Seven signs you've nailed product-market fit
Bessemer Venture Partners
For the entrepreneurs who want to build revolutions of their own.
Without achieving product-market fit first, pricing exercises are futile.
On Atlas, we share ???????????????? ???????????? — the fundamentals and best practices that help aspiring and audacious founders build enduring businesses.
If you don’t tackle product-market fit in tandem with pricing, you’ll be building on a cracked foundation. If you can unlock this elusive symbiosis, all your future pricing efforts will be much more successful.
Pictured below are the stages most startups go through to arrive at optimized pricing.
Much ink has been spilled on the topic of product-market fit, so we’re not going to go deep here.
We’ll just review the basics, and then get into how it complements pricing.
What is product-market fit?
Product-market fit is the degree to which a product satisfies market demand. Adam Fisher, Partner at Bessemer, says it like this:
“It is a single business term that at once denotes successful product delivery, a working go-to-market strategy, and customer satisfaction.”
In this diagram, the x-axis measures the depth of customer engagement, characterized by carefully listening and understanding the target customers and users. This involves understanding customer priorities, needs, alternatives, concerns, and levels of usage and engagement.
The y-axis measures the strength of your product and business vision as determined by how compelling it is for prospective customers and users. A compelling product vision will be clever and innovative, with a pitch that generates a buzz among customers, partners, and investors alike.
“The upper-right quadrant is where everyone should be aiming, but invariably most startups find themselves in one of the three adjacent quadrants, especially in the early years,” says Adam. “It is also natural that a startup would drift from one quadrant to another before achieving product-market fit.” ?
What product-market fit doesn’t look like
In the messy, awkward transition years to achieving product-market fit, here are some indicators you’ve some work ahead of you:
??? Customers wouldn’t be bothered if your product stopped existing.
??? Evaluation cycles are really long.
??? Your product nearly always requires a third-party integrator.?
??? Prospects think your product is one thing, but leave demos surprised.
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??? Prospects have to justify the purchase?to their team.
??? Customer success teams are burnt out with customizations.
??? The support team is often involves the product team in tickets.
??? Churn is high and lots of customer relationships feel tenuous.
What product-market fit does look?like
When you begin to unlock true product-market fit, here are the indicators that you’re onto something:
?? Customers tell you that they couldn’t do their job without your product.
?? People come in using your own terminology.
?? People take you with them from company to company.
?? Your platform is mentioned in job postings.
?? Others begin building their businesses around yours.
?? Competitors imitate your product language.
?? The ultimate: You become a verb. (“We’ll just Uber there.”)
We’ll end with a final word from Adam Fisher :
“Don’t be alarmed if you find that you are not where you want to be on [the above] diagram. It is common for startups to feel the conflicting forces that pull the company in seemingly contradictory directions. As long as you are conscious of the dangers of compromising on either of these two measurements of product-market fit, you are less likely to remain stuck in the wrong quadrant.”
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