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March 9, 2019

The 4 Steps to Product-Market Fit (with Examples)

By Aggelos Mouzakitis

Are you looking for the steps to product-market fit?

In this article, I am going to give you the 4 (four) steps that every early-stage startup should take to find a product-market fit.

You will learn what product-market fit means, why it’s important and what are the steps that every startup need to take, to get there.

This article can help you:

  • Guide your product team more effectively,
  • Form or adjust your product strategy,
  • Re-think your business model, AND
  • Point you in the right direction, so that your new product has chances of success.

So, without any further ado. Let’s dive right in!


Step 1: Initial Idea/Product Concept

Step 2: Validate your MVP and Find a Problem-Solution Fit

Step 3: Scaling With a Strong Value Proposition & Sales

Step 4: Product-Market Fit

Last Thoughts

Step 1: Initial Idea/Product Concept

Nowadays, most startups fail before they manage to find a product-market fit.

This doesn’t mean that they don’t add enough value to their customers or that they don’t manage to satisfy customer needs and meet expectations.

Finding a product-market fit is more than having a great product.

You should be:

  • Very clear as to what your value proposition is,
  • Very careful with your product development process,
  • Very keen to identify your customer needs and build a product that covers these needs.

Even though there are many great products out there, most of them fail.

In fact, 3/4 VC-backed startups fail nowadays.

But, let’s see what this step is all about.

If you are familiar with the term product-market fit, then you know Dan Olsen.

Image Source: Twitter

Dan Olsen is the writer of the Lean Product Playbook on how to achieve a product-market fit.

One of the most important concepts of the Lean Product Playbook is the Product-Market Fit Pyramid.

The Product-Market Fit Pyramid is divided into two main layers:

  1. Market
  2. Product
Image Source: Mind the Product

As you can imagine, a startup business has some level of control in both layers.

However, the second layer is the one you have the most control of and—according to Olsen—is consisted of the following:

1) Value Proposition

According to Peep Laja:

“A value proposition is the #1 thing that determines whether people will bother reading more about your product or hit the back button. It’s also the main thing you need to test – if you get it right, it will be a huge boost.”

Here is an example of a great value proposition coming from Unbounce:

Image Source: Unbounce

Defining your value proposition is among the first things you need to do.

2) Feature Set

The Feature Set is a collection of features and functionalities that your minimum viable product needs to have to deliver what you’ve promised with your value proposition.

Remember, your minimum viable product doesn’t need to—and probably won’t—be perfect.

But, as Sparktoro founder and CEO Rand Fishkin put it:

“Can we finally stop launching “minimum viable products”? The fact is, users hate them.”

More on that later in this chapter.

3) UX Design

This is the moment when you bring your product to life.

Remember: that doesn’t mean that every feature has to function perfectly; it means that the product has to provide users with a great user experience.

Remember: a good idea is NOT enough.

Because, as Steve Jobs once put it:

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas that there are. You have to pick carefully. I’m actually as proud of the things we haven’t done as the things I have done. Innovation is saying NO to 1,000 things.”

Even though there are many guides and how-tos online on the exact actions that you need to take during this first step, I am going to give you the ones we use here at Growth Sandwich with all of our clients.

1) Create your Lean Canvas

What is the Lean Canvas?

The Lean Canvas is a framework developed by Ash Maurya in the context of the popular Business Model Canvas (by Alexander Osterwalder).

Here is how a typical Lean Canvas looks like:

Image Source: LEANSTACK

As you can see, the Lean Canvas is focusing on customer needs and problems, and essentially includes everything that you need to get started.

Even though there isn’t a “fill order,” the creator of the framework—Ash Maurya—suggests that you fill it in the following order:

Image Source: LEANSTACK

The questions that you have to answer are the following:

  1. What is the problem that we are trying to solve?
  2. Who are the people who have this problem?
  3. Where can we find those people?
  4. What is the solution we are offering?
  5. What is our Unique Value Proposition?
  6. What is one thing that we do better than the competition, that can’t be easily copied or bought?
  7. What is our pricing structure and how are we going to generate revenue?
  8. What are our costs—both fixed and variable?
  9. What are the key metrics we are going to use to measure our success?

I know this might seem overwhelming, but it’s easier than you think.

