Product/market fit

Product/Market Fit is the degree to which a product satisfies a strong market demand.

Product/Market Fit has been identified as a first step to building a successful venture in which the company meets early adopters, gather feedback and gauges interest.

History

Marc Andreessen was the first person that used the term: “Product/market fit means being in a good market with a product that can satisfy that market.”.^[1][2][3] Many people interpret product/market fit as creating a Minimum Viable Product that addresses and solves a problem or need that exists.

Sean Ellis is often associated with popularizing the term. He placed Product/Market Fit as a precondition for effectively scaling marketing for a company in his Startup Marketing Pyramid.^[4]

Steve Blank referred to the concept of product/market fit as a step in between Customer Validation (step #2 in his book The Four Steps to the Epiphany) and Customer Creation (step #3).^{[5][6][7][8][9]}

Interpretations

In Alexander Osterwalder's Business Model Canvas paradigm, product/market fit could be interpreted as a business model's value proposition, customer segment, relationship, and channel are fixed without requiring additional pivots.

Popular Frameworks

Ten Steps to Product/Market Fit

Ash Maurya outlines ten steps for exploring Product/Market Fit.^[10]

1. Your product is not "product"
2. Explore different business models and prioritize where to start
3. Understand the three stages of startups: Problem/Solution Fit, Product/Market Fit, Scale
4. Focus on the right metrics
5. Formulate falsifiable hypotheses
6. Architect for learning
7. Architect for speed
8. Go only as fast as you can learn
9. Validate qualitatively, verify quantitatively
10. Systematically test your model

Product/Market Fit Storyboard

Building a Minimum Viable Product requires four components of the Business Model Canvas in the Product/Market Fit Storyboard:^[11]

1. Customers
2. Value Proposition
3. Channels
4. Relationship

Popular Metrics

The 40% Rule

One metric for Product/Market Fit is if at least 40% percent of surveyed customers (Users) indicate that they would be "very disappointed" if they no longer have access to a particular product or service. Alternatively, it could be measured by having at least 40% of surveyed customers considering the product or service as "must have." Sean Ellis is noted for popularizing this heuristic after examining many startups.^[12]

Common Mistakes

It is important to differentiate between Product/Market Fit and Problem/Solution Fit when measuring a company's customer base. More specifically, when gauging a customer's desire, companies need to be sure they are measuring desire for the product or service—not just for a solution. Misinterpreting customers' desire for a solution as a company's product or service will end up being a False positive for Product/Market Fit.^[13]

Popular Quotes

• Marc Andreessen: "The #1 company-killer is lack of market."
• Marc Andreessen: "…The life of any startup can be divided into two parts – before product/market fit and after product/market fit.”
• Marc Andreessen: “When you are BPMF, focus obsessively on getting to product/market fit. Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.”
• Paul Graham: “Make things people want.”
• Sean Ellis: "I ask existing users of a product how they would feel if they could no longer use the product."
• Steve Blank: “Customer Validation proves that you have found a set of customers and a market who react positively to the product: By relieving those customers of some of their money.”

Misinterpretations

Venture capitalists Fred Wilson and Ben Horowitz point out common misunderstandings of Product/Market Fit:^[14]

• Myth #1: Product market fit is always a discrete, big bang event
• Myth #2: It’s patently obvious when you have product market fit
• Myth #3: Once you achieve product market fit, you can’t lose it.
• Myth #4: Once you have product-market fit, you don’t have to sweat the competition.

See also

• Lean Startup

References

1. Marc Andreessen. "Product/Market Fit - EE204".
2. Quora. "How do you define Product-Market Fit?".
3. Marc Andreessen. "The Pmarca Guide to Startups, part 4: The only thing that matters". Archived from the original on July 1, 2007.
4. Sean Ellis. "Startup Marketing".
5. Steve Blank. "The Four Step to the Epiphany - 2006" (PDF).
6. Blank, Steve and Dorf, Bob (2012). The Startup Owner's Manual, K&S Ranch (publishers), ISBN 978-0984999309
7. Blank, Steve (2008-2015). Blog on entrepreneurship
8. Blank, Steve (2013). What I Wish I Knew About Startups - Steve Blank, Consulting Associate Professor at Stanford University (video, 30-min). The audience is composed of the CEOs of the portfolio companies of Khosla Ventures. Talk given in May 2013, posted on the official You Tube channel of Khosla Ventures in May 2014
9. Blank, Steve (May 2013). Why the Lean Start-Up Changes Everything, in Harvard Business Review
10. Ash Maurya. "10 Steps To Product/Market Fit".
11. Tristan Kromer. "The Four Parts of a Minimum Viable Product".
12. Venture Hacks. "How to bring a product to market / A very rare interview with Sean Ellis".
13. Tristan Kromer. "False Positives & Product/Market Fit".
14. Ben Horowitz. "The Revenge of the Fat Guy - March 20, 2010".