How to move your startup towards product market fit
The Fifth Mark Product Market Fit Canvas is a methodology which we use to help our Startup clients achieve business concept validation and an early Product Market Fit. In this article we explore the principle of Product Market Fit, why it matters and some tangible strategies to help move your Startup business towards it.
According to CB Insights, 42% of Startups fail due to a lack of market need for the products or services they offer.
This statistic gets us right to the heart of the Product Market Fit problem – if you don’t build something that enough people value or will use and – in some currency or another – pay for, then your business will most likely fail. Seems obvious, right? Quite often, it isn’t. In this article, we’ll explore what Product Market Fit is and unearth some tangible strategies to help you move your Startup business toward it.
The Rise of Product Market Fit
Throughout my career, I’ve always been attracted to businesses with excellent products. Products that people love. Products that deliver a superior level of utility, on both an emotional and functional level. Products that markets PULL. Quite simply, because businesses with these types of products make my job as a Marketer a ton easier and a lot more fun.
It wasn’t until recent years that this loose feeling of mine has been formalised – by people much smarter than myself, may I add – into the principle of Product Market Fit, a term now synonymous with achieving both Startup investment and business success.
What is Product Market Fit?
An agreed upon definition of Product Market Fit is still a touch allusive, but I like to think of it as a business’s ability to identify a pain point – whether current or potential, whether declared or observed – within a market of a viable size, and answer to it more effectively than anybody else.
Why is Product Market Fit Important?
Let’s deconstruct the definition to answer this question:-
- “A business’s ability to identify a pain point – whether current or potential, whether declared or observed” – if there is no pain or no tension, there is no reason for anyone to care about your product. Be cautious of the nuances of this statement; pain and tension come in many forms and are not always easy to understand or observe. Social Media, for example, answers to innate human desire for inter-personal connection and a fear of isolation and exclusion – that’s a pretty deep-seated, emotional need
- Viable size” – size in this context is total aggregated market value, rather than volume of in-market customers. If there is not enough value in the market to sustain your business then your venture is not a commercially viable one
- “Answer to it more effectively than anybody else.” – now the best Product Market Fit will speak to the “anybody else” component of this sentence. If you wish to dominate a market, you need to be better. And I mean, truly better. Not just think you’re better. Be better. If you cannot deliver on this, it’s likely that what your product will become is commoditised, and without superior product benefits, the race to the bottom begins
There are a ton of challenges and complexities to address when launching and scaling a Startup business – talent, funding, technology, product, etc., etc. – but if you have an excellent Product Market Fit, the market creates a kind of pull for your product, which constitutes increased amenity to your Startup’s shortcomings or teething problems.
If you don’t feel like your Startup business entirely answers to this definition of Product Market Fit just yet, that’s ok. Product Market Fit is created, crafted and refined, rarely born. Many businesses change their market focus and/or business model over time in favour of a better or more commercially viable Product Market Fit; this is known as a Pivot. And they happen more often than you might think. For example, Airbnb started its life as a networking business, and YouTube as a video dating platform.
The Product Market Fit Mindset – becoming consciously incompetent
Before we explore tangible strategies for finding Product Market Fit, you need to establish the right mindset. A mindset that is open to iteration, refinement and feedback. As humans, we are unconsciously biased towards our own ideas. To truly validate the viability of your Startup business, you must become consciously incompetent as to your lack of ability to see your Startup as others and the market do or will.
Receiving feedback on an idea or product you love can be excoriating, so you’ll need to get excellent at inviting, taking and implementing feedback in a positive and constructive manner. Think of feedback as a gift; a gift that can translate into huge financial gains and fuel for your journey towards “Better”.
A humble disclaimer
Finding Product Market Fit is both an art and a science in equal parts. The concept is totally critical, yet illusive and subjective and objective all at the same time. With this in mind, The Fifth Mark Product Market Fit Canvas is not a watertight framework for finding PMF; instead, it is a set of tangible steps and strategies to help you think critically about PMF and support you in moving your Startup towards it.
Where to begin – The Fifth Mark Product Market Fit Canvas
Step One: Business Concept Hypothesis
This is the easy part – your Startup idea. Start by writing down the product, service or experience your business will deliver in no more than a sentence.
Step Two: Building the Startup Business Canvas
Start by creating a simple and articulate view of what your Startup does, why it’s excellent, and who it’s for – a document known as a Startup business canvas. Your SBC should be a simple, one-page document that clearly articulates answers to the following questions:
- The problem – what is the user tension or problem your Startup seeks to solve?
- Solution – how will your Startup answer this problem or tension?
- Offering – which products or service will your Startup offer?
- The user/customer – who is your Startup for?
- Value proposition – what unique value will your Startup deliver to the user or customer?
- The business model – how will your Startup make money?
- Why you?
- Why now?
Step Three: Approximate Market Demand Validation
How many people are looking for a product like yours? When you’re looking to buy or research something, what do you do? More often than not, we reach for Google, right? So it follows that Google Search data is a great place to start to get an indicative read on how much demand there is out there for the product, service or experience your Startup will offer. Two useful tools for this are Google Trends and SEMRush.
Google Trends compares the total number of Google searches for topics over time against each other. I find this too loose to make serious assumptions upon, as it lacks the nuances of the search behaviour. However, if you’re seeking to understand top-line consumer interest over time, it’s a great place to start. For example, we can see below how the search interest in gin has increased since 2018, whilst rum is fairly flat in comparison.
When you need to get more specific on search behaviour, SEMRush is an excellent tool, which – amongst other things – estimates the number of searches for exact phrases or topics. You can sign-up for a free 7-day trial here.
Using the Keyword Magic Tool, pay specific attention to the volume of searches for terms of interest to your Startup. Looking at the example below, the total UK gin search demand is 3,242,100, but if the product you’re looking to launch is rhubarb gin, the market would be significantly smaller, with 33,100 monthly searches in the UK.
Also pay attention to the keyword trend – are searches for this term increasing or decreasing over time? And the estimated CPC (cost per click) of the term in Paid Search – as a rule, the higher the CPC, the more businesses are willing to pay for this term, meaning it’s likely it’s driving them good commercial returns.
The topic research feature (in Beta at time of writing) also gives an interesting insight into the questions people are asking around the subject. Play attention to categories in your subject area that are marked as “trending” and have a high “topic efficiency” – these are terms that are increasing in demand and for which there is still relatively low competition for within Google.
Is there any direct or indirect competition?
It also makes sense to understand whether anyone else is playing in the space you wish your Startup to operate within. Compile a seed list of potential competitors by performing some Google searches around your problem, consulting related forums, doing some hashtags digging on Social Media or by speaking to relevant contacts within the industry in question. You can dive into competitor analysis in more detail during the creation of your business plan. For now, the question I want you to consider is, is anyone else doing this? If not, why not? What are the barriers? If yes, are the businesses doing well? If yes, how will you deliver superior value to gain market share? How much is an average product, service or experience sold for?
Back of an envelope exercise
Work through this equation:
((total search demand for terms directly related to your Startup idea) X (the % of the market you could potentially gain in the next 5 years)) X (average unit price)) = a very rough, caveated read on potential revenue for your business.
I cannot even begin to say how caveated this formula is; the point however here is that you need to get an indicative read on the aggregate revenue your startup could generate, given current demand, competition and unit price.
Action: assess the data above. Do you feel like there is enough market demand and potential market value for the Startup you plan to launch?
