Many ideas circulate product/market fit. Many times, these misconceptions confuse founders and the teams they manage, leading to possible future setbacks.
Success at finding PMF is not a guarantee, especially for products that have not previously been tested or for businesses with no prior experience in the process.
By setting the record straight on some of the most popular beliefs in the industry related to product/market fit, we hope to put some of these myths to rest.
Myth #1: Achieving PMF often happens spontaneously
The reality is, finding a good market fit for a specific product involves an often-grueling process of trial and error. In-depth market and customer research, careful planning of your MVP, and lots of testing in particular market segments are all required.
Because the aim is always to create, market, and sell a product that resonates with specific groups of people, businesses often need to invest substantial time in this process.
Dan Olsen, in his book titled Lean Product Process, outlines the steps involved. This procedure is often compared to the scientific method. It requires product teams to start with an initial hypothesis, test it, prove its validity (or lack thereof), tweak the product and its value proposition, and continue this cycle until they see favorable results.
As Bryan Clayton, CEO of Greenpal, said, "We are seven years into building the marketplace with over 200,000 customers and $20 million a year in annual revenue. But it didn't start that way, the first three years of our business we were trying to find product/market fit… we found [it] with a relentless focus on the pursuit of what works."
It is nearly impossible for a product/market fit to happen rapidly or spontaneously for a process like this. It does not suddenly manifest; you must work toward it.
Myth #2: It is evident when you achieve PMF
This idea is partly correct.
There are some obvious signs that you have a product/market fit. For example, the demand for your product keeps growing, word of mouth helps you acquire new customers, and your company revenue increases over time.
However, these things take time to unfold. If you have not been testing your product for an extended period, but it is still selling, pay attention to the type of customers buying it. If they tend to fall within your buyer personas' guidelines, perhaps you are well on your way to PMF. If customers only buy your product once, you might not have PMF, but a customer retention issue.
Myth #3: Once you have PMF, you cannot lose it
Product/market fit is said to be an iterative process for a reason.
Once you have hard data to support PMF, you have to continue working to maintain it. This includes keeping up with industry trends and the ever-changing needs of your market and customers.
This upkeep is essential to stay ahead of the competition and gain an edge in developing product upgrades. Market research and testing your marketing and sales approaches are necessary at this stage.
Sergei Ciachir, CEO of Open Packaging Network, Inc., had this to say about his company's constant reiteration. "We launched two years ago and [very early on] we learned it is very important to have the right target. After continuous testing and adjusting our sourcing from all companies to SME (small and medium-sized enterprises), we started to grow from 5% per month last year, to 20% per month, this year."
Because markets are constantly changing, especially in industries with a lot of earning potential, it is essential to continue testing ideas for your products for continued success.
Myth #4: Having PMF gives you an advantage over your competition
At first glance, this statement makes a lot of sense. Suppose that product/market fit is the key to business success and increasing your company's revenue. In that case, achieving it should provide a competitive edge over other companies like your own.
However, this is not true.
Having a product/market fit is only the beginning of your journey toward business growth. Without the right market and customer base for your product, your business does not stand a chance to compete or succeed in your industry.
The CEO of Cost Reduction Consultants, Michael Hammelburger, shared how his company has learned about PMF's benefits.
"The greatest lesson we've learned is testing the product fit with the market [as it] involves risk and taking huge risks can also mean huge payoffs…coming into terms with what the market wants has been fruitful in the end. The gamble we made paid off, and now, we're in a niche industry with very few competitors, but with a huge demand for our services."
Myth #5: Having a product/market fit means your business has the potential to dominate its market
Many of the most profitable markets are very competitive for a reason. Every business that serves it wants a piece of the revenue it generates.
The total addressable market (TAM) is a metric every entrepreneur needs to use. It gives a rough estimate of the size of a market (including how many competitors and possible customers exist within it) and serves as the basis to identify how much revenue potential a market has.
Once TAM is determined, you identify the serviceable available market (SAM), or the market opportunity that exists within your business's core competencies.
Finally, the serviceable obtainable market (SOB) will determine how much of your chosen market you can realistically influence. (Source: Corporate Finance Institute)
Even in the smallest of markets, it will be challenging to dominate your chosen industry. Being the go-to provider of the products or services your target customer wants or needs will require massive amounts of talent and luck.
Often, competitive markets are made of various segments. After trying to scale your business in one part of your market and doing it successfully, once you try to do the same in a different segment, it often does not work.
This is why retargeting ads exist. They target distinct demographic segments to ensure that what does not work for one group could work for another.
To increase your business's opportunity at succeeding outside of its initial customer base, you can:
- Focus exclusively on a segment within your market, or
- In a big market, concentrate on the pain points that require distinct solutions for each segment.
If you want to scale in different segments, make sure you tackle those that resemble what you offer the most. Often, this segment requires little effort instead of a segment that will require you to invest more in it.
Myth #6: A good team will build a product that works
According to popular belief, if you work hard enough despite the circumstances, eventually you will succeed.
While this may be true for many things in life, when it comes to business and PMF or a lack thereof, this is not necessarily true.
Success is a byproduct of working hard on the right thing.
If you choose a good market with abundant opportunities, you are more likely to succeed. The key is to find a good market and create a viable product that satisfies the market's needs.
Your product does not need to be a great one, it does not need to be the best product in the market, but it must fulfill a need. This only works best if you choose a good market.
The market you choose will not know how great your team is; they will only care that the product works. Once you have more success, you can incorporate new team members with more experience and help you scale your product.
What matters is that your product is viable. When you have a great market, your team can find it easy to upgrade your product.
The opposite also applies. Even if you have the best product, but in a terrible market and a fantastic team with a lot of experience, your product will fail.
To help you find a good market, most experts suggest using the Jobs Stories Framework.
It takes knowledge and confidence in the process to allocate the resources required to attain PMF. Whether it takes months or a couple of years, learning what is accurate and inaccurate about product/market fit is crucial to your business growth.