A Researcher’s Guide to Product Market Fit
Product Market Fit is unfortunately not one of those things where you have a single golden metric that tells you most of what you need to know. You won’t get away with one test or survey. But there are a few things you can combine to get a pretty good read on how close you are to “fit” in the market, and what’s holding you back.
Before you dive in, it’s easy to get overwhelmed. I know I was the first time I embarked on the challenge of measuring product market fit. I of course Googled ‘product market fit’ to find an endless source of business metrics that led to more overwhelm and no action. I had no idea where to start, while feeling like the whole company was looking to me to figure out something that didn’t have a simple, proven method-in-a-box.
Since that first time, I’ve had a few companies ask me how to evaluate their product market fit, and a few others who thought they had it, while I had my doubts. It’s certainly not an exact science. But over some years of experimenting, I’ve found that the following combination of methods gives a pretty helpful understanding of fit by combing user analytics and some qualitative work.
🧐 What is Product Market Fit?
Product market fit means how well your product serves the market’s needs.
Marc Andreessen has been widely quoted as saying you have product market fit when “customers are buying the product just as fast as you can make it…You’re hiring sales and customer support staff as fast as you can.”
I used to think that was an extreme way to see it, but I’ve found that it’s actually pretty accurate.
As a side project and business experiment, I started a community ceramics space in Berlin. We give nearly 24/7 studio access to hobby potters with a secret dream of starting their own ceramics brand. By fully understanding our customer audience, we aced product market fit. We receive more applications every week than we can even reply to — and certainly can’t offer them all membership spots. It’s become accidentally exclusive.
For startups and early products, knowing if you have product market fit — and if not, how to get there — is obviously crucial to minimising the risk of failure. Failure to have product market fit means no one needs your product, so no one’s buying (and you’re burning cash, not earning any back, and probably not attracting new investment).
If your current product doesn’t have product market fit, deep down you already know. Growing your customer base feels like a slog through quicksand. No one seems to sign up without a discount or an extension of your normal trial period.
There are a few reasons that your company might not have product market fit today:
- Your product hasn’t really solved a problem yet
- Your company hasn’t served an audience’s most important/urgent need
- Your company hasn’t served a user problem better than others in the market
- Your company isn’t serving the best-fit audience or doesn’t know who it’s best customer is
🤯 How can we know for sure if we have Product Market Fit, and how do we fix it?
The most important information is not simply if we have product market fit, but why we do or don’t. I look for information that will tell us which barriers we face to achieving product market fit, and how high the hurdles are.
A colleague once sent me a list of metrics VC investor Andrew Chen shared, which he checks to evaluate product market fit of companies he’s considering for investment.
He says we want to check the current state of customer growth, such as “growth loops, the quality of acquisition, engagement, churn, and monetization.” In other words, is the company growing or losing customers, and how is it growing — organically, through happy customer referrals, or by other means?
I try to pair similar metrics with qualitative insights.
🧩 Piece together these mixed sources to gauge Product Market Fit:
- Customer satisfaction score
- Retention/Churn rates
- Growth rate
- Jobs to be Done (instead of Personas)
- USP: What you think it is vs. what your customer says
- Motivation and Ability to use your product
I recommend combining all of these sources and methods. The more sources you have, the more detailed the picture becomes. But each one has a few parts.
Customer Satisfaction (and is it going up over time?)
- NPS has long been the standard for understanding your user’s willingness to recommend your product. It’s best when you get actual comments along with it so you get more insight into the reason behind the score. The dark side of NPS is that it’s sort of asking users to predict their behavior. It’s more like asking something if they would recommend you than if they have.
- You can then ask your customers in interviews or surveys if they have recommended your product in the past. This fills the gap that NPS misses.
- The Sean Ellis Test went somewhat viral a few years ago as a shortcut to measure product market fit in one short and sweet survey. He suggested asking how disappointed users would be without the product as a measure of stickiness. I don’t use this alone — but it can be helpful to compare results with the other sources in this list
Retention
- Cohort retention. The “target’’ retention percentage that equals product market fit can differ by industry. A best in class case is Netflix’s 1-year cohort retention of 70%! You want to see that you’re solidly holding on to a large portion of customers over a relevant time period for your service (ex: three months after starting to pay) rather than losing them to disappointment that you haven’t solved their problem.
Growth
- You’re looking for organic growth. Talk to your team’s management and/or sales team to check with ‘experts’ about your industry’s typical growth rates, and how much organic growth you could expect from a successful company in your industry.
- Increase in revenue and/or actions per user. This shows us that our existing customers are highly engaged and finding value in the product if they spend more money and time on it as they go.
Jobs to be Done instead of Personas
- Jobs to be Done is a highly effective framework because it challenges us to ignore distractions like user demographics and focus on the problems our product needs to solve. What is our customer trying to achieve by buying this product?
- If you already have personas, you could run a new round of interviews and compare the needs you hear with those of any profiles you already have. Do they match? Are the jobs clear? Is your product doing those jobs today?
- If you’re starting from scratch, you’ll need to either run some implement research, or build JTBD profiles from feedback your team already has (ex: Customer Support tickets, NPS comments, etc).
USP: What you think it is vs. what your customer says
- If you ask your customers what they feel is the most valuable thing about your product, does it match how you describe your USP? Compare their responses to the value proposition your team thinks your product offers.
- Interviews and surveys can both help you here
- If there’s any disconnect between what the user needs (in the JTBD step), what they say your USP is, and what you think it is, there’s space that needs to be explored here. Either your team is selling the product as something it doesn’t do, missing out on something it does well that isn’t highlighted enough, or not solving the real needs at all.
Motivation and Ability to use your product
- You can use the Fogg Model to check how likely your audience is to sign up for/use your service
- Your audience should be motivated to solve the problem you’re addressing, able to use it (there are no major accessibility or payment issues, for example), and triggered to use it.
- Triggering them is often within our control. Motivation and Ability are often not. It’s pretty hard to motivate someone to solve a problem if they don’t already feel self-motivated. If your audience isn’t motivated or able to use your product, then reaching product market fit is going to be a problem.
There are a few things I typically ignore when evaluating Product Market Fit…
Market Share
Some people suggest that looking at market share is an important part of understanding product market fit. I believe market share has more to do with the company’s stage of development and time in the market than actual product market fit. An early stage company may be growing fast and have achieved an early level of product market fit — but still not own a dominant share of the total market. I therefore leave this to those who are estimating the company’s growth trajectory and potential finances, but I don’t use it to determine whether the product is meeting user needs.
Usability
Usability is generally really important. But I’ve seen companies achieve product market fit and still have usability issues. In my experience, I’ve noticed that users are willing to push through bad usability when they feel that a product or service does a much better job of solving a critical problem for them than anyone else is doing. I don’t think usability blocks a company from achieving fit unless it is so bad that it actually prevents the user from signing up and completing the central task. Even then, a motivated customer who urgently wants their problem solved will be pretty patient and resilient in the face of even the worst usability.
A few additional good reads about product market fit and articles mentioned above
The story of the Superhuman team’s use of the Sean Ellis Test.
Marc Andreessen’s thoughts on whether product, market or team is the most important part for a startup’s early success.
The Fogg Behavior Model mentioned above, developed by BJ Fogg at the Stanford Behavior Design Lab.
