What is product-market fit?
Product-market fit (PMF) is a term from the startup world that refers to the magical moment when a company realises that they are ‘in a good market with a product that can satisfy that market.’ It’s usually the point at which a company will begin to scale, taking on bigger risks in order to pursue a greater share of the market they’ve broken into. The criteria that indicate when PMF has been reached are much-discussed but not well-defined; one of the more popular metrics comes from Sean Ellis, who considers product-market fit to have been achieved when at least 40% of users state that they would be ‘very disappointed’ if a product were no longer available. More often than not, product-market fit is portrayed as something that can be determined via ‘gut feel’ and instinct, rather than any clear set of circumstances. One notable feature of PMF is that it seems far easier to measure it in retrospect rather than to predict it - the factors that feed into can be identified only after they’ve had an effect, not before.
There’s nothing wrong with the idea of product-market fit in itself - it just describes a particular moment when a great product meets a strong demand for the product in the market. The problem lies in the way the concept of PMF influences how companies, particularly startups, develop and grow their products. Regardless of how it’s defined, reaching PMF requires a product to be built and released - without a product, there isn’t any product-market fit. The understanding is that putting a product into the market allows the company to test it under real market conditions, gathering feedback from customers and measuring the impact of any changes or improvements. Over time, the product gets closer and closer to product-market fit until it reaches that point at which it has shown itself to be viable, profitable and worth scaling up. At least, that’s the expectation.
In principle, attempting to reach PMF seems like a good way to use customer feedback and market data to create a successful product. However, reaching PMF involves shaping a product that already exists - it almost entirely ignores the process by which the idea for the product was arrived at in the first place.
What if the product will never fit the market?
What if product-market fit will never be reached, no matter what changes are made? What if nobody will ever be interested in the product, because it doesn’t solve an actual problem, or the business model isn’t realistic? A company can potentially spend years iterating and pivoting, wasting time and effort, burning through capital, only to find that that magical moment never comes - sales are always slow or stagnant, churn of customers is high, profit is small or non-existent. Iterations may bring about short periods of success, but they aren’t sustained. Eventually, the company runs out of money, or steam, or both, and goes under - a common fate for many startups.
Encouraging companies to put faith in their great idea and then run headlong to market sets them up for failure, or at the very least, greatly reduces their chance of success. There are many factors that feed into the success of a product, but the most fundamental one is whether anyone needs or wants it enough to pay for it. A product that serves no purpose will never be successful. A product that serves a purpose but does so in the wrong way, or in a way that isn’t financially viable, is equally doomed. No amount of pivoting or adding features will make any difference - the foundation of the product is rotten and simply cannot support a thriving business.
Don't be lucky, be smart
So what’s the alternative? In a word: research. Well-designed research, carried out from the very first day of a design project, allows a company to explore an idea fully, without fixating too early on a particular style or type of product. It provides the opportunity to find, refine and test a product concept before any time, money or effort is spent on building anything. It also greatly increases the chances of uncovering genuinely new and innovative solutions to real problems. A major added benefit is that research flags up potential long-term problems early, before they become unmanageable or fatal.
Product-market fit encapsulates an idea of success, an aspirational goal. But as a guiding principle, it amounts to ‘be better,’ or ‘sell more’ - it’s vague and unhelpful. For companies who do no research and head straight into market hoping that they’ll eventually find success, whatever outcome they achieve is largely down to luck, because they haven’t given themselves a chance to control the situation through data and insight. Without research, even great ideas can fail because knowledge gaps - about users, the market, the business model or even the team building the product - can set deadly landmines that the company eventually, unwittingly stands on.
Companies that include research at all stages of the product development process - from the creation of the product concept, through every iteration of the product across its entire lifecycle - don’t have to hope that at some undefined point in the future the moment of PMF will be reached. They have a genuine understanding of what their product needs to do in order to attract customers and be successful. With research, design decisions can be made pro-actively around known requirements and needs and the impact of those decisions can be tested and measured, to understand the interaction between the different factors that the product’s success depends on. Product-market fit can be defined and worked towards, rather than being a matter of 'gut feel' or serendipity. And vitally, if the research shows the product is unlikely to be successful, the plug can be pulled early, before months or years are wasted on a product with a fundamentally flawed concept.
Companies should strive to achieve product-market fit, but they shouldn’t set themselves up to chase a vague, potentially impossible goal. Taking control of the process through research ensures that the company can move towards PMF in clear, evidence-based steps, using data and insight to guide decisions.
If you would like to know more about how to take control of the success of your product, get in contact. Our experienced, approachable team will be happy to talk through your project and identify the most effective research methods for you.