Here is how an example of the Lean Canvas looks like for Uber Drivers:

Image Source: Get Product Market Fit

2) Define your Customer Avatar

According to Hubspot:

“A buyer persona (or customer avatar) is a semi-fictional representation of your ideal customer based on market research and real data about your existing customers.”

Even though you have listed the customer segments that your potential customers and early adopters belong to, you have to dive a bit deeper and define your ideal customer.

Why is this important?

Because, based on the assumptions that you’ll make in this step, you are going to construct your marketing (and product) strategy.

Now, let me get one thing straight: most people believe that defining your customer avatar (or buyer persona) is only necessary for marketing.

However, defining your ideal customer is also essential on a product level.

Here is how a customer avatar could look like for a digital marketing agency, based in the UK:

Keep in mind that in this first step, we are making assumptions.

Which means that your customer will probably change later on, when you “get out of the building” and start selling your product.

However, it’s essential that you design a customer avatar, to begin with.

3) Do a Competitive Analysis

In this step, you need to do a competitive analysis (or market research).

The success in this step is heavily based on:

  • Your research skills
  • The tools you are using

I may not be able to help you with the first one, but I definitely can give you some tools you can use.

But, before I give you the tools, let me give you a framework you can use to get the most out of your research.

1) Make a list of your competitors

Let’s assume that you want to build an SEO tool.

The first thing that you need to do is make a list of SEO tools.

So, a list like this would include SaaS like:

  1. Ahrefs
  2. SEMrush
  3. SEOMoz, and
  4. More

2) Try their services

So, you get them one-by-one and visit their websites, starting with Ahrefs:

Image Source: Ahrefs

You sign up for a 7-day trial $7:

Image Source: Ahrefs

And, you test the product’s core features, that are similar to the one that you are thinking to build:

Image Source: Ahrefs UI

It’s important to take notes on what their products best features are, and even list inefficiencies or missed features.

3) Break-down their marketing strategies

Next, you want to break-down your competitors’ marketing strategy.

You can find information about their marketing strategy if you read their CMO’s guest posts:

Image Source: Medium

You can also search in their blog or YouTube channel.

There will be plenty of useful information about how they managed to attain growth.

Don’t be obsessed with it; just take the information you need, that could be useful for your startup business.

4) Find out where you are different (and even better)

Now that you have all the data you need—and your Lean Canvas in place—you can identify opportunities that you can use in both your product and your marketing strategy.

You may have to make a small adjustment to your Lean Canvas, especially to these two sections:

  • Value proposition
  • Channels

Also, and this is very critical, you may discover opportunities about your early adopters, by looking for dissatisfied customers from your competitors.

Even though Ahrefs (for example) is an amazing tool, there still will be some people who express their negative experience online:

Image Source: G2 Crowd

These are people you want to reach out to when your MVP is ready.

To source online reviews for your competitors, you can visit websites like:

4) Build a Minimum Viable Product

This is the fourth—and last—step of the first stage towards finding a product-market fit.

As Eric Ries, the author of the Lean Startup book defined it back in 2009:

“The minimum viable product is that version of a new product which allows a team to collect the maximum amount of validated learning about customers with the least effort.”

And, here is the original post from Monday, August 3, 2009:

Image Source: Startup Lessons Learned

Building an MVP doesn’t mean that you can get into product development for something that will offer a bad user experience when your early adopters get there.

It essentially means that you’ll build something that is as good as it can, so that people will find value in it, and will want to continue using it—and, of course, give you feedback on what they liked and what they didn’t like.

Based on Dan Olsen’s Feature Set (which I mentioned earlier), an MVP has to have enough features to provide your early adopters with a great first experience.

No more, no less.

In the context of a pyramid in Aaron Walter’s Designing for Emotion book, Dan says that an MVP should have the following characteristics:

Image Source: Medium

Which means that your MVP has to be:

  • Functional
  • Reliable
  • Usable
  • Delightful

This framework is fundamental.

Simply put, you can’t have a great first experience if your MVP is fully functional, but not reliable or delightful.

Your minimum viable product should share all these four characteristics, as mentioned in Dan Olsen’s Lean Product Playbook.

You should know, that there are many different types of MVPs:

And, that there is no right or wrong when it comes to choosing an MVP type for your business.

Let me share an example with you.

This is how Airbnb’s website looked like back in 2010:


Image Source:

Right now, Airbnb’s valuation is more than $35 billion.

