You’ve got an amazing idea for a new piece of software or service that you’re confident about developing further, but is the market really ready for your idea? Whether you’re an emerging startup or an established business, finding product-market fit is a good indicator for the success of your next venture. First coined by Marc Andreessen in 2007, “product-market fit” was initially defined as “being in a good market with a product that can satisfy that market.”
Over the years countless venture capitalists, founders, and product professionals have offered their own interpretations for the term, but at its very core product-market fit is all about creating a product that not only meets the needs of your customers (the market), but does so in a way that is better than the other existing alternatives. Dan Olsen, a product management consultant, expands on this topic further in his framework; the Lean Product Process, to help businesses achieve product-market fit.
Whether you’re looking to launch a brand new product or introduce a new service to an already existing product line, following this 6 step framework will help you determine the feasibility of your idea.
Step #1: Determine Your Target Customer
It’s important to recognize that you may not have a precise definition of who exactly your target customer is initially, having a high-level hypothesis about who your product will serve is sufficient for this first step. As you conduct more market research and begin segmenting your customers, you may find that your initial hypothesis may change.
Establishing clear buyer personas to describe your customers adds a human element to the design process and gives your product team a better understanding of who exactly you’re building the product or service for. Some characteristics you should include in your personas are customer demographics, behavior patterns, motivations, and goals. You’ll want to be as detailed as possible since these fictional personas will serve as a representation of the real users who will end up using your product.
Step #2: Understanding the Needs of Your Customers
After identifying a core set of customers you’d like to market your product to, the next step is to understand their needs. Whether you call it pain points or customer needs, the underlying principle is the same, the success of your product in the market will depend on its ability to address the underserved needs of your target customers.
Because your product will be compared to existing solutions, it would make more sense to try and break into a market where the customer needs aren’t adequately met. A good market opportunity exists when your software or service is able to create value for customers.
Step #3: Define Your Value Proposition
We’ve already discussed how your product will be compared to existing market competitors. Having a clear value proposition helps distinguish your product from others in the market by outlining exactly how your product plans to meet customers needs better than the alternatives.
You may uncover a handful of unmet customer needs during your conversations with your target customers, but it may not be feasible to try and go after the entire list. Your value prop offers guidance for your product strategy by forcing you to pick a clear set of pain points to address. How will your product do a better job at meeting these needs compared to the competition? What unique features do you offer in order to add more value and delight customers? Why should your customers pick your products over others?
Step #4: Offer Up a Core Set of Features For Your Minimum Viable Product (MVP)
The goal in this step is to iterate until you have a Minimum Viable Product that your customers agree is viable. Having a clear feature set to show customers helps validate what core functionality your customers value and acts as a safeguard against investing considerable time into developing a product that your target customers don’t like or need.
During the process you may discover that:
- Your customers really value an important piece of functionality that’s currently missing in your MVP.
- You’ve included an extra feature in your MVP that your customers don’t particularly utilize.
Step #5: Build the MVP Prototype
Don’t be intimidated by the word prototype! Your Minimum Viable Product doesn’t have to be a fully fleshed out product since product fidelity and interactivity will vary for each business idea.
Your MVP prototype will act as a representation of your finished product without requiring you to completely build the final product. The MVP prototype exists to help test your hypothesis by offering customers an iteration of your product to interact with and offer feedback on.
For example, having a mock-up of an app’s interface (like a wireframe) is just as viable as building the actual app itself. At the end of the day, it’s about staying lean so we can easily react to the feedback we receive from customers. It isn’t very efficient to invest considerable time and effort into building a finished product if you have to drastically change the product or pivot down the road.
Step #6: Get Your MVP In front of Customers
Once you’re satisfied with the first iteration of your MVP, it’s time to test it with your target customers. Data integrity is extremely important in this final step since the feedback you receive will be instrumental in influencing the direction of your product.
From the start, you’ll want to only elicit feedback from people who fit the criteria of your target customers. If you’re not careful, you could risk iterating your product in the wrong direction to meet the needs of customers who might not necessarily be in the market for your product. To prevent this, consider designing a survey/questionnaire to make sure you’re identifying research participants who more closely fit your ideal customer persona.
The actual test of your MVP with your target customers should incorporate a variety of qualitative and quantitative questions. Open-ended questions are more helpful in soliciting constructive feedback than questions that can be easily answered with a “yes” or “no” response. Of course, you should be careful and ensure you’re not asking leading questions since they can prime your users to give a particular answer.
At the end of each test, be sure to look at both the positive and negative feedback you receive and take notice of any patterns in the responses and behaviors of each user who interacted with your product or service.
Reflections, Pivots, & Iterations
The overall process for achieving product-market fit is an ongoing process. You may find that your initial assumptions about your product, the market opportunity, or even your target customers may not hold true after each iteration of the Lean Product Process. As long as you stay persistent and receptive to the feedback of your market, you’re on the right track to developing a product with strong market opportunity.
Once you’ve determined that your software or service has achieved adequate product-market fit, the next logical step is to figure out a viable go-to-market strategy and get your product in front of as many customers as possible. FastSpring’s ecommerce platform is designed to support a full spectrum of digital products and distribution models and has helped thousands of businesses monetize their product offerings.
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