What is Product-Market Fit and Why Achieving It is Essential For Your Startup
By: Madhur Dixit
Tags: Product Market Fit, Digital Marketing, Growth Marketing, Startup, Marketing

Product-Market Fit and Startups

What is Product-Market Fit and Why Achieving It is Essential For Your Startup Madhur Dixit Follow Jun 13 · 5 min read

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Failing to achieve a product-market fit is a major reason why 9 out of 10 start-ups fail. For a startup to be successful, it is essential to embrace the value of this least understood concept.

When customers are willing to stand in lines for hours outside a store to buy your product, or when your product runs out of availability on online stores, i.e., when you as a brand are unable to match customer expectations (demand) with the supply of your product, you have achieved a product-market fit.

Achieving product-market fit starts with understanding your customers, their needs, how they feel about your product, and whether they believe that hiring your product would help them with their job at hand (as I mentioned in my article on Jobs To Be Done Framework: https://medium.com/swlh/incorporate-jobs-to-be-done-framework-with-buyer-personas-up-your-marketing-game-f5b0414bd878 ).

Designing a product that no one needs is a sure short recipe of failure. That is why it is very important to divide your time equally between product development, customer research, collecting feedbacks and identifying key traction channels.

To get to a product-market fit it is essential to start with a ‘Minimum Viable Product’ as explained by Eric Ries in his book “The Lean Startup”. A minimum viable product is the very first draft of what you actually want to put out in the market. Testing this product with your customers, asking them for feedback and collecting all the meaningful data on how this product could be improved is the best practice that would lead you to create products which your customers actually want.

Achieving this product-market fit i.e. designing products that would blow your customers’ minds away is not a task limited to your business’s design or product development team. This task requires the product development team, design team and the marketing team to join hands and work on it collaboratively.

Another important thing to remember is that achieving a product-market fit does not mean that you cannot lose it. This changes as the market changes and therefore, constant upgrades must be made to your product in order to be well received by the market. In order to be able to make these upgrades, constant testing, iterations and analyses of both the product and customers’ needs is of high importance. In other, words it is a constant loop of gathering information and data and then validating your product based on this information via constant iterations and testing.

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Let us take a look at how one of the most loved apps was born and how it achieved a product-market fit. Daniel Ek and Martin Lorentzen were two close friends from Sweden who were frustrated with the limitations of finding and listening to music using a computer. The year was 2006, and the music industry was in a crucial state of flux with two extremes in the market. At one extreme was Sean Parker’s Napster which was highly popular but was suffering from tons of thousands of copyright infringements. At the other extreme was Apple’s iTunes which charged users as much as $2 per track. Ek and Lorentzon identified and carved out a niche between these two extremes and as a result, Spotify was born. Ek and Lorentzon believed in testing their product and started out by developing a peer to peer music sharing service like Napster. However, from their constant testing and feedback loop, they identified that piracy’s limitations existed beyond illegality (infringements): It took several minutes to download a single song. The audio quality of pirated tracks varied wildly. Even popular torrents were infested with viruses and malware.

What made Spotify so brilliant was that it, at its core, improved on the Napster experience in every way. Spotify delivered music instantly, with high-quality audio, no downloads, and completely legally. Ek and Lorentzon invested heavily in engineering to nail down every aspect of Spotify’s user experience.

“We spent an insane amount of time focusing on latency when no one cared because we were hell bent on making it feel like you had all the world’s music on your hard drive. Obsessing over small details can sometimes make all the difference. That’s what I believe is the biggest misunderstanding about the minimum viable product concept. That is the V in the MVP.” — Daniel Ek

Ek was obsessed with making the Spotify user experience so good that users would happily pay $10 per month and would not turn to the free music that existed out there. What both Ek and Lorentzen created with continuous testing and an insane focus on MVP and user experience is what we know as Spotify; the most loved and used music app worldwide.

Image by Omid Armin

Being open to feedback, asking customers questions and using data to create meaningful insights is a key for your startup to get to a product-market fit.

Change is possible, but for that you as a startup need to be open, flexible and willing to iterate and reiterate.

To conclude, let us view product-market in a very simple scenario. Imagine a kid trying to sail her paper boat in a river. The product market fit could be seen as the boat actually sailing with the flowing water. The paper boat here would be the product and the water current would be the market. This boat sails if it could withstand the water current (market). If it does, the kid reaches a product-market fit for her boat. If not, the boat sinks!