.
And what to do with all this data?
Improve the user experience through design, of course!
Calm down, let’s explain it better. What we are saying is that numbers can empower innovation actions and even feed the argument for upcoming initiatives. But you need to choose the right indicator according to your objective.
As Paypal co-founder Peter Thiel says, the numbers will not be useful for your business until you understand the whole qualitative part of it (that’s why we use Design Thinking in our core business).
Today, UX and UI are the pillars of the digital strategy for all companies that perform well in the digital context. And this is because they are directly about understanding and anticipating user needs to offer more adherent business solutions.
This business strategy has grown a lot with the rise of digital and user-centric models. The result of this is the emotional link between product / service / brand and the customer through the creation of good experiences.
Follow our equation to understand in a practical way!
We know that generating value for the business and leading the market is not easy, but it is something that is always on the agenda of all corporations that want to survive. In this sense, abandoning the bureaucratic and linear model of the industrial era is a matter of survival.
There is nowhere to run: this is the time to mature the Digital Transformation process to enter the era of Disruption. Being prepared for the digital age is the only way to ensure market leadership.
Check out our ebook and understand how disruption has become an effective practice for generating business value. Believe me: this is the most assertive strategy for your company to take the lead in the market!
Digital Disruption: Your company leading the market
3 tips for reaching Product Market Fit
Now that you know what PMF is, how to know your customer and how to generate value for the business, let’s talk about practical tips that you can start doing today – even remotely – in your corporation. Follow along!
We have a truth to tell you: the niche that you believe your product or service caters to, is not always the best one. There may be an even better niche that is more aligned with your offerings.
How to know? The spoiler is in the name of this item: experimentation. The first step is to define the niches that you believe are yours, okay? Then, you will provide your product or service for that audience to use for a period of time (here you will stipulate: it can be a trial of a week, 15 days, a month, depending on the profile of your business).
What do you ask in return? Constant feedback. Believe me: you will find a niche with which your product or service has total fit. Otherwise, it is time to adjust your offers.
Tip 1: think about the possibility of testing the same product in a new market in order to adjust strategies. If it is not working, test in other niches before investing in improvement actions.
Tip 2: Some niches are more difficult to target. In that case, focus on flexibility to find the best alternative.
- Know your customer
We have already spoken here, but it is worth repeating because it is very important.
Personas, jobs to be done, journeys and data analysis, are some techniques used to find answers – often not explicit – about consumption habits. The effectiveness of each of them varies according to the business objective.
Use these innovative techniques to analyze the behavior of the new consumer. That way, you can get the best out of each situation.
Believe me: surveys are a great tool for that! In addition to being essential for differentiation, knowing more about your customers and capturing insights from their mouths has different intermediate purposes.
- Take small risks
It is essential to make a constant replanning movement, as Agile preaches. This is becoming common practice in companies because most have realized how important it is to redesign and set new goals.
It is essential to be able to take small risks, often. If you have an idea, test it on a small scale. Don’t expect everything to be ready to start taking the real test.
- Discard what doesn’t work
We are always looking for solutions, to solve problems and to know exactly what we have to do to make something work. However, sometimes that answer does not exist: it is not an answer, there is not only one way to do it.
If you can take a chance and recognize what went wrong, you will arrive much faster at what will work. This is because you will be excluding what hinders, delays and prevents you from reaching a result.
How do I know if my product has a market fit?
Now you’re here, understanding everything we’ve described and finding that it applies to the reality of your company, its offerings, and its products & services. However, the question remains: how do I know if my product / service already has Market Fit?
We will help you identify this through the analysis of 5 aspects.
It may seem easy, but it is not. Often, your customers will not send warm messages and affectionate reactions truly declaring their love for your offers. In fact, in the vast majority of cases, this does not occur.
So, you must know how to interpret the signs. Positive messages can be barely noticeable. Often, they are issued spontaneously, without being requested – yes, they do not always appear in surveys and satisfaction tests.
A categorical example is the demonstrations on social networks, showing the product, praising the service and indicating the company. When this happens, your client is saying that your solution to his or her problem was not only excellent for them, but he or she believes it will be excellent for other people as well. Do you realize how valuable this is?
Believe me: stories and hashtags have almost immeasurable strength!
Ease and continuity of sales
Golden rule: the marketing of your product or service needs to be simple, easy, and happen continuously. The design of a good user experience is what divides innovative companies from laggards. Hello, UX and UI !!
The goal of UX is to create a customer-focused experience, adapting processes, products and services to your needs and demands, creating a personalized journey. A good experience is the result of careful planning, analysis, testing, and investment. All of this happens in a process of continuous improvement.
That is, good experiences do not happen by accident.
