Myths and facts surrounding the concept of product-market fit.
In this article, I am going to clear the record once and for all.
By telling you what is right and what is NOT when it comes to product-market fit (PMF).
So if you want to know what PMF is, you need to read this article.
Let’s dive right in.
Chapter 1: Product-Market Fit Myths
This chapter is all about product-market fit myths.
As you probably know, getting to product-market fit is difficult.
Also, no one can guarantee you that when you get there, success will come.
The reason why myths around PMF exist is simple:
Most people don’t really know what product-market fit is all about.
Below, you will find the most important ones.
1st Myth—Product-market fit will “protect” you from competition
This is one of the most common myths when it comes to PMF.
Most people falsely believe that finding a product-market fit will protect them from the competition.
Spoiler alert: it won’t.
There are countless examples of companies that:
- Managed to find a product-market fit
- Had enough momentum to get things going
- Had a great team and all the resources they needed
But, massively died because competition crushed them.
This is not necessarily a bad thing; after all, the market has its own rules.
Let me explain what I mean with a simple example.
I am sure that you already have heard of Intercom.
Here is some useful information about the company:
Intercom has everything a company craves for:
- A great set of products,
- Loyal customers,
- Strong brand.
You could say that it’s impossible for such a company to have a “competition problem.”
After all, who could catch up with Intercom’s success and strong product-market fit?
If you are into marketing for a while now, you should have heard of Drift.
I’ve mentioned Drift repeatedly in my articles here on Growth Sandwich’s blog.
Some information on the company:
Even though the company was founded in 2014, it has definitely shaken up the messaging industry, and have a name to the new way of doing marketing:
Thus, there is definitely a battle going on between Drift and Intercom when it comes to business messaging:
Has Intercom’s product-market fit protected the company from the competition?
As you can see, it didn’t.
So most of the times, PMF can’t protect a company from the competition—especially if the competitor knows what they are doing.
This is the first myth you should keep in mind when it comes to PMF.
Let’s move on to the next one.
2nd Myth—Companies that find a product-market fit can’t die
Have you ever heard of Blockbuster?
If you were born in the US in the 80s’, there is a high chance you’ve visited one of the company’s 9,000 stores across the country.
Nine thousand stores and thousands of paying customers renting VHS, and later DVDs from Blockbuster.
Now, with thousands of stores, and thousands—if not millions—of paying customers, you would say that Blockbuster is a well-established company.
Could a company like Blockbuster die, especially after filling an IPO and going public?
Well, in this case, it did.
You could say that it’s because of:
- Bad management,
- Lack of innovation, OR
- Passing a chance to buy Netflix.
Whatever the reason—and even though it had great signs of post-PMF growth—Blockbuster massively died in 2010.
Let’s move on to the third myth.
3rd Myth—Getting to product-market fit means that you are a fit for the whole market
This is another misconception when it comes to PMF.
Finding a PMF doesn’t imply that you are a fit for the whole market.
Because the market—in most cases—is too big to be satisfied by only one company.
Your product has to solve only one (real) problem that people in the market have.
If you can solve more than one problem?
“Yes,” but I wouldn’t suggest doing so before you don’t find the main problem that people:
- Are willing to pay money for
- Have to deal with constantly
- Don’t consider replacing you with another solution
There are countless examples to support this statement, but I’ll give your three that you know already.
The first one is Hubspot.
Hubspot is an amazing software that focuses on mid-size companies.
Does that mean that an enterprise can’t use their product?
No, but it means that Hubspot found a PMF focusing on one market segment within the market they are operating.
And, based on their YoY growth and their stock price, I would say they are doing a great job.
The second one is Mailchimp.
Up until recently, Mailchimp was the standard Email marketing solution for SMBs.
After Mailchimp’s 2018 rebranding (which was a repositioning if you ask me) they target enterprises as well.
However, Mailchimp’s growth didn’t come from enterprises; it came from SMBs.
Again, Mailchimp didn’t target the whole market, rather than a segment of it.
And, based on the results it did a good job.
Last but least, we have Marketo, an enterprise marketing solution which was recently acquired by Adobe.
Once more, Marketo grew by focusing on one market segment.
As I hope it is evident by now, getting to PMF doesn’t mean that you are a fit for the whole market.
You just have to be the best you can in a market segment.
4th Myth—Getting to product-market fit means that you can relax and enjoy your win
I’ll keep this one short.
