Around 30,000 new products hit the market for the first time every year. What’s shocking is that 95% of these products eventually fail to make the cut in the specific markets. Determining the product’s market fit is what sets the remaining 5% apart.
Before introducing a product into a given market, there ought to be extensive research to determine the gap the product seeks to bridge. Your only proof of success after a product launch is the demand and resultant sales attributable to the product. This reality is what makes product-market fit a critical focus area for any company.
Are you wondering what product-market fit is all about? Well, wonder no more. This article will provide you a comprehensive guide on how to determine the product/market fit for any given product.
What Is Product-Market Fit?
What most businesses fail to realize is the fact that the market always wins. As such, it is essential to ensure that your product or service responds to a specific need in the market. Product-market fit refers to the introduction of merchandise that satisfies a broad range of clients in a good market.
Two conditions must work in-tandem for the product-market fit concept to apply. First, the product must bridge a specific gap in the market, hence accelerating demand. The second condition is that the product must be in the right market.
There are well-designed products that would have satisfied a vast market base. However, due to a failure to consider product-market fit, they did not survive well past their launch. Part of the problem in such cases if often the failure to recognize the best market.
Product-market fit may refer to the extent to which a product satisfies strong market demand. This should be the first step for any business that’s keen on a successful venture. At this stage, startups can successfully determine a target market by serving customers with the right products.
Importance of Product-Market Fit
Everyone dreads developing a product that’s not commercially viable. Yet many investors don’t understand the real importance of product-market fit. Well, product-market fit is essential given that your creation of a product is speculative, and you don’t know if it solves any problem for a huge number of people.
Product/market fit can help the business in the following ways.
Introducing a product into a market is costly .You need to know whether bridging the gap will create a large enough market to support the process of production. This is because the process of research, design, and development can push a company to its knees financially.
Once the process of R&D is complete, you must then put money into product launching and promotion. All these financial commitments have a toll on your budget. It’s worse in a situation where you decide to scale up production with the hope that the product will generate returns.
Do you want to save money? You need to ensure that you only invest in a product that will guarantee market penetration. Product-market fit helps your business manage the process of product development and scaling in a way that minimizes losses on your end.
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Product-market fit helps you make sound decisions. The reason many startups fail is due to their inconsideration of product-market fit when undertaking research and design.
Further, the product-market fit helps a business in the decision making process about a suitable market. Remember, the right product in the wrong market won’t survive beyond the launching stage. With product-market fit, the process of decision making on which market best suits your products is easy.
How to Measure Product-Market Fit
When running your business, what you can measure you can manage. It’s essential to understand the process of product-market fit and how to measure the success rate. How do you know if your business is getting closer or if your company has achieved the product-market fit?
These are some of the ways you can use to measure product-market fit.
How Many Customers Would Miss Your Product in Case of a Recall?
This is one of the easiest ways to measure product/market fit. If you have recently launched a product and are considering scaling up, you need to reflect on this question. Would the market notice a sudden recall of your products?
Most commercially viable products or services penetrate the market within a short time. You can measure this based on actual sales or revenues. If you realize that your customer base is still low, it will help to consider value addition.
Do Your Customers recommend the Product to Friends?
Most of the successful products thrive through word of mouth. This is because referrals are the most authentic marketing tools. Before a client can recommend your products to an acquaintance, it must be worth the salt.
When your customers recommend a product to their acquaintances, it means that the product is bridging a gap. You can measure the product/market fit on such a premise. It’s vital to know whether your current customs would be willing to recommend your products to anyone else.
How Many Customers Leave, and After How Soon?
It is vital to retain current records of your product’s growth trajectory. This helps you keep track of the incremental changes in the number of new customers. You also get to measure the retention rates.
Product-market fit may be assessed based on the number of clients who leave. If the numbers are high, then the product may be experiencing trouble fitting in the market.
How Do You Achieve Product-Market Fit?
With everything else said, it would help to now consider how to achieve product-market fit. These simple steps should get you there. First, you should focus on identifying the target market. This is only achievable by focusing on research and feedback.
Once you define the target market, your next focus should be to understand the main customer needs in the market. You must then know what you offer as your value proposition. With these in mind, the next step should be to determine your minimum viable product options.
The most crucial step during this process is to establish a testing procedure. You should test your prototype among the target group on a pilot basis before expanding the market reach. You can learn more about growth markets and customer segmentation here as you learn how to determine the product-market fit.
Don’t Let Your Product Be Part of the Statistics on Failure Rates
Most new products in a market flop because of the failure to consider product-market fit. Before you invest all your money into product research and development, you need to determine your target market and the gap you intend to bridge.
Product-market fit is a measurable concept. This makes it an essential component in the process of decision making for any startup.
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