Product/ Market Fit is a vital stage in the startup journey. But its is a tough concept to understand. I prefer to call it Customer/ Product Fit because it is about customer need. It is still hard to define. Think of it as being like the process of making a designer, bespoke suit. Lots of careful craftsmanship and testing to reach a product the customer falls in love with.
An Essential Part of The SaaS Revenue Model
Product/ Market Fit is a key concept for growing and developing any startup. You can't build the SaaS recurring revenue model without it. Investors and analysts see it as a key milestone on the path to building a successful new business. Almost every entrepreneur is aware of its importance. Most funding pitches will refer to the idea.
Yet I see a lot of business plans that go wrong dealing with Product/ Market Fit. Many have a bad way of handling the question. Or the description is confusing. Maybe the claimed fit just doesn’t exist. Or the evidence to support it is not in the pitch. In a few, the point is just not addressed.
The Problem of Definition
I don’t think the phrase is right to describe the idea. I prefer Customer/ Product Fit for a couple of reasons. The main challenge for a startup at the ‘fit’ stage is finding and defining a real customer need. What is the problem that someone will hire your product to solve? Product design is important. But in response to customer testing and feedback. Not in isolation. So the phrase should put customer first.
Using the word customer is also more helpful than talking about market. A lot of investors and entrepreneurs seem to define a market as something large and amorphous. Described by numbers and figures. Maybe sized by respected third party research. The Fit we are looking for is much more specific. It needs to talk about a recognisable person. With a problem that is practical and/ or emotional.
Think about all the problems that you might build a startup to solve. The things that you feel need fixing in your life. How many could you put a value to? My bet is no more than a handful. That’s one of the reasons pricing is so tough.
Values for markets are ascribed by others. They are not taken direct from customers. We can’t build a product this way. It needs to come alive. The customer needs to be real. Or at least a persona that an outsider can recognise.
Customer/ Product not Product/Market
The challenge may be that the concept is hard to define. For most SaaS metrics you can find a load of articles analysing and explaining the principles in detail. Books such as The Lean Startup and 4 Steps to The Epiphany describe each stage of the startup process. There is a fair bit of unfamiliar jargon. And plenty of illustrations and examples to make it all clear.
Product/ Market Fit is different. The most common advice is “You’ll know it when you see it”. Very helpful.
I love watching Guy Kawasaki talk about this stuff. When he describes Product/ Market Fit for YouTube. “The business will take off when people start dropping Mentos into a bottle of Diet Coke and filiming it” Or Twitter. “The turning point will be when everyone starts sharing pictures of their cat scratching itself.” Do you think those teams knew they had a fit when they saw such examples?
This is vital to build a SaaS recurring revenue model. Small business consulting is all about solving this type of problem.
Think About a Bespoke Suit
I am no closer to having a good definition than anyone else. However, there is an analogy I find helpful. Compare Customer/ Product Fit to the process for creating a bespoke, designer suit (or a dress if you prefer).
Everything about bespoke tailoring is slow and doesn’t scale. The measurements are by hand. The cloth is cut and stitched by hand. The craftsman needs to talk to the customers face to face. Many times. And all that is perfect for a startup that hasn’t yet found a Fit. You can spend any amount of time getting things right for that first customer.
Its a Collaboration
Your beautiful suit is also a collaboration. The customer will have ideas and preferences. From colour of cloth to how many buttons on the cuff. The designer will also offer ideas. A new style of lapel perhaps. Or an extra pocket in a useful place. Most new products are like this. It is not as simple as just asking the customer what he or she needs and then building. But finding a complete new market where the customers don’t yet know they want what you have to offer is also rare. Digging into the customer thought process. Learning from how your potential users work. Offering some new ideas of your own. This is exactly the cycle you need to go through.
Use Every Piece of Data
The other part of the initial process for bespoke is also important to remember. Your tailor will want to gather lots of data points. Measure every part of your body. Sometimes 2 or 3 times. Ask lots of detailed questions. What do you carry in your pockets? Where do you keep your phone? How does your weight fluctuate? Every tiny detail that could influence the fit and wear of your new clothes is investigated.
Learn how to do this. Get as much information from and about your customers as possible. Measure when you can. Ask and probe and test for the rest. Look at every piece of the picture. Pay special attention to things that don’t seem to fit. Use the data to make sure your design is right.
At this point the customer leaves the shop. Their suit is then handmade with wonderful craftsmanship and skill. That is, the tailor makes a great product. This should be obvious. But its not. You do not have Customer/ Product Fit if you product is a ropey old beta. You might have some potential interest. But you have not reached a Fit.
Test, Test, Test
And even after all that data gathering and all that craft the process is not done. Now our bespoke tailor is going to test his product. The customer returns for a fitting. Inch by inch the suit gets checked and rechecked. Notes are taken. Pins are deployed. The tailor takes the clothing back and makes his adjustments. This can happen several times. Only when both designer and customer are completely happy does the suit become the perfect fit.
Testing is one part of the startup journey where advice and expertise is plentiful. So use it. Show me Customer/ Product Fit with no tests. No iterations or tweaking to reflect user feedback. I will show you a startup that is not there yet.
Build Something Users Love
In the end the best bespoke tailors will not let a garment out of the store until the customer is in love with it. This is the true craftsman’s definition of Customer/ Product Fit. On reflection it is pretty good definition for a startup as well. This is a process without a guide book. Every founder will need to reach his or her own Fit.
I do small business consulting for startups to help solve this type of problem. If you would like more ideas about building a growing a SaaS business in your inbox every week, subscribe below.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.