Finding a product-market fit does NOT mean that you can relax and enjoy your win.
If anything, I would say that getting to PMF means that you should get your gears turning and speed up.
Let’s look at an example.
Google Reader was as RSS feed aggregator operated by Google.
Some useful information about Google Reader:
Even though Google explained that the main reason behind pulling the plug was “declining usage,” Google Reader had a huge pool of loyal users.
Of course, the news followed articles in well-known publications such as Mashable:
As you can see, PMF didn’t “protect” the product from dying.
And, if a company with unlimited resources like Google pulls the plug on its product, you can imagine the analogy for a bootstrapped and even VC-backed company.
Chapter 2: Product-Market Fit Facts
I showed you some of the most common myths around PMF.
In this chapter, I am going to show you some facts.
Facts you should know when it comes to PMF.
These will help you the next time you are in a conversation around product-market fit.
So let’s take a look at four facts about PMF.
1st Fact—You DON’T need to grow exponentially to get to product-market fit
This is the first one.
“Yes,” I know that in today’s world there is a “scale or die” mentality.
However, there isn’t a single company that died because it didn’t manage to grow exponentially.
Which means that you don’t need to have hypergrowth (>40% CAGR) to find a PMF.
As you can see in the above graph, exponential growth comes later:
Don’t me wrong; this doesn’t mean you can’t have explosive growth before finding a product-market fit.
After all, there are some examples—like Robinhood’s pre-launch campaign—that prove this possible.
But, the reason these examples are so popular, is because getting to PMF with exponential growth is rare.
Last but not least, getting to PMF with exponential growth may cause a series of problems:
- Inefficiency in handling user and customer requests,
- Lack of time to set up efficient processes.
- Technical issues (i.e., server crashes),
Thus, you should know that you can get to PMF without exponential growth.
Let’s move on to the next one.
2nd Fact—You need to have a widespread set of customers to say that you’ve found a product-market fit
This is an important one.
To find a PMF, you need to have a widespread set of customers who:
- Are loyal to your products and services,
- Get actual value out of your product.
- Are not looking for alternatives,
A logical question that arises here is:
What is a good number that indicates a PMF?
The truth is that there isn’t a standard answer to this question.
Simply put, it depends on several factors like:
- The market you are in,
- The type of business,
- The type of clients,
- The maturity level of the market.
According to John Dawes from the Costanoa Ventures, the number of customers differs for enterprise clients, mid-market, and SMBs:
Even though these numbers are not definitive, they can give you an idea of what is considered normal.
Moreover, when you manage to find a product-market fit—most of the time—you can feel it.
So, don’t be overly obsessed with numbers, and focus on adding value to your customers and users.
3rd Fact—A product-market fit analysis is important
I don’t mean to be blunt here, but the product-market fit analysis is essential.
Before I delve any further, I want to be clear about something:
You don’t conduct a PMF analysis to find out whether or not you have found a PMF.
You do it to discover and identify:
- How satisfied customers are with your product,
- How engaged they are with your product,
- How often they come back to use it,
- What are their unfulfilling needs,
- How fast you are growing.
So as you can imagine, a PMF analysis can tell you things that are vital for your business.
Many founders and marketers will tell you:
“A product-market fit analysis is like stating the obvious, it’s unnecessary.”
Trust me; it’s not…
4th Fact—A simple NPS survey is NOT enough to tell us if we’ve found a product-market fit or not
I saved the best for last.
Very often, I see companies that send a simple NPS survey via Email, asking me to describe my experience with a number from 1 to 10.
The problem with most of these surveys is that (most of the time):
- I hadn’t indicated any monetization behavior, AND
- I wasn’t engaged with the product.
This can create a false impression as to what users actually think about the product.
Even worse, it can be misleading as to what people want from the product in terms of new features.
Thus, you have to know that a simple NPS survey is not enough.
You have to dive deeper, ask more questions, jump on calls, and talk to your customers to understand what they really feel.
Only this way you will be able to understand them and give them what they need.
Chapter 3: Last Thoughts
So there you have it.
Now, you have a better understanding of what product-market fit really is.
Remember: the product-market fit isn’t an idealistic situation, and it can’t protect you from:
- Market changes, OR
Finding a PMF is, of course, important, but it’s not everything.
Do you want to dive deeper into the world of product-market fit? Make sure to join our Product Market Fit Online Masterclass which is delivered live every Tuesday at 5 pm BST time.