How to Find Product Market Fit (PMF)
In our last blog we told you why product market fit (PMF) is an important milestone and how to start looking for it. In this continuation, we dive deeper into HOW to find it.
- Actual PMF may be adjacent to the initial idea.
- Finding the customer hotspots that lead to PMF often requires casting a slightly wider net around the initial idea, which can feel like heresy to passionate founders.
- The CEO, product team nor investors determine PMF. The customers and sales team decide.
Start with the product-market hypothesis
To find PMF, start with the hypothesis of a compelling solution (the product) to a huge pain point experienced by a specific customer segment (the market). Working with that hypothesis, do three important things:
- Find customers who fit the target
- Iterate on minimum viable product
- Validate customer interest.
Focus but be open to adjacencies—even if that seems like heresy
Some startups (especially those with passionate founders) make the founding product-market hypothesis their exclusive focus. Focus is a great thing, but religiously keeping it narrow is a high-risk approach. That’s because the founding product-market hypothesis rarely survives intact after contact with the real world. Often a slightly different customer segment, or an adjacent pain point, turns out to be a more compelling “hotspot” and PMF opportunity.
Start with the initial focus on the product-market hypothesis, but also cast a slightly wider net for adjacent pain points and customer segments.
Targeting product-market adjacencies isn’t free. Testing them diverts resources from the original idea. There is no hard-and-fast rule on this, but spending 20–30 percent of your energy testing adjacencies provides enough coverage to detect a potential hotspot that may be outside the initial focus. Ask customers “what other problems are you struggling with?” Deliberately meet customers in different segments. Ask probing questions “if we had such-and-such, what would that mean to you?”. Modify initial pitch decks to catalyze exploratory discussions. Be willing to test adjacencies with digital marketing, prototypes or mockups. Testing adjacencies also complicates early sales calls, because they won’t be identical and will require some nimbleness. Emotionally, too, this approach can be difficult for founders and first developers, since by definition they are passionate believers in the Founding Idea. Pursuing anything else can seem like heresy!
Critical but unsung skill: Gathering customer data
Gathering the right customer data is a real skill. First is collecting unfiltered data:
Tae Hea: “One founder has a unique gift for building relationships with potential customers and collecting valuable unfiltered data. He wouldn’t filter the data to fit his original product-market hypothesis. We heard what customers were really saying. With his input, we pivoted away from the original hypothesis and found a different hotspot, which got us to PMF.”
Second is collecting customer data in a structured format that will accelerate the analysis. Start with a common framework and list of questions to gather comparable information that eliminates bias. Refine the data framework and questions over time to focus on the most important information for the startup.
Customer interviews: seek ruthless feedback and “teaching customers”
The first customer meetings typically are with “friendly” potential customers who are already known by the founders or are introduced by a mutual connection (e.g., advisors, investors). While these potential customers provide detailed and honest feedback, their historical relationships to the team may include some bias.
Customer interviews must go beyond friendly customers. Find customers that represent the target segment. Seek out ruthless feedback. And, keep an eye out in particular for “teaching customers.” What are teaching customers? Thoughtful potential customers who have both vision (a view of the future world) and practicality (a view of what’s useful and would be bought) to help you iterate during PMF.
Digital marketing as a test bed
Digital-marketing methods, like search advertising and email campaigns, can help test early customer interest and gather early customer feedback before the early product is even ready.
To test early customer interest, try using paid search advertising around different pain points, and measure the response. Or try using paid search ads to drive traffic to landing pages that describe different versions of the solution, and measure the response. Send emails to different potential target customers with different descriptions of the pain point and solution, and measure the responses and actions, such as opens, clicks, downloads, and registrations.
Digital marketing’s ability to systematically test pain points, solution descriptions and target customers at scale serves as an effective complement to direct customer interviews. Digital marketing importantly enables startups to gather feedback from potential customers who are not known through prior relationships.
Tae Hea: “One CEO excelled at sales and digital marketing, but was not a developer who could prototype. Instead, he tested potential product-market fit ideas through website and content marketing ahead of product development. The marketing and website results, plus follow-up phone calls, highlighted a more attractive adjacent hotspot. He pivoted the company and achieved Product-Market Fit.”
We’ll soon be releasing the next edition of our Survival to Thrival book, which will deep dive into Go To Market Fit (the next thing for B2B startups after GTM Fit). Sign up to our newsletter to be updated on when we release it.