Product/Market Fit: 1 of 4

What is Product / Market Fit?

Let’s just start by breaking apart this term product/market fit (the slash is important).

Product = The thing you are building

/ = an implied symbiotic relationship between the the group of people who will purchase the thing you are building and this thing

Market = The group of people who will use and purchase the thing you are building.

Fit = You can produce the thing at a price and cost that makes sense for the number of people that actually want it and are willing to pay for it.  

Product/market fit is a term that defines a very specific milestone in a company’s lifecycle. Hitting product/market fit is when the company is ready to sell the product and scale the solution for many users who all share the same need.

Product/market fit is a term that defines a very specific milestone in a company’s lifecycle. Hitting product/market fit is when the company is ready to sell the product and scale the solution for many users who all share the same need.  Product/market fit is what creates the foundation for a self-sustaining, scaled business.

Product/market fit is what creates the foundation for a self-sustaining, scaled business.

Self-sustaining means that you can make more money selling the solution to the people who want to buy it than it costs to make and market it.

Scaled means you have one easy to replicate solution for one specific need that many people want to use.

Words Matter

It’s important not to continue to speak in terms that cause ambiguity and confusion, so let’s speak human. In practice, having product/market fit answers - Does anyone want this thing? More specifically, will they pay for this thing - the  solution to some problem they have - and how much will they pay?  

Pricing your product is firmly based on the value it provides. You can price at what someone will pay to solve their problem. There are two straight-forward ways to figure out what someone will pay:

  1. Market research to understand how they are solving the problem today and how much that costs them
  2. Testing different price points for different versions of your solution - we talk more about monetization testing in How do I know if anyone will pay for what I’m building?

Pricing research and testing helps you understand if you can actually charge enough money to enough people for your solution to run your business as a self-sustaining entity.

To get an idea, look at the cost of making your product and compare that against the number of people who want your product for the price. Can you make more money than it costs you to make the product? Why would you ever try to scale if you don’t know?

When we talk about readiness for scale we mean you have identified one user type who wants to use and pay for your product. Ideally there are many of this type of person. The aim is to create a motion where you can optimize the same solution repeatedly for a lot of people. This is the only way to achieve scale.

Scale is not doing many different things for many different types of people, even if they pay you. That’s just running a business - a business that is not ready for scale. Many lifestyle and services businesses never find scalable product/market fit even if they become self-sustaining. That’s okay. What is not okay is deluding yourself into believing that you have product/market fit when you are not self-sustaining or ready for scale.

So to recap.

Product / market fit is building a solution people care about solving enough to pay for it - the practical application of “pay for it” can mean paying money, time, or attention. Time and attention are often translated into money through digital advertising and data products. In a market that is big enough to support your business - a market is a specific set of people with a clear problem or needs who are motivated to solve it with money, time, or attention.

Product/market fit is the foundation for growth and scale. You can’t force it but you can build your way there.

Our mission is to help builders find product/market fit with tools and technology.

The key to finding product/market fit lives at the intersection of your product’s unique value to a market. Your value proposition is why your solution is uniquely appealing to a specific set of people in a differentiated way from other solutions.

There isn’t magic to this process, but there is a lot of hard work required in thinking and testing. Aligning value to people who need or want your solution enough to pay for it is the only way to build a self-sustaining, scaled business.

Getting your product’s value proposition and your company’s market right is essential for building success.

You can do this through testing.

Foundations can help.

Start using Foundations for free now.