Steve Blank, an American serial entrepreneur and author of The Four Steps to the Epiphany (2005), has coined a term called “product-market fit”. He defines it as “when a startup finally finds a widespread set of customers who are willing to pay for its product or service”.
According to him, this is essential for any company that intends to succeed in the market. If you want to create a startup, the first step is to identify a product-market fit. It's significant for founders to recognize that this is an ongoing effort.
This article explains the importance of product-market fit in entrepreneurship. Product-market fit is a key milestone in the development of a company. It’s essential to have a product that is able to satisfy the market’s demand, so you should be careful when working on your business idea.
The first step in understanding product-market fit is to conduct valid market research. There are many ways to do this: surveys, interviews, focus groups, etc. After you know your target audience, then it’s time to create an MVP or a prototype.
What Is A Product Market Fit?
Product-market fit can be defined as a business idea that can completely satisfy the demands in the market. The key to success in product-market fit is adding value for your customer. By doing it, you are gaining long-term customers for the business. This customer retention tactic can be a primary driver of your business growth potential.
The biggest mistake of most entrepreneurs is that they start with the product and then search for a market. In contrast, true entrepreneurship start with a market that needs to be fulfilled and then create a product to grow a business.
It’s important to realize that before you start selling anything, you first have to test if you are solving a real problem in the market. If you don’t do this, your startup will fail miserably.
According to Marc Andreessen, a business witnesses two stages: before and after the product-market fit. This is very true as getting product-market fit is critical but it helps them to gain the long-term growth potential.
Sean Ellis, author of Hacking Growth: How Today's Fastest-Growing Companies Drive Breakout Success, has a straightforward test to determine product-market fit. His single question is the basis for this test.
How Can You Test Product Market Fit?
I no longer use this product
This test can be sent to many customers, and at least 40% of the respondents state “Very disappointed.” Then you have to drill down your products to understand what values it brings to customers.
How Do You Find The Product Market Fit?
There are four main ways in which to achieve this, as mentioned earlier. It can be done through customer interviews, market analysis, surveys and experiments.
Customer interviews allow startups to gain insights into their customers' needs and wants. This helps to create products that will fill these gaps; these interviews also help startups learn about their customers.
The first stage of the startup process is to get a problem/solution fit. Your business idea must solve the customer problem. This can be challenging for entrepreneurs, but don’t leave out this crucial step. You must clearly understand the importance of product-market fit before jumping straight into building a brand.
How Should You Develop Your Business Idea?
To explain it to you, we’ll discuss an entrepreneur's story here. A canvas was co-created with an entrepreneur who is in the process of launching her business. This canvas contains nine boxes that allow you to outline important aspects of your business such as customer segments, issues and solutions.
The key here is to ensure you validate your assumptions, it's critical that you take these elements from the canvas and then focus on the elements you need.
Once you could validate your assumptions and refine the business model. Then it’s better to start building the first version of the product in an offer form.
An offer is not a final product, but it gives an outline or presentation about your business. This presentation will help potential customers to understand your business. The next step is to find difficulties and give solutions for them.
Are You Excited?
When startups are able to find a product-market fit, they can get their businesses off the ground and start generating revenue. For example, Facebook’s usefulness as a way for people to connect with one another helped it reach product-market fit. Once it did, people started flocking to the site in droves and asking their friends to join them.
As of July 2017, Facebook had over 2 billion active users worldwide and generated $40.68 billion in revenue. Building a startup will take everything you have and it's essential to understand the key importance of entreprenuership. There will be days when you feel like you’re making no progress and that it's hopeless, but if you really believe in what you're doing, then don’t give up.
It's not easy to find a product-market fit and trends in entreprenuership, but with OpenGrowth Academy behind your idea, it is possible!
We at OpenGrowth Academy aim to convert your one idea into a full-fledged business. We are a next-gen platform to nurture your dreams into reality. Visit us to know more about the Academy programs, sessions, and events. Are you excited? Get insights on “How to Measure Product Market Fit” with us.
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