When you’re launching a startup, the single most important factor to consider before you do anything else is product-market fit. Without this, nothing else matters. Regardless of how outstanding your idea, team, or marketing plan might be, without a hungry market, your business is doomed