See: the sale cannot require much effort from the customer, nor a large investment of time to carry out the action – whatever it may be. Registration needs to be simple, confirmation needs to be quick. All difficulties must always be minimized.
A simple mentality shift – from product-centric to user-centric – and companies stop offering just one product or service like any other competitor, and start making their customers feel good about their products, services, and user experiences as a whole (pre, post and during purchase).
The advantage? Always ensure fluidity to the process. If necessary, segment your market. This ensures that your sales actions are directed to the right customers and potential customers, avoiding waste of time and money.
New purchases and ongoing membership
This is a “metric” that is very easy to check. And we put metrics in quotes because, in fact, companies always check how their product sales are and / or the renewal of their services. This is something that most (if not all) managers already follow.
See: if a large part of your users are, spontaneously and naturally, making the purchase of your product again and effecting the renewal of your service, it is clear that you have Market Fit, right?
Here the thermometer has to be:
little effort, much return – MARKET FIT ↑↑↑
many efforts, little return – WITHOUT MARKET FIT ↓↓↓
However, if the scenario is the opposite and you notice decreasing sales, many cancellations, and immense efforts are needed for few purchases or renewals, RED FLAG! STOP THE MACHINES! This is the cue to review the actions regarding your product, service, or market.
Less is more rule: more revenue, less cost
If your product or service has Market Fit, it is a fact: it will increase revenue without increasing costs in the same proportion.
What does that mean? Sales growth happens in an organic and natural way because the solution offered completely meets the existing demand. That is, it has a fit with the market.
Low bounce rate
If your solution fits the market, the rejection rate will obviously be very low. Important: low, never zero, ok? A rejection rate of zero is impossible to achieve.
Low rejection rate is directly related to an earlier step: an efficient and well-done segmentation process. This ensures that your efforts are used in the right place, that is, only with your customers and potential customers.
Always keep in mind: Market Fit is to “marry” a product / service with the customer’s pain. If you offer the solution he or she needs for your problem, they will be a loyal consumer, who will not stop consuming.
Jobs to be done: icing on the cake
As we said earlier, the customer is always wonderfully dissatisfied. So, thinking about a solution that has a good fit is a difficult task – but not impossible.
For this, here at MJV, we have used a theory called ‘jobs-to-be-done’ to help our clients and partners assertively identify the pains and needs of their customers in order to hit the target: their hearts!
JTBD seeks to analyze, discover, and synthesize an individual’s wishes for progress. The idea is to understand what the person is trying to achieve as a goal in his or her life, the progress he or she is trying to achieve in a specific circumstance.
“Update your user, not your product. Don’t build better cameras – build better photographers.”-Kathy Sierra
This quote represents the idea of jobs-to-be-done well because it is about an improvement for the consumer, not your product.
Discovering your clients’ desires for progress, understanding what they want to achieve in their lives, is how you start working on your product or service to best fulfill those desires.
- Keep that phrase in mind: consumers hire products or services to get the job done / do the job for the sake of advancing the customer journey in a way that allows them to make the desired progress.
Quick play: 8 purposes of Jobs-to-be-done
- Understand what the customer wants, in a deeper and more perennial way – instead of what he or she says they want
- Define new proposals for offers, products, experiences, services (or transform existing ones)
- Expand your competition market, understanding indirect competitors of your product from different markets
- Prepare to monitor potential competitors who could be disruptive in the market
- Understand the hierarchy and flow of motivations for a consumer to choose a product
- Clarify purchase motivations and barriers for each customer profile for specific purposes
- Understand the JTBD of people in the same circumstances, without necessarily having the same characteristics of use
- Holistically analyze your portfolio
Attention! What Jobs-to-be-done doesn’t do
- Demonstrate processes, activities, and step by step experience with product / service
- Have a superficial investigation on the topic
- Present the tasks people want and not the desire for deeper progress
- Do not include social and emotional dimensions
Time to turn the key: the only constant is change
“People are generally afraid of change because they fear the unknown. But the biggest constant in history is that everything changes.” -Yuval Noah Harari, 21 Lessons for the 21st Century
The world we are living in today is changing faster than ever. The transformations are happening now, even as you finish reading this sentence.
If everything has changed, the consumer has changed too. As well as their consumption habits, the relevance of your product, and the importance of your service. How should you deal with all this?
We know that change is scary, it brings insecurities. Leaving the cave, Plato said, is a difficult but necessary movement. The keyword is collaboration. By working in a partnership, this transition becomes more fluid and less complicated.
If you need help getting to know your consumer better or adjusting your Market Fit, contact us! Our experts will help you dive fearlessly into these transformations. That’s what the future asks of you – and your customer, too.