But, the beginning for Airbnb back in 2007 was quite humble.

Co-founders Brian Chesky and Joe Gebbia were in San Francisco back then, trying to start a business.

At the same time, they were looking for ways to pay for their rent and utility bills.

There was a conference in town, and soon enough there were no rooms available in local hotels.

Thus, Chesky and Gebbia decided to:

  • Take photos of their apartment,
  • List their own apartment, and
  • Wait for their guests.

Soon, they had three paying guests who would attend the conference and live their house.

That was a proof of concept for their MVP; and, the rest, of course, is history.

Would the founders of Airbnb be happy about their MVP today?

Probably not, but as LinkedIn’s Co-Founder Reid Hoffman put it:

“If you are not embarrassed by the first version of your product, you’ve launched too late.”

Let’s move on to the next step.

Step 2: Validate your MVP and Find Problem-Solution Fit

This is a step where mostly marketing and sales are involved.

It is also one of the most challenging steps because it requires you to get out of the building and start selling.

This stage includes four main steps:

  1. Validate your MVP
  2. Discover how your ideal customer is
  3. Reach problem-solution fit
  4. Pivot or Persevere

Let’s take a look at them one by one.

1) Validate your MVP

There are many ways to validate your MVP and find your early adopters.

For example:

  • You can talk to potential customers in micro-communities such as Facebook groups or Reddit,
  • You can run validation Ads on Facebook or Google,
  • You can attend events and meetups, to meet with people, exchange ideas and generate awareness about your product.

Here is a nice example from a validation question on Reddit:

Image Source: Reddit

And, here is another one in the SaaS Growth Hacks Facebook group:

Image Source: Facebook

Nowadays, many people are using micro-communities to get feedback about their MVP and build on top of that.

You can jump into calls with early adopters and ask them what they liked and what they didn’t like about your MVP.

This feedback is pure gold both for your product team and your overall strategy.

I have covered the concept of validation extensively in the past; thus, I suggest that you read some of my past articles to educate yourself around the topic.

Some useful resources you can use when it comes to validation are:

  1. What is Validation Marketing and Why Should you Care
  2. The 9 Principles of Validation Marketing
  3. Startup Idea Validation: 5 Successful Examples
  4. The Do’s and Don’ts of Validation Marketing

At this stage, you also have to map out your conversion funnel.

There are many frameworks you can use—like the AARRR framework:

I suggest though that you find the one that works best for you.

The reason is simple: the AARRR—or any other, similar—framework is not for everyone.

Besides, the way that you are going to bring in early traffic can be significantly different from other startup businesses.

All in all, you should focus on the two most important steps of the funnel (that you are going to build):

  1. Activation
  2. Retention

You may wonder why.

Well, getting people to visit your landing page is not enough here.

You need to make sure that they will try your MVP.

And, you also need to make sure that the experience they will have will be enough to keep them coming for more.

Don’t worry about monetization or referral at this stage.

These stages come later.

2) Discover Who is your Ideal Customer

In the first step to product-market fit, I mentioned that you should create a customer avatar.

Remember: since you have no historical data, your customer avatar will be based on assumptions.

This second step, allows you to validate your initial assumption, and see if the customer avatar you’ve designed does indeed get value out of your MVP.

As a Medium publication by Greg Sands, from the Costanoa Ventures, puts it:

“But, customer discovery for a 1.0 product is really tricky, because unlike a 2.0 product, you don’t have existing customers — their reactions, usage patterns, or comments — about key features they need.”

That’s 100% true.

Discovering who your ideal customer is, can be very difficult.

The best practice here is to jump on calls with people who have tried your MVP, to see what their main problems are and what the experience with your product looked like.

Three questions you can use are:

  1. What your day looks like when you do [this thing that I am trying to sell]?
  2. What’s your biggest need when it comes to [this thing that I am trying to sell]?
  3. How much money would you be willing to spend on a monthly/ yearly basis to use such a product?

Remember: there is no right or wrong here.

The more information you get, the better.

Even though you can use a Typeform—or any other similar technology—don’t do it.

It’s far more useful to jump on calls with your early adopters.

Some tools you can use are:

  1. Appear – To make video conversations
  2. Otter – To make phone conversations that are auto-transcribed
  3. Google Sheets or Airtable – To keep notes from your conversations
  4. Calendly – To schedule your calls

Something vital here is how should you filter the feedback you receive.

