How to Build a Product-Market Fit Framework in 3 Steps
Product management can be unpredictable. Markets change all the time, and customers’ needs change with them. Achieving measurable product-market fit (or PMF) early on is a sign of a great product, but your work is far from over.
As new tech develops, products that are successful now could be obsolete in a few years. There’s no guarantee your product will still fit your market after you’ve launched a new feature set or after new competitors have entered the landscape. Targeting new segments or new markets altogether can also disrupt product-market fit.
Change is inevitable in SaaS, but with a product-market fit framework, you can navigate unforeseen changes and keep your product successful long term.
What Is a Product-Market Fit Framework?
If product-market fit means your product solves the right problem for the right market, having a product-market fit framework means you’ve got a strategy to help you iterate on and maintain that fit. Your framework guides your organization’s approach to product development in a way that always tracks back to what you know about your market, your customers, and your competition.
There are three components to product-market fit: the market, your customers, and your competition. To build a product-market fit framework, you’ll need a deep level of understanding of each of those three pieces.How do you know when your customers’ needs change?
Connect with them and get their feedback. Sign up for a free trial of UserVoice Discovery and get a direct line to your customers’ thoughts, wants, and problems in real time.
Step 1: Understand the Market Your Product Serves
With a deep understanding of your market, you may be able to spot potential changes coming. It’s important to know key metrics about your market—like TAM, SAM, and SOM—and it’s also crucial to watch how those benchmarks change over time. Good markets develop alongside profound needs, and great products offer what the target customer is looking for.
Those profound needs can emerge as a result of new tech entering the landscape. Not too long ago, the concept of a scheduling tool to manage social media posts wouldn’t have made sense. When Myspace reached 25 million users in 2005, it was because the site offered more entertainment value to its users than competitors did (not because it was good at connecting businesses with customers). However, as more social media platforms sprang up and started collecting a vast amount of users, companies noticed their potential—and developed a new need to reach their audience on every available social media channel. A tool to manage the cross-posting process like Hootsuite became a natural fit for that problem.
Likewise, consider how the market for online advertising has changed over the years. In the early days of the internet, we started with mysterious banner ads and disruptive pop-ups; now, we have a hyper-targeted ecosystem that spans paid search, paid social, and native advertising. That’s because the market shifted. Once users became savvier and more discerning with their clicks, businesses needed a way to serve up ad content that was interesting and relevant enough to earn people’s attention. Companies like Google and Facebook responded effectively to that new problem—and they’ve experienced quite a bit of success ever since.
How to Check-In With Your Market
Customers hold the key to predicting changes in your market. They know when their problem has shifted—and they’re typically willing to tell you about it. Give your customers the ability to provide feedback through quantitative surveys and/or qualitative interviews, and keep an eye out for mentions of a new problem your product doesn’t currently solve. These customer feedback check-ins can be done regularly and on a small scale.
Your target customers are another great source for new market insights. They may not be familiar with your product, but they do know what they need from their SaaS tools. You can use these same tactics to survey your potential customers every so often. You’ll get a pulse for their needs and keep track of how those needs change over time.
Step 2: Find Out How Your Customers Use Your Product to Solve Their Problem
If you understand your customers’ reasons for choosing your product over another, you’ll learn which features or functionality drive your product’s value—and you’ll get a clear idea of which changes you should prioritize. It tracks back to your value proposition: Why should someone pick your product to serve their needs?
Slack is a compelling example of user-centricity at work. Now a remote workplace communication staple, Slack was originally developed as a way to communicate internally while creating an online game. Founder Stewart Butterfield and his development team realized the platform filled a need in the market—a streamlined, centralized, searchable communication tool for work. They tested their minimum viable product (MVP) with a small number of companies to gather insights and feedback, and they updated their product accordingly. Slack exploded in popularity (driven initially by word of mouth), and it’s now the go-to choice for almost 170,000 customers, including 65 Fortune 100 companies.
How to Track Your Product’s Value
To learn why people find your product valuable, regularly gather customer feedback, so you can determine if their reasons change over time. If you can watch your customers interact with your product, even better—you can spot areas where their actual user experience doesn’t match your expectations.
For example, when health insurance company Health Net studied how its customers renewed their insurance plans, the company found that many people opted to stick with their current plan out of apathy or due to a lack of other affordable options—not because they preferred their current provider. That realization prompted Health Net to make company-wide changes focused on expanding its customer base.
Open-ended questions are an excellent way to let your customers describe your product’s value in their own words. You can ask these in focus groups or one-on-one interviews or via a survey. Pay attention to the themes that emerge from their answers, as these can offer hints about how you can maintain product-market fit.
If customers say they use your product because it’s perfect for solving their problem, that’s a strong indication your product strategy is working and your product is delivering value. If they choose your product because it offers something unique or because there are no other viable options on the market today, those could point to future challenges in keeping your product-market fit. Novelty eventually wears off, and if you’ve landed in a profitable market, you can expect new competitors to seek out their own share of your base.
Step 3: Look for Signs of Change in Your Competitors
SaaS moves fast, and customer expectations move quickly along with it. If your users like the way another SaaS product works, they may expect you to deliver the same experience. Always try to find out all of the options your customers have to solve their problems. Even the most unique trailblazers will eventually see competitors.
When Netflix added a streaming service to its video subscription business model, it was a brand-new product for many people. While other streaming tools existed in 2007 (like YouTube), they didn’t fill the niche of movies and TV on demand as well as Netflix did. Netflix found its fit as a startup, and it dominated the streaming service landscape early on. It’s only recently, due to the pandemic, that the company has seen other competitors crowd in—and it’s starting to struggle to keep up. It will be interesting to watch how it adapts its approach and offers more value to customers than its competition.
How to Monitor Your Competitor Landscape
Analyze your competitors, and watch what they’re doing. If they release new features or cut others, can you determine why? Do they see a trend you haven’t spotted yet? If so, that’s a chance for you to iterate based on an emerging customer need—and it’s your product team’s opportunity to do that better than the competition.
Keep up to date on industry news, so you can get alerts when new companies launch in your market. Consider monitoring what’s going on outside of your target market as well. Even companies that don’t operate in your space can influence what your market needs. Customer Service chat boxes are a great example of this: when LiveChat (one of the early developers of this software) first launched its product, it was intended to support the sales teams for enterprise businesses. Now, customers expect a chat option for customer service (regardless of business size).
Your customer metrics can also show you if you’re losing your users to a competitor. If your user retention drops and churn rate spikes without another explanation (like a recent change to your product), it’s worth it to find out why your customers are leaving and learn where they’re headed.
Apply Your Framework to Your Product Strategy
Earning product-market fit is a great achievement, but keeping it is an iterative process. With each product update and tweak, you may deliver even more value to your customers, or you may stray a bit from offering the solution they need. Keeping a framework in the forefront of your mind throughout every stage of your product roadmap can help direct you toward those changes that will maintain your fit and away from updates that don’t match what your market needs.
Checking in regularly with your customers and validating your product changes will give you valuable insights into which path is the right one for your product—and UserVoice Discovery and Validation can help you get fast, regular feedback at a scale that works for your organization.