How to improve your Product Market Fit?
This article will help you how to improve your Product Market Fit, with pragmatic tips.
It’s not hard to recognize if your company has an excellent product market fit: acquisition of new customers is easy, you have happy customers and high retention rates. Your customers are actively referring your product, even unasked!
The other side of the spectrum is also easily recognizable. Because, how do you know you have no product market fit? Well, that’s not hard to tell: you don’t sell anything…
But what if you are somewhere stuck in the middle? Then an important question is: How to improve your Product Market Fit. In this blog, we will discuss signs of a poor product market fit, how to measure it (properly), and several compelling examples.
Signs of a poor Product Market Fit
If you can tick multiple boxes in the following list, it is a clear sign you have to come into action to (re)align your products with customer demands.
- The Sales team struggles to sell the product. At first glance, it may seem that the disappointing sales are due to increasing competition. You may be inclined to “buy” customers by giving big discounts. But if your product has insufficiently fit with the market, the situation will only worsen.
- The Product team is struggling with customers demanding more and more functionalities. This may seem positive (“The customers are happy, they want more!”). But in reality most of the time this is a clear sign that you haven’t found the perfect fit yet. Maybe you are close, and customers recognize that. Keep up the good work! Focus not just on more functionalities, but on delivering the right functionalities.
- The Marketing team struggles with conversion on inbound campaigns. They do their efforts, but the message just doesn’t resonate with the targeted audience.
- The Customer Success team complaints about their ‘leaky bucket’, meaning that retention rate is low and thus churn is high.
How to improve product market fit
It is really no mystery to find out how well your solution is really solving a problem for your customers. And the methods come at all sizes and prices. So, the biggest hurdle to overcome is we ourselves. We have to be humble and honest to listen to the real needs of our customers.
First, do your research
Customer Research helps you to get a clear understanding of customer needs and problems. This article only covers the basics of Customer Research, relevant for the topic how to improve product Market Fit. To learn more about Customer Research Methods, read this in depth article.
Qualitative methods
- Get out of the office and talk to your customers! This can’t be said enough. It is the cheapest method and a very effective one. So, whatever other methods you choose to use, make sure that multiple people in your organization talk regularly with the clients. Remark: not about your product, but about their needs, their business problems they have to solve, their jobs to be done. How to do this? Make it a habit to schedule regular meetings with (random) clients. Make an interview template. That helps you to structure the interview and document the results in an organized way.
- If you try to find something more scalable than one on one interviews, send out surveys. Surveys can be a useful instrument on all levels: from strategy to operations. You could choose this method situational to survey for example a specific customer segment on a product decision. Surveys can also be helpful if you find it hard to get started with customer interviews. If you first sending out a survey, maybe you find it is easier to call them to delve into a few points after they have completed the survey.
Quantitative methods
- The 40% rule. Also known as the “Sean Ellis Test”. This is a simple, yet powerful method. In short, you ask your customers the following multiple-choice question: How would you feel if you could no longer use our product?
– Very disappointed
– Somewhat disappointed
– Not disappointed (it really isn’t that useful)If the ratio of the answer “very disappointed” is above 40%, then you can be pretty sure to have nailed it with your product.
- Cohort analysis on customer retention and customer lifetime value (CLTV). Make a cohort of all the customers that onboarded per period, e.g. week, month, or year. And plot on the other axis how many percent overtime of the customers in that cohort come back to use your product. It is normal to see this percentage declining over time in a given cohort. But what happens if you compare the different cohorts now? Is the percentage increasing over time? That is a strong signal your product-market fit is improving!
Then, put it into practise and start designing
The real value of doing research is putting it into practice. Customers don’t pay you because you understand their needs and problems. They pay you because you fulfill their needs and solve their problems. So, use all the insights to design a compelling Value Proposition and start iterating on your MVP.
Value Proposition
Writing out a Value Proposition is a helpful tool to design and document your added value for the customer. Make sure that you cover (at least) the following topics:
- Description of the customer segment:
- What tasks of the customer do you help him to do/improve/etc?
- Which pains does the customer experience in performing these tasks?
- What are the potential gains?
- Description of the product service you offer:
- What are the pain relievers of your product? Ideally is this a 1-to-1 match with the pains your customer experiences.
- What are potential gain creators?
A helpful tool to get started is the book Value Proposition Design from Strategyzer, including the Value Proposition Canvas.
Iterate on your MVP
It is important to quickly turn your learnings into supposed solutions for the customer’s problem and test again if your supposed solution is a real problem solver. Don’t be too quick satisfied with the customer’s answer. Count for multiple iterations and ask for feedback again. This way you systematically improve your Product-Market Fit every step you take.
From Product Market Fit to Go to Market Strategy
Finding Product Market Fit is essential for success. So is a good Go to Market Strategy. Because your product won’t sell itself. This step by step guide will help you to create a Go to Market plan.
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