Product-Market Fit: Guide to Market Research

“The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product'" - Eric Ries

Product-market fit is matching the product you're selling to a group of customers. To do that, you have to take two steps: (1) define (very specifically) the problem(s) your product solves. (2) Determine the market who has that problem(s).

Let's walk through a product-market-fit journey with our app template, Market Research.

1. Product overview: Laying out your product's place in the market.

Andy Rachleff has said:

"A value hypothesis is an attempt to articulate the key assumption that underlies why a customer is likely to use your product. Identifying a compelling value hypothesis is what I call finding product/market fit. A value hypothesis identifies the features you need to build, the audience that’s likely to care, and the business model required to entice a customer to buy your product. Companies often go through many iterations before they find product/market fit, if they ever do."

This is where you lay out the objective - the problem - that your product solves.

Once you've thoroughly written about the objective, write about the feature(s) that specifically aid in solving that problem.

Create as many records to coincide with the facets of problems and features you want to highlight.

2. Target Customers

On determining the market, Don Valentine has said:

“Give me a giant market — always...My position has always been: you find a great market and you build multiple companies."

In the process of determine the broader market, you've got to know your customer. Determine the person who needs your product by defining what problems they're having and what makes them want to give money to solve them.

3. Surveys: Getting concrete answers about your customer

Reid Hoffman has said:

 “Product/market fit requires you to figure out the earliest tells."

You've got to be religious about soliciting feedback from real potential customers if you really want to know if you have achieved product-market fit.

And consistency is key. Putting out multiple solicitations for feedback is important.

That's why we have a survey planner in our app.

Andy Rachleff has said this about finding the right customers:

"You often stumble into your product/market fit. Serendipity plays a role in finding product/market fit but the process to get to serendipity is incredibly consistent. What we do is teach that incredibly consistent process.”

Here's our survey template - track responses inside our app.

Always be making observations about the data you're collecting from your customers. We've got a tab for you to make an entry, assign a date, and take notes on each piece of feedback from your customers.

5. Data analysis: using real feedback to determine changes to your product

Marc Andreessen has talked about the rigorous lengths founders must go through to achieve 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. When you get right down to it, you can ignore almost everything else. I’m not suggesting that you do ignore everything else — just that judging from what I’ve seen in successful startups, you can."

The data analysis tab is designed so that you make as few early mistakes as possible.

If you're debating on implementing a feature, this tab is particularly designed to help you decide. Before you have to go to the extreme lengths described by Andreessen, use the feedback you've collected first.

-Implement feature: yes, no, undecided

-Feature importance: grade the significance on a scale of 1-5

-Who else solves this problem: link this field to the next tab - the competitor who is already (trying) to solve this problem

6. Competitor feedback

Analyze the competitors who are already in this market.

Do not fret too much about first mover advantage. As Andy Rachleff:

"First to market seldom matters. Rather, first to product/market fit is almost always the long-term winner...Time after time, the winner is the first company to deliver the food the dogs want to eat...Once a company has achieved product market fit, it is extremely difficult to dislodge it, even with a better or less expensive product.”

Depending on the size of the market, in fact, there can be multiple people competing in the same market. Recall Don Valentine's statement that he likes there to be multiple companies in the same 'giant' market.

That being said, in order to succeed in a market, you must understand your competitor and then serve the customer with a unique way of solving his or her problem. This tab in our app helps you do that.

Go ahead and note the valuation, although of course sometimes this is not relevant.

Also input a brand awareness rating. Judge the target customer's awareness of the competitor. Note the market capture and trust that existing customers have in your competitors.

Competitor analysis is the last step in our guided journey to product-market-fit.