Product-market fit (PMF) is the holy grail of venture capital. It means that your product solves a real problem for a large and profitable market. But achieving PMF is not easy. It requires constant experimentation, feedback, and iteration. In this article, we will explore some of the most common challenges in achieving PMF and how to overcome them.
Your value proposition is the core of your product. It describes how your product delivers value to your customers and why they should choose you over your competitors. But defining your value proposition is not a one-time exercise. It evolves as you learn more about your customers, their needs, and their preferences. You need to test your assumptions, validate your hypotheses, and refine your messaging. A clear and compelling value proposition will help you attract, retain, and grow your customer base.
MVP ( minimum viable PRODUCT) is critical, but not the right barometer in many cases. Unless the expectations set are for a MV-Proto (minimum viable PROTOTYPE). Typically the last leg of the product development cycle completes the delivery-of-promise. While the initial prototypes and interim serve to validate the building blocks. It's like an architect validating his/her structure based on market feedback at various MVP (minimum viable PHASES), and based on feedback received change/ modifying the facade, floor plan or footprints. MVPs work only when you already know what you are aiming for. At each stage the feedback will be inconsistent and one needs the conviction and an ability to discern .
The primary challenge in achieving product-market fit is defining a clear, compelling value proposition. It's about pinpointing what sets your product apart and why it's essential for your target audience. Startups often struggle here, either offering too broad a value proposition that fails to resonate with any specific group or too narrow, missing a larger market segment. For example, a tech startup must clearly communicate how its product uniquely solves a problem more effectively than existing solutions. This precise articulation of value is key to attracting and retaining customers, crucial for sustainable growth and market penetration.
An easy trap to fall into when trying to define your product's value proposition is confirmation bias. Instead of collecting data on why your product will deliver value to your customers, collect information and data to prove why your product will fail to deliver value to your customer. Be ruthless. If you fail, then your product passes the test and you can be reasonably sure of success. To define the value propostion it is critically imporant to understand the need gap and customers attitudes and behaviours towards them. Not every need gap needs a soltuion that customers are willing to pay for. Do these two validations, they will serve you well.
Your target market is the segment of customers who are most likely to buy your product and benefit from it. But finding your target market is not a simple task. You need to conduct market research, customer interviews, surveys, and analysis. You need to identify your customer personas, their pain points, their goals, and their behaviors. You need to segment your market based on relevant criteria, such as demographics, psychographics, geography, or industry. You need to estimate the size, growth, and potential of your market. A well-defined target market will help you focus your efforts, optimize your resources, and increase your conversion rates.
Finding the right customer, is as much about the customer, as it is about you. As for the customer, do your demographics, psychographics, competitior mapping, trends analysis and so on. These are important steps to create a clear picture of the market landscape. Equally important is assessing your own capabilites to address specific customer sets. Not all customers with seemigly similar needs are your customers. If not thought through clearly and assesed deeply, then it is possible to incorrectly include cusotmer sets that you may not be equipped to handle. This can make calculations and projections go awry, and set unrealistic expectations.
A potential or target customer is one whose problem you can solve. A cluster, of such common needs that can be served by you & is big enough to be viable as a business is the target market. As well there is a Unique Value proposition that is apparent & sustainable. Customer needs may be known, dormant, yet undiscovered or for that matter created. The target market definition may shift laterally or expand in size and even deepen in engagement over time as both the consumers/market and the product/services evolve over time. Target market is about solving & serving those customers that you can do better than anyone else or atleast as good, over time and profitably.
Your minimum viable product (MVP) is the version of your product that has the minimum features necessary to test your value proposition and get feedback from your target market. But building your MVP is not a straightforward process. You need to prioritize your features, balance your scope, and manage your expectations. You need to avoid the temptation of overbuilding, underbuilding, or building the wrong thing. You need to measure your key performance indicators, collect data, and learn from your results. A lean and effective MVP will help you validate your assumptions, improve your product, and achieve PMF faster.
Ask yourself the question, what is the deliverable of the MVP you are building, what will be the metrics and how will they be measured ? The MVP needs to create a high confidence level in the final products reliability, scalability, and its ability to ensure a seamless user experience aka customer delight. To this end it is very important to start with the purpose of the MVP and set clear goals and objectives. At this juncture, define clearly who the early users are going to be and how they are representative of the customers you are tageting. A large variation in the mix of early users v/s your intended customer mix is likely give you incorrect indicators. Access market feeback in light of this. This aspect is easy to overlook.
MVPs tend to have the Goldilocks Syndrome "too big, too small", 'too, hot or cold ", " hard or soft ". This could end up into unending cycle of creating the "perfect" MVP. Which takes away resources & time, building a version which by definition is non optimal. MVP should not serve as a feedback on the "Total Product", but be checkpoints of validation of "Minimum Viable PUZZLES" , of the larger picture that the creator/ architect has visualised.
Your product is not done when you achieve PMF. You need to scale your product to reach more customers, generate more revenue, and sustain your growth. But scaling your product is not a simple matter of adding more features, users, or servers. You need to consider your product strategy, your business model, and your competitive advantage. You need to evaluate your product-market fit, your unit economics, and your customer lifetime value. You need to optimize your product development, your marketing, and your customer service. A scalable and profitable product will help you create a lasting impact, attract more investors, and dominate your market.
Scale is critical for growth, profitability & sustenance. Scale is discovering & adding customers/markets which have identical or near similar problems/ needs that you are already addressing by: - Reaching out (awareness & distribution) - Refining (fine-tuning features, packaging or price positioning), -Refreshing (new features, functional expansion) or even - Replacing (the competition or a substitute product)
Your product-market fit is not a static state. It can change over time as your customers, competitors, and environment change. You need to be aware of the trends, opportunities, and threats that affect your product and your market. You need to be agile, flexible, and responsive to change. You need to experiment, iterate, and innovate constantly. You need to listen to your customers, monitor your metrics, and adjust your course accordingly. A adaptable and resilient product will help you maintain your product-market fit, delight your customers, and stay ahead of the curve.
The Product Market Fit is often a step beyond MVP ( Minimum Viable Product) in most product roadmap but it's the MMP or the Minimum Marketable Product or ready to launch is the most critical. Simply because not all which gives value initially gives revenue later in the long run... The difference is CAC or customer acquisition cost which can be lured by MVPs but the LTV or customer life time value depends on how it translates from MVP ( validation pending) to MMP ( validated) and to Product Market Fit for a given period and market within constraints of time and value.
Discovering The "Why" : Most founders focus on ICPs but a more robust idea is to discover: Job-To-Be-Done People visit Starbucks as they wish for a space that gives them a casual space to work from. In India, lots of people start small mom/pop counters, not to build a business but to socialize or to keep themselves busy. Once you are clear in the domain you want to work/build brand in, next step should be to discover: Job-to-be-done (which your audience wants), helping you plan: - Go-to-market approach - Brand experiences at moments of truth