Product-market fit, also known as product/market fit, is the degree to which a product satisfies a strong market demand.
Product-market fit has been defined by its inventor as "a unique product offering that people desperately want."[1] It is a first step to building a successful venture in which the company meets early adopters, gathers feedback and gauges interest in its product(s).
According to Benchmark Capital co-founder Andy Rachleff, Sequoia Capital founder Don Valentine developed the thinking behind product-market fit,[2] but it was Andy who first put a name to it.[3] Venture capitalist Marc Andreessen of Andreessen Horowitz would later popularize the term in the mid-2000's. Andreesen credits Rachleff for the concept, referring to the idea as Rachleff's Corollary of Startup Success: "The only thing that matters is getting to product/market fit."[4][5]
Marc Andreessen defined the term as follows: "Product/market fit means being in a good market with a product that can satisfy that market."[6][7] Many people interpret product-market fit as creating a so called minimum viable product that addresses and solves a problem or need that exists.
Steve Blank referred to the concept of product-market fit as a step in between customer validation (step #2 in his book The Four Steps to the Epiphany) and customer creation (step #3).[8][9][10]
One metric for product-market fit is if at least 40% percent of surveyed customers indicate that they would be "very disappointed" if they no longer have access to a particular product or service. Alternatively, it could be measured by having at least 40% of surveyed customers considering the product or service as "must have". Sean Ellis is noted for popularizing this heuristic after examining many startups.[citation needed][according to whom?]
Analytics metricsedit
There are five metrics any online business can measure to empirically verify if they achieved product-market fit. They are 1. Bounce Rate, 2. Time on Site, 3. Pages per Visit, 4. Returning Visitors, 5. Customer Lifetime Value.[citation needed] Low bounce rates means a visitor's expectation is being met. High Time on Site and Pages per Visit indicate that the experience of the user is satisfactory. High Returning Visitor reflects the lasting impact a product has on their customers, causing them to come back, and Customer Lifetime Value measures the profitability each customer brings to the company. If these 5 metrics are above average and your 40% rule is met, you'll know you have a product-market fit company.[according to whom?]
Common mistakesedit
Andy Rachleff says there are four common product-market fit mistakes:[11]
Prioritizing well-known customers over desperate ones: “The counterintuitive thing is that you should not go after the big market first. It's the exact opposite of what everyone tells you.”
Iterating on the what instead of the who: If a product doesn't resonate with an audience, founders often want to change the product. But Andy says founders should instead focus on shifting the customer they’re creating the product for.
Pursuing growth before value: Many founders are tempted to engineer growth with ads and other scale tactics too early, but that artificial growth can cause them to wrongly assume they've truly found product-market fit.[12]
Slowing down on innovation: Product-market fit is a process, not a one-time achievement. As markets, customers, and competitors shift, product-market fit must be continually reassessed and pursued.
It is important to differentiate between product-market fit and problem/solution fit when measuring a company's customer base. More specifically, when gauging a customer's desire, companies need to be sure they are measuring desire for the product or service—not just for a solution. Misinterpreting customers' desire for a solution as desire for a company's product or service will end up being a false positive for product-market fit.
Product-market fit is not binary. For a fledgling startup, a minimum degree of product-market fit will not be adequate in order to achieve market traction and success. Rather, what is actually required is a high degree of product-market fit, or extreme product-market fit.[citation needed]
^"How to find product market fit: the counterintuitive secrets". www.unusual.vc. Retrieved 2023-06-27.