For example, let’s assume that you launch your MVP on Product Hunt, and get a dozen positive comments:

Image Source: Product Hunt

Now, these people may support you, but they haven’t shown any monetization behavior.

Thus, you should treat comments from your audience and feedback from your customers in a different way.

Because, as Brian Dean, the founder of Backlinko put it in a podcast, discussing the difference between the feedback of our audience and the feedback from our customers:

“There is a big difference between your audience and your customers.”

3) Find a Problem-Solution Fit

In our experience, even though most VC-backed startups make it to this step, they still can’t manage to scale.


The reason is simple: there is another thing finding a problem that a market segment has, and another thing to be able to scale based on your solution.

Here, you have a core group of happy and reference-able customers.

How many customers should you have?

Even though there isn’t a standard answer, according to John Dawes from the Costanoa Ventures:

  • 6–8 for an enterprise,
  • 20–30 for mid-market,
  • 50+ for SMBs

Of course, these customers should be happy with your services, and should not be looking for other solutions rather than yours.

If you manage to find a problem-solution fit, you most likely need to persevere.

If not, then it’s the right time to pivot.

4) Persevere or Pivot

In his Lean Startup book, Eric Ries mentions that there are two main strategic directions that a startup should consider before finding a product-market fit:

  1. Persevere
  2. Pivot

The direction that you are going to follow can profoundly affect the success of your startup.

Let’s see what each of these two terms mean.

You persevere when you keep believing that your MVP and your overall strategy needs nothing more than small adjustments to be successful.

Essentially, persevering means that you follow your initial strategy.

You pivot when you have concluded that you are not making any progress towards finding a product-market fit.

Pivoting may require you to change your strategy completely, by identifying the needs and the problems that your users have.

Many startup founders falsely believe that pivot equals failure.

This is not true.

Did you know that many successful companies had to pivot 2-3 times before they find a product-market fit?

For example, Twitter started as Odeo:

Image Source:

Which was a network where people could find and subscribe to podcasts.

However, since iTunes started taking over the podcast niche, Twitter founders made a pivot and turned Twitter into what it is today.

Another great example that clearly shows the importance of pivoting, is customer data analysis platform, Segment:

Image Source: Segment

Segment had to pivot two times before it find a product-market fit.

When it first started, Segment was a platform where college students could share their real-time feedback on the class, while the professor was teaching:

Image Source: YouTube

However, that didn’t work out because, according to Peter Reinhardt, co-founder and CEO at Segment, no one of the students—who supposed to use the product—were actually using the product:

Image Source: YouTube

Next, the team behind Segment built an analytics tool.

And, even though they had some positive early feedback, they didn’t manage to find success through its analytics tool.

According to Peter Reinhardt, the most common objection from users was:

“I already have Mixpanel installed; I don’t want to use your tool.”

Segment had to pivot again, and build something different, something that would not interfere or compete with other analytics tools like Google Analytics or KISSMETRICS but would work as an API for all these tools.

This time, before building anything, the team created a beautiful landing page:


Image Source:

And, promoted the link on Hacker News:

Image Source: Hacker News

The feedback was encouraging, and it was shortly after that major publications like TechCrunch started talking about Segment:

Image Source: TechCrunch

My advice here is this: don’t be afraid to pivot when your data show no progress towards finding a product-market fit.

Because, as Winston Churchill once put it:

“To improve is to change; to be perfect is to change often.”

Step 3: Scale With a Strong Value Proposition & a Repeatable Selling Motion

This is the third step towards finding a product-market fit.

Some of its main characteristics are:

  • You have a clear view of your ideal customer,
  • You have a core group of happy customers who refer your product to others and continuously bring in new customers,
  • You know that sales can happen from a salesperson (that is not a co-founder or founder) when a prospect fits your ideal customer profile.

As Marc Andreessen mentions:

“In a great market—a market with lots of real potential customers—the market pulls the product out of the startup.”

Which means that, when you reach that level, it shouldn’t be so hard to sell and scale.

In this step, we have three main stages or actions that you need to take.

1) Choose a success metric

First, you need to choose a success metric; a metric that shows you if you are on the right way to finding a product-market fit.

Usually, this metric will be correlated with the stages of Activation or Retention of your funnel.

