Do you know why so many startups fail? Of course, you do – bad team, lack of cash, too much burn rate, poor product, bad leadership and the list goes on. But do you know what is the BIGGEST reason of startup failure? You can probably take a guess but it is not any one of the above. The top reason for a startup failure is no market need. You can have the most talented team, good funding, great product and still you may fail if your product is not needed. If nobody wants to buy then to whom are you going to sell? To avoid this issue it is important that you determine your product market fit. Simply put, product market fit is the way to prove that you stand in a favorable market condition with a product that satisfies your users. A good product market fit reassures your assumption of the underlying pain points of your prospects and the ability of your solution in solving it. The problem is how to achieve product market fit and what product market fit metrics to follow?
4 Steps to Achieve Product Market Fit Using the Right Metrics:
1. Choose your Market:
The journey of every startup startups begins with the identification of a problem and the market for the solution. It is very important that you start with the identification of the pain points of your prospects and bring out a scalable solution for their problem. While identifying market do remember to analyze the demographics, income, and extent of the problem.
2. Building your MVP:
MVP stands for minimum viable product i.e. the product that is good enough to test your hypothesis regarding the problem and your underlying solution. An MVP should convey your value proposition, retain your early adopters and provide feedback for further development. Building an MVP for determining product market fit is highly recommended as it saves resources and provides a basis for determining product market fit.
3. Determining product market fit metrics:
Once you have your scalable MVP developed, you can move to determining its product market fit. For any service or product to be scalable it is important that you determine your product market fit. This articulates your assumption and provides insights for further product development.
a. Product or Service
In the case of any product or service, the best-accepted insights come from your users. To validate your idea you need to survey your users regarding the usability of your product. If at least 40% of your users say that they will feel really disappointed if your product is out of the market, then you are on the right track. This is a widely accepted metric for the primary reason that you need that much of customer base to keep your standing in the market. Companies like Buffer also advocate use of this metric for deciding product market fit.
What if you want to test the market fit for your website? You can check your website market-fit from your bounce rate. If your bounce rate is lower than 40% than you are doing a great job in sustaining your visitors.You can use Google Analytics for checking your bounce rate.
A lot goes into a website from your content and design to CTAs. If you are not able to get a recommended bounce rate then you should start by changing the most pressing problem on the website first. To prioritize key issues, tools like KissMetrics and Inspectlet will help.
4. Change or Scale?
Whether or not you arrive at the product market fit determines the choice to scale or change. If you are able to achieve the recommended market fit then you should definitely choose to increase your business size and scale further. If you don’t achieve the recommended metric then you will need to make some changes. These changes can be as small as changing the value proposition you convey to your end user (marketing level) or as big as changing your entire product (development level). Depending upon the responses you should prioritize the changes and repeat the process again.
It is recommended not to exhaust your resources until you achieve a product market fit because you might end up spending everything for nothing. Team building, scaling and working on new services and products should all come after achieving the product market fit. This way you are able to control your burn rate and eventually make better startup decisions.