The exact definition of product-market fit is in its name — when you’ve built a product that meets a market’s needs.
In order to reach product-market fit, you need to make sure the demand and desire exist for the product you want to create. Its creation needs to be feasible, and you need to be able to create a viable business model around selling your product.
Is There Demand?
Your ability to fit into a market requires an understanding of the market you’re entering. You need to start by researching the market you’re trying to infiltrate. Figure out the answers to questions like:
What is the need in that market?
What are the pain points and challenges of your buyer personas?
What are the alternatives to your product? (This could mean competitors, but it could also mean substitutes that don’t directly compete but provide a workaround to the challenge you’re trying to solve.)
How are people trying to solve this problem?
If you have trouble understanding the existing solutions, you won’t be able to know whether there are demand and desire for a new solution and thus won’t be able to begin to achieve product-market fit.
If people have a good solution because substitutes and alternatives sufficiently address the challenge, there won’t be desire or demand for your product.
Is It Feasible?
Can you actually build this thing or provide this service? Do you have access to the time and resources to create a product that’ll satisfy the existing demand?
There are three main components of feasibility to consider:
How much money do you have to invest in this? This encompasses not just whether or not you can afford the required resources, but also whether or not you can afford to spend time on creating your product — as opposed to working on something else with a more immediate payoff.
Do you have the people or physical resources you need to create the product? With software, resources tend to refer to people, specifically developers. But if your product is something physical, you need the materials to build it and people who can work with those materials.
Is your product market dying off due to technological innovation? Is there someone else trying to solve for the same thing and whoever gets there first wins?
For example, two inventors developed the electric television completely separate of each other: Philo Farnsworth, who started developing the idea in high school, and Vladimir Zworykin, who was working on developing the technology for the Radio Corporation of America. Their inventions were so similar in terms of timeline and technology, the two had to battle for the patent to the technology.
While they were bringing an electronic television to market, it wouldn’t make sense to be trying to reinvent the radio.
Is It Viable?
How are you actually going to make money off of your product? How will it be packaged, marketed and sold?
Viability encompasses the development of your go-to-market strategy and what the ongoing product lifecycle will look like. A critical component of this is pricing and how you’ll find and retain customers through methods like Product-Led Growth.
Typically when products fail due to viability it’s because they miscalculated or poorly executed their demand and feasibility. For example, data virtualization startup Primary Data failed despite having major investors and functioning software because they were unable to actually draw in the customers they needed. Even though their product was feasible, their business wasn’t viable due to a lack of ability to generate demand.
In terms of identifying demand, they essentially built their audience by identifying a gap in the market that no one else at the time was addressing the way they planned to. Very few other players were trying to fulfill that need when Drift started. Now other companies are trying to compete, but Drift is staying ahead due to the strength of their brand.
In terms of feasibility, the presence of their chatbots on numerous sites — including New Breed’s — proves they had the resources needed to create their product. During their introduction, they became their own best case study to prove their product’s effectiveness. They dropped all their forms on their website and only used chat to convert people.
In terms of viability, they use a SaaS freemium model with both free and paid variations of their product. Their pricing strategy and business model is supported by their effective branding.
Fitting into the Product Life Cycle Stages
The main product life cycle stages are introduction, growth, maturity and decline, with product development being a prerequisite to entering the cycle. Product-market fit falls at the intersection of the introduction and growth stage.
The goal of the introduction stage is to reach product-market fit so you can reach growth and start selling your product to a wider audience.