Has your product achieved product market fit?
As a product manager, how do you know if your product has achieved product market fit? And what does product market fit actually mean?
Marc Anderson coined this term in 2007, his definition for product market fit is the following:
“Product/market fit means being in a good market with a product that can satisfy that market.”
He also explains how you can detect when product market is not happening:
- Customers are not getting value out of product
- Word of mouth is not spreading
- Usage is not growing fast
- Sales cycle takes long
- Lots of deals never close
And how you can detect when product market fit is happening:
- Customers are buying the product as fast as you can make it
- Money from customers is piling up
- Hiring sales and customer support staff as fast as you can
Sean Ellis who is a startup growth expert then came up with a more concrete definition. He defines it by asking existing users of a product how they would feel if they could not longer use it.
“In my experience, achieving product/market fit requires at least 40% of users saying they would be “very disappointed” without your product.”
He defined this threshold after comparing results across nearly 100 startups.
Marty Cagan who is well known in the product space has different definitions for product market fit depending on the type of the product.
What product market fit means for B2B products:
“For a B2B product, I consider the product to have demonstrated Product Market Fit once you have achieved a threshold number (I advocate at least 6) of live, referenceable customers for a given vertical market.”
What product market fit means for platform products:
“For platform products, the idea is similar but we’re looking for a threshold number of applications to have been successfully built and deployed using your API or platform services.”
What product market fit means for consumer products:
“For consumer products, especially those that are free services, we’re looking for an indicator of serious engagement. I like Sean Ellis’ 40% benchmark but we often need to craft the test for Product Market Fit based on the unique situation.”
It takes good judgement to know when product market fit has been achieved as it is very often not a distinct moment in time. Most startups get there slowly and making painful mistakes along the way. Ben Horowitz wrote a great article explaining product market fit myths:
- 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.
As a product manager, it is really important to define what product market fit is for your product and engage with existing and target users until they define your product as a ‘must have’.