Product Market Fit: what it is and how it can help you scale
Attentive to this concept: the Product Market Fit. It is not one of the best known, but it is nevertheless critical when scaling a commercial project.
As usually happens with those terms that we can find in an eCommerce Dictionary , most of the time it is only to put a name to measures that we take intuitively to limit them in some way and turn them into factors on which we can work in a strategic way .The PMF or Product Market Fit fits the millimeter with what we are discussing. You will see it as we develop it in this post illustrated with some examples of how you should analyze it.
What is the Product Market Fit?
We could complicate the definition as much as we want, but in reality it is something (in theory) as simple as finding the product that meets the main needs of a specific and specific market niche .This actually means that we have hit the mark and therefore the product we are selling is providing an optimal shopping and usage experience for our customers.As a consequence of this, we have a loyal, recurring audience with a very long CLV ( Customer Lifetime Value ), which leaves us with a higher profitability per customer throughout their entire life cycle.
Why you should think twice about the PMF
The first thing I’m going to recommend is that you be objective . We all believe that we have the perfect product for our target , but intuition or a biased analysis is not enough. It is necessary to be able to validate hypotheses with data and not based on intuitions or presuppositions.There is a certain risk when we take that sweet spot for granted . The investment can literally get out of hand because, instead of reaching the maturity of the product in its market, we will be focusing our efforts on attracting an article that simply does not work or, at least, does not work for that public at the that we are heading.Thousands of impacts, visits and euros thrown down the drain for not carrying out a simple analysis that validates our product in the same way that we validate our business model to be clear about its viability before investing.It is not that it is not possible to scale a product that has not found the Product Market Fit . But even if the results are increased, the profitability will always be much lower if it is not at this point.
How do I know that I have actually reached the PMF?
In reality there is no specific metric , you will have to start from an analysis as deep as possible of different aspects.We have already pointed out the first: the period or life cycle of the client . If your customers repeatedly buy that product, as well as updated versions ( upselling ) or complementary products ( cross selling ), and they do so in a sustained way over time , you are facing a very good indication regarding the Product Market Fit. One of the key indicators is that customer retention capacity .The level of peer recommendation and social proof would be another aspect to assess. In fact, by monitoring and improving the reviews published on different portals, it also transmits us first-hand a satisfaction indicator that we are contributing to the specific needs of the market.
You can also use other qualitative techniques such as surveys, tests user groups focus .. . These have the great advantage of focusing on discovering the “what” over the “how much.” They are a great source of insights that will help you draw an accurate vision of how you are in the market and what is the positioning of your product.This is not to say that you forget about qualitative identifiers and techniques . These data give you volume and are also highly relevant. Look at KPIs such as the growth rate , the market share with respect to your competition, the churn rate or withdrawal rate or the rate of returns that your eCommerce suffers.With all these variables correctly analyzed , you will be in a position to consider scaling your business with many more guarantees . You will know that every euro you invest in making it grow will be backed by a product that meets customer expectations and, therefore, you will achieve more conversions in a consistent way over time.