Find and Validate Product Market Fit to Boost Your Business
Running a business takes a lot of foresight. This simple truth applies to both start-ups, and well established businesses. Releasing new products haphazardly can result in lost time, resources, and revenue. Yet despite this, many CEOs, chief product officers, and other executives will oftentimes jump the gun when they get an amazing new idea, and rush it to market without taking the time to find and validate product market fit.
The good news is that validating product market fit is a relatively straightforward process, and well worth the investment. Let's go over the basics of product market fit, and how you can use it to make sure your next product a big seller before you even begin production.
What is Product Market Fit?
The short answer is that product market fit is exactly what it sounds like: Checking to see if your product is a good fit for the market. However, the reality of the situation is that finding or validating product market fit is a multi-step process in which you research the market you intend to release your product to in order to see if it will actually sell. Factors that are often researched include:
- The problem that your product solves
- Who you're solving it for
- Can brand loyalty be developed using said product
- Will your customers tell other people about your product if they like it
While most of these may seem like no-brainers, you might be surprised to find that the answers aren't always as cut and dry as you might think. For example, you may be inclined to believe that if your product solves a problem it will sell really well. People want their problem solved, right?
Yes, but there are many factors to consider such as cost and accessibility. There are even factors that are a bit more abstract that should be taken into account as well, such as whether or not the product will be fashionable, or if it could quickly fall out of fashion.
A good example of this would be the rise, fall, and resurgence fanny packs. They were popular in the 80s and 90s because they solved a problem for people who needed a way to carry extra stuff with them, but eventually became unfashionable. This caused the market shrank considerably and became much more niche for nearly 20 years before they started to come back into style thanks to big name companies like Prada, Gucci, and Louis Vuitton.
In any case, fashion is just one of the many abstract factors that can determine product market fit, and whether or not you should go ahead with a new product idea. With that said, let's get into what you should be doing to find/validate product market fit for your ideas so that you can quickly identify winners, and rapidly grow your business by bringing them to market faster.
Product Market Fit Starts With An Idea
While you may be thinking that product market fit is just a fancy way of talking about market research, there are some significant differences that you should be aware of when implementing this process. The first thing you should know is that finding product market fit is all about ideas. Yes, the numbers and metrics are important as well, but it will be the ideas that get you to that stage of the process.
For example, your idea might be for a dog collar that has a tracking device that can be accessed by an app on your phone. This would mean that your first question should be "Are people interested in buying a GPS dog collar?" The key word here is "buying." People want all kinds of things to make their lives easier, but that doesn't necessarily mean they're willing to pay for them.
Now that you have a central concept concerning your product idea, you can expand upon it by identifying key factors needed for the product to sell. In this case those factors would include:
- Having enough income to purchase such a product (Possibly for multiple dogs)
- Owning a smart phone compatible with the app software
- Keeping their dogs outside at least some of the time
By narrowing down these factors it becomes possible to identify your core demographic, and prioritize target customers. In the long run this will allow you to save lots of time and resources on your marketing. More importantly though, it will allow you to validate market fit in the short run so that you don't end up producing and marketing a product that no one will actually buy.
Identifying The Metrics for Success
Something to keep in mind is that all the testing and research in the world won't mean anything if you don't have a criteria for success already planned out. You can't just do market research and judge the results by a gut feeling. Instead you need clearly defined metrics as to what constitutes a go ahead for the product, and what constitutes a cancellation.
For example, you can decide that if 70% of the people you present your product idea to expresses interest then you will proceed with the project, and if it fails to meet this threshold, you'll cancel it and come up with a different idea for a new product and. The important thing is to have a set value that makes sense in the context of the response you need in order to be significantly profitable with your new product.
Getting Accurate Data
It should also be mentioned that there is a big difference between someone expressing interest in a product, and someone actually being willing to spend money on it. Marketing research teams can often be led astray when a large portion of their sample say that they would be willing to purchase their new product idea, only to find out later that sales are much lower than the projections suggested.
The reason this happens is that people engage in wishful thinking in situations like these, and don't consider the impact of actually spending money. When the time does come for them to actually pull out their wallet, they may think of a variety of reasons to not go through with the purchase.
The best way to overcome this problem is to use a mockup that seems 100% legit. For example, you could create a dummy sales page online pitching your product idea complete with pictures, a guarantee, and everything else you'd come to expect from a legit sales page. The only difference is that when the reader clicks the "Buy Now" button, it takes them to a "Coming Soon" page, or a survey page to get more info from them on how they feel about the product and it's features.
The big benefit here is that you know that everyone who actually clicked the buy button was serious about buying your product. This kind of data is critically importance when it comes to finding product market fit because it weeds out people who will say they want to buy your product, but won't actually do it for whatever reason.
The Final Phases of Product Market Fit
Once you've determined that people will actually spend money on your product idea, it's time to gather the final piece of the puzzle: How will people react when they're actually using your product? The reason this is important is that just because someone is willing to purchase your idea, doesn't mean that they'll actually like it when they get their hands on it.
Remember the metrics we talked about earlier involving brand loyalty and whether or not people will talk about the product to other people? This is where you figure out all of that stuff by building a prototype.
When most people think of a prototype, they think of a cheaply produced version of a product primarily used to identify flaws that need to be fixed. However, when it comes to identifying product market fit a good prototype will be packed with as many features as possible so that you can see which ones really resonate with your target audience, and which ones can be removed in order to cut costs. This being the case, the production model of the product will likely be a scaled down version of the prototype.
Regardless, getting your prototype into the hands of your demographic and sub demographics is what you'll be doing in order to see how they like it. This will give you a lot of data on what features are the most popular, any problems people have with the product, and if different versions of the product should be made for different sub demographics.
Feedback is crucial in this phase so make sure that you gather as much as possible. It will be used to refine, polish, and improve your product idea until your have a blueprint that's a real winner.
Bringing Your Product to Market
Once you've validated product market fit for your new idea, and you've found that it would have a high chance of success, it's time to begin production and bring it to market for real. All of the research you did, and the data that you collected will ensure that you're able to product a product that people will actually buy. You'll also be able to keep production and marketing costs at acceptable levels allowing you to generate maximum revenue from your new product so that you can rapidly grow your business.
Just remember that once you bring your product to market you need to continue gathering feedback and data on product market fit. Markets change over time, sometimes very rapidly. Continuing to evaluate product market fit is critical for making sure that your product is always tuned to the needs and desires of your customer base. Adding new features, adjusting pricing, and making sure that your product always provides maximum value will ensure your success for years and decades to come.