How to Find Product-Market Fit Before You Launch a New Feature
Product-market fit is difficult to predict: For SaaS product teams, accurately gauging what target customers want can be more of an art than a science. However, if you gather intel on your customers and market, you’re more likely to find your fit before launching new product features. To find product-market fit, you’ll want to check your assumptions about your market throughout your product’s lifecycle. Armed with precise information, you can make a knowledgeable prediction about product-market fit and develop an actionable way to correct course when you need to.
What Is Product-Market Fit?
Product-market fit means that your product suits your target customers’ needs, and the size of your market suits your business needs. It’s necessary for product success: If your product doesn’t deliver what the customer needs, they won’t buy it, and if the target market isn’t large enough, you can’t sustain or grow your business. Product-market fit is also a critical component of attracting and keeping investors after initial funding. Understanding your potential fit early on in product development will save you time and resources—and hopefully prevent product failure. One key component to product-market fit is the value hypothesis. Your value hypothesis is an educated guess about the value that potential customers will find in your product. A strong value hypothesis coupled with a good market that’s the right size for your business is the path toward finding product-market fit. Andy Rachleff, co-founder of the investment service firm Wealthfront, describes it this way:
A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. … Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis addresses both the features and business model required to entice a customer to buy your product.
Metrics Showing That You’ve Found Product-Market Fit
Typically, you see the signals of product-market fit even if you’re not tracking them: Sales are great, your business is growing, and all signs point toward success. However, specific metrics can prove that you’ve found it.One such metric is exponential organic growth due to word of mouth (not marketing). Word of mouth is a compelling signal that your market is full of customers who value your product so much they’re willing to tell their friends, family, and coworkers about it and effectively pitch it for you. Other signs to look for are a high user retention rate and a good return on customer acquisition cost. Another signal of product-market fit is Sean Ellis’s 40% test: if, when surveyed, 40% of your customers would be disappointed if you left the market, that’s an indicator of a good fit. Signs that you haven’t found product-market fit are:
- Slow sales cycles
- Problems defining your customer personas and their customer journeys
- High churn rates
It can be common for early-stage startups to garner a lot of customer interest at first, when their product is brand new and unique in the market. That can lead to a surge of early adopters but, according to entrepreneur and software engineer Marc Andreessen, that’s not a reliable indicator of product-market fit: “If you stick to the early adopters, you’ll get 5% of the market, but you’re not going to get 95% of the market. And that means, sort of by definition, somebody else is going to go get 95%.”It’s important to note that these metrics won’t show up until after you’ve achieved product-market fit—that means, at minimum, you’ve launched an MVP or even a finished product. If you’re in that stage of your product development cycle and you’re lacking product-market fit, it’s not too late to adjust course and find it.
How to Find Product-Market Fit on a Feature-by-Feature Level
Product management teams often discuss product-market fit in the context of a go-to market strategy for a new product. However, you also need to achieve product-market fit on the feature level; each time you’re iterating on your product and adding new features, you still have to serve and delight your target audience. Every time you change your product, your product-market fit may change along with it. However, you need to retain a good fit within your market to maintain a healthy business and ensure long-term growth. While it’s impossible to know for sure if you’ve achieved product-market fit until you launch your feature, you can follow a few steps beforehand that will point you in the right direction:
- Research your target customer and target market: Even if you’ve already conducted this research in the past, it doesn’t hurt to look at customer personas, buying journey, and market size again—especially if you’re having trouble finding product-market fit.
- Come up with a value hypothesis: What value do you think your new feature will deliver to customers? Be specific when you craft your value hypothesis, as this is the assumption you’ll test in the next step.
- Validate your value hypothesis: Test your assumption with users by gathering customer feedback or surveying prospective end-users who don’t currently interact with your product (more on these approaches in the next section). Analyze your results until you have an answer: Do customers agree that your feature will deliver the value that you think it will?
- Make changes based on your findings: Iterate your product based on what you found out. Try to make changes that users identified as valuable—they need to see your product as so important and meaningful that they’ll recommend it. As you make changes, don’t be afraid to return to the validation step to double-check whether you’ll meet your customers’ needs.
Your last step is to launch your new feature and keep track of how well it achieves product-market fit. Keep this process going as you continue to release product updates.Now, let’s dive in a little deeper into testing your value hypothesis. We’ll look at collecting customer feedback and engaging in product validation.
Collect and Analyze Customer Feedback to Learn Their Pain Points
Customer feedback provides you with a direct line to your users’ needs, pain points, and opinions on your product. Your product feedback management software may already have stored suggestions from your customer base that tell you precisely how you could improve your product to better meet their needs. For comprehensive insights into your customers’ experiences, try to follow best practices and collect feedback through a variety of channels—within your app, via social media, and through surveys. Take steps to ensure you ask the right questions, so you get the kind of feedback you need to make changes to your product.During analysis, look for key takeaways to steer your work. Note whether user opinion clearly trends in favor of a proposed feature and keep an eye out for areas where different users agreed in their open-ended responses. Follow up on the feedback you received and keep your customers informed as you make updates based on their comments and suggestions.
Validate Your Product Feature to Test Your Value Hypothesis
Product validation is a simple way to test your value hypothesis before you start development on a new feature. It’s a process to gather information (and check your assumptions) about your customers and market, which will help you find product-market fit once you launch your next update.During validation, you collect and analyze information that maps back to your feature’s value hypothesis. That information can take the form of customer feedback or surveys of potential end-users who share key characteristics of your customer persona. Product validation can be intimidating at first, but if you create an accessible, realistic product validation procedure, it’s easier than you think. Check out our free eBook on how to build your own validation process.
Use a Scalable Process to Keep Product-Market Fit
To maintain product-market fit, you’ll need to check in with your target market on a continual basis—but you don’t need to undertake a large research project each time you check in. Keep your process confined to a smaller scale so it will remain realistic for your team to follow these steps again and again, as frequently as you need.
UserVoice Validation offers a simple way for you to do that: it’s made for small-scale research projects with a quick turnaround time. You can check in on your target customers and market each time you tweak your product’s features or functionality, ensuring not only that you find product-market fit but also helping you to keep it as well.