For example, for a SaaS startup that offers analytics solutions to eCommerce businesses, such a metric could be:

  • The month-over-month churn rate, or
  • The month-over-month number of new paid users

Many founders and even marketers seem to confuse the success metric that I’ve just mentioned with the North Star Metric.

But, the truth is that:

You should define—and use—your North Star Metric after finding a product-market fit.

2) Build a Feedback Loop Around that Metric

Now that you’ve chosen a success metric that will—most likely—lead you to finding a product-market fit, you have to build a feedback loop around that metric.  

Your feedback loop will allow you to gather information about your product.

You can then use that information to build better features, fix bugs and provide users with a better overall experience.

Keep in mind that you’ll need a small team of kickass customers success heroes, and a stable process they can use to gather feedback and serve your customers.

Some other tools you can use to monitor what people say about you online are:

Google Alerts, to monitor the web:

Image Source: Google Alerts

Ahrefs Alerts, to track mentions of your brand:

Image Source: Ahrefs UI

FbRadar, to monitor Facebook groups:

Image Source: FbRadar UI

Zapier, to automate your customer success team’s workflow:

Image Source: Zapier

And, Typeform to ask for constant feedback.

3) Focus on One Market Segment

This is probably the most crucial aspect of finding a product-market fit.

You will notice that there will be small market segments that perform better than others.

By “performing,” I mean that these customers will be the ones that resonate more with your brand, sales, and marketing messages, and usually have the lower customer acquisition cost.

A common mistake here is that many founders try to get as many customers as possible, from different segments, without focusing on one market segment.

However, that’s not a good practice.

To be able to chase new segments, new vertical, new geographies and languages, you need to win this one market segment first.

Then, you will be able to use your scalable sales process into other market segments.

Let’s move on to the next step.

Step 4: Product-Market Fit

If I had to describe this step, I would use the following three phrases:

High Demand. High Retention. Low Churn.

Getting to product-market fit could be misleading some times.

As Alex Schultz, a VP of Growth at Facebook mentions:

“The number one problem I’ve seen for startups, is they don’t actually have product/market fit when they think they do.”

As Eric Ries, the author of The Lean Startup book puts it:

“Product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product.”

I want you to pay attention to the word “widespread.”

Because widespread doesn’t mean 30-40 customers. (Even though, that depends on whom you are selling to; for example, benchmarks will be different if you are selling to enterprises.)

Most of the times, when you find a product-market fit, you know it.

But, that doesn’t mean you shouldn’t measure it, analyze it and find how happy your customers are with your product.

This is why we always suggest to our clients to conduct a product-market fit analysis, with our guidance and help.

A while back, I published an extensive guide on how to do that:

Thus, if you want to learn more about how to conduct a product-market fit analysis, you should take a look.

You can find it here:

Product-Market Fit Analysis: The Ultimate Guide

Last Thoughts

Many people argue that getting to product-market fit is the only thing that matters.

This is a correct argument, but it’s not always right.

There are many examples of companies that made it to product-market fit and then died.

Was it because they lacked momentum, ran out of resources or got outbid by competition?

No matter the reason, product-market fit is not a utopia; and, it definitely doesn’t mean that when you get there, things will be easier.

As Brian Balfour, founder, and CEO at Reforge mentions:

“… product-market fit is not the only thing that matters.”

The bottom line?

You should be able to analyze PMF, but you shouldn’t be obsessed with it.

Now, I want to hear it from you.

In which of these four steps are you at right now? Is it the first one? Or maybe is it the third one?

Either way, let me know by leaving a comment below.

People Who Read This Article Also Read:

  1. Product-Market Fit Myths and Facts (You Wish You Knew Earlier)
  2. 5 Winner Product Marketing Strategies to Replicate
  3. 21 Must-Read Product Marketing Books (for 2019)
Aggelos Mouzakitis

Aggelos is the founder and Growth Product Manager of Growth Sandwich. He is among the first Customer-led experts in the world, leveraging advanced, Jobs-to-be-done customer research to orchestrate and guide Growth for B2B SaaS companies. A- and B- series SaaS are hiring him to organise, design and execute programs that infuse the whole company with qualitative data, empathy and the necessary knowledge to address any growth dilemma. In the last 4 years, he has worked with more than 100 SaaS companies and trained literally, thousands through my physical and online courses.