Unlocking Product Market Fit For Tech Startups
Every technology startup has a strong desire to find product market fit. It is every founder's dream and the key to unlocking growth and success.
Achieving this feat for your startup requires a significant amount of effort and consideration of various factors.
Some founders struggle with this, while others believe they have a product-market fit when they don't, so they waste resources.
The Spark Circle, our exclusive community for under-represented founders, hosted its first community event last month, with Sefunmi Osinaike speaking on this important topic in startup building.
They facilitate collaborative, hands-on product development experience for product managers, designers and software engineers to gain real-world experience shipping products in eight weeks.
He is also the author of How to Product—a book on transitioning into product management from outside the industry. Before Co.Lab, Sefunmi was previously a product manager at Microsoft and Apple.
Every startup has some sort of product that caters to a specific market or customer base.
Product market fit is the synergy between building something people want with a clear path to making money and making of scalable.
To further explain what product-market fit means, he talked about the key components that dictate it.
Building something people want
The first step toward achieving product-market fit is to build something that people want. This is frequently said about the people at Y Combinator, one of the world's most well-known accelerators.
To build something people want, you must first solve a problem. Speaking with your target audience allows you to identify and understand the problem and develop the right product that solves it and meets your customers' needs.
As a founder, building a solution without a problem in mind means you're building to fail.
After you've created or are on your way to creating something people want, the next step is to consider the startup's feasibility and whether you can profit while providing value to people at scale.
You may have a good product that solves a problem for your users, but if it is too expensive for them, it limits the operations and ability of your startup to scale to different groups of people and markets.
When creating something people want, one thing to consider is the market impact of your product and your ability to deliver it to people at a low cost.
Your consistency in onboarding new users will determine whether or not you can find a product-market fit.
Finding your first set of customers is fantastic, but as you work on delivering value to them at a price they can afford, you must develop strategic means to deliver value and onboard new users on a continuous basis.
This is necessary because, as your startup grows, several factors, including operations, can impact how your company provides value.
Signs Of Product Market Fit
Customers are willing to pay
Your customer's willingness to pay for your product or service is a good indicator of product market fit. Even if you are in the early stages of development, customers will be willing to pay it at the time you pitch to them.
The founder advised him that the next time he pitches to potential clients and they tell him they are going to use his product, even though it isn't yet available, he should ask them to $1. "Tell them that if you give me $1 today, I'll add you to my mailing list, and when the product is ready, I'll give it to you," he said.
If customers are willing to give you that $1, even before the product is released then that is a sign that you have made something that people want.
Strong Customer Feedback
Continuous customer feedback, even from a small group, is a strong indicator of product market fit.
This indicates that your product is addressing a pain point for them, and they are interested in seeing it improve. They may also have other concerns that they would like you to address.
High Usage when there is a malfunction
In the early stages of a startup, it is nearly impossible to build a perfect system free of flaws.
Due to limited resources, you may find it difficult to address all of your customers' concerns and complaints about your product.
In such cases, and if you are developing a product that truly solves a problem, despite any challenges you may face, you will see high usage of the product which should tell you that you're on the path to achieving product market fit.
Unlocking Customer Or Product Market Fit
To unlock product market fit for your startup, it is critical that customers provide feedback and that you can see that it actually solves a problem for them.
Sefunmi cited an example in which the co-founder of SuperHuman surveyed his users and asked them one simple question: 'How will you feel if you could no longer use our product?'
If more than 40% of people say they will be very disappointed if they can no longer use your product, you have product market fit.
This indicates that you've created something that people want and your customers will be highly disappointed that they will not be able to use it any longer.
Interacting with your customers on a regular basis to understand where you're at is extremely beneficial and can help you unlock product market fit for your startup.
In today's startup ecosystem, achieving exponential growth is extremely difficult.
In order to achieve exponential growth, it is very important to have organic growth which is one of the most powerful levers for unlocking product market fit. It is connected to whether your product provides value or solves a problem.
Considering consumer products, if people can completely tell other people about the product right easily, then you're already unlocking product market fit because they love your products to the point where they can't wait to tell other people about it.
A good example will be social media platforms like TikTok that build and leverage a lot of connections to share and be talked about it publicly, which is why you see TikTok videos on Twitter, on Instagram, even before you even download TikTok, because then you've seen it around.
Customer Acquisition Cost and Lifetime Value
Customer acquisition cost is the cost of acquiring one customer, and lifetime value is the average cost of the length of time the customer stays with you, which is very common among SaaS products.
When your customer acquisition cost is significantly less than your lifetime value, you can begin to see signs of product market fit.
For example, if you spend $2 and make $1, that is not a sign of product-market fit because you are not finding or retaining customers in a sustainable manner.
To achieve product-market fit, you must find strategic and long-term ways to ensure that your customer acquisition cost is less than your lifetime value.
In summary, to achieve product-market fit, you will have to build something people want, make profit from it while delivering value at scale, and easily find and keep people sustainably.
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