^Andy Rachleff from VC to Entrepreneur, 2023-03-22, retrieved 2023-06-27
March 16, 2024
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Product market fit also known as product market fit is the degree to which a product satisfies a strong market demand Product market fit has been defined by its inventor as a unique product offering that people desperately want 1 It is a first step to building a successful venture in which the company meets early adopters gathers feedback and gauges interest in its product s Contents 1 History 2 Interpretations 3 Popular metrics 3 1 The 40 rule 3 2 Analytics metrics 3 3 Common mistakes 4 See also 5 ReferencesHistory editAccording to Benchmark Capital co founder Andy Rachleff Sequoia Capital founder Don Valentine developed the thinking behind product market fit 2 but it was Andy who first put a name to it 3 Venture capitalist Marc Andreessen of Andreessen Horowitz would later popularize the term in the mid 2000 s Andreesen credits Rachleff for the concept referring to the idea as Rachleff s Corollary of Startup Success The only thing that matters is getting to product market fit 4 5 Marc Andreessen defined the term as follows Product market fit means being in a good market with a product that can satisfy that market 6 7 Many people interpret product market fit as creating a so called minimum viable product that addresses and solves a problem or need that exists Steve Blank referred to the concept of product market fit as a step in between customer validation step 2 in his book The Four Steps to the Epiphany and customer creation step 3 8 9 10 Interpretations editProduct market fit might be interpreted in terms of Alexander Osterwalder s Business Model Canvas paradigm as comprising value proposition customer segment relationship and channel Achieving product market fit implies these are set without requiring additional changes or pivots Popular metrics editThe 40 rule edit One metric for product market fit is if at least 40 percent of surveyed customers indicate that they would be very disappointed if they no longer have access to a particular product or service Alternatively it could be measured by having at least 40 of surveyed customers considering the product or service as must have Sean Ellis is noted for popularizing this heuristic after examining many startups citation needed according to whom Analytics metrics edit There are five metrics any online business can measure to empirically verify if they achieved product market fit They are 1 Bounce Rate 2 Time on Site 3 Pages per Visit 4 Returning Visitors 5 Customer Lifetime Value citation needed Low bounce rates means a visitor s expectation is being met High Time on Site and Pages per Visit indicate that the experience of the user is satisfactory High Returning Visitor reflects the lasting impact a product has on their customers causing them to come back and Customer Lifetime Value measures the profitability each customer brings to the company If these 5 metrics are above average and your 40 rule is met you ll know you have a product market fit company according to whom Common mistakes edit Andy Rachleff says there are four common product market fit mistakes 11 Prioritizing well known customers over desperate ones The counterintuitive thing is that you should not go after the big market first It s the exact opposite of what everyone tells you Iterating on the what instead of the who If a product doesn t resonate with an audience founders often want to change the product But Andy says founders should instead focus on shifting the customer they re creating the product for Pursuing growth before value Many founders are tempted to engineer growth with ads and other scale tactics too early but that artificial growth can cause them to wrongly assume they ve truly found product market fit 12 Slowing down on innovation Product market fit is a process not a one time achievement As markets customers and competitors shift product market fit must be continually reassessed and pursued It is important to differentiate between product market fit and problem solution fit when measuring a company s customer base More specifically when gauging a customer s desire companies need to be sure they are measuring desire for the product or service not just for a solution Misinterpreting customers desire for a solution as desire for a company s product or service will end up being a false positive for product market fit Product market fit is not binary For a fledgling startup a minimum degree of product market fit will not be adequate in order to achieve market traction and success Rather what is actually required is a high degree of product market fit or extreme product market fit citation needed See also editCohort analysis Customer churn Founder market fit Lean startup Revenue streamReferences edit How to find product market fit the counterintuitive secrets www unusual vc Retrieved 2023 06 27 Andy Rachleff on How to Know If You ve Got Product Market Fit Retrieved 24 September 2020 Andy Rachleff on coining the term product market fit 2022 10 31 event occurs at 3 58 retrieved 2022 11 08 Andreesen Marc Part 4 The only thing that matters Pmarchive Retrieved 24 September 2020 Griffen Tren 12 Things about Product Market Fit Andreessen Horowitz Retrieved 24 September 2020 Andreesen Marc Product Market Fit EE204 Stanford University Retrieved 6 December 2018 Kenny McQuarrie Evaluating Product Market Fit Steve Blank The Four Step to the Epiphany 2006 PDF Blank Steve and Dorf Bob 2012 The Startup Owner s Manual K amp S Ranch publishers ISBN 978 0984999309 Blank Steve May 2013 Why the Lean Start Up Changes Everything in Harvard Business Review How to find product market fit the counterintuitive secrets www unusual vc Retrieved 2023 06 27 Andy Rachleff from VC to Entrepreneur 2023 03 22 retrieved 2023 06 27 Retrieved from https en wikipedia org w index php title Product market fit amp oldid 1201258645, wikipedia, wiki, book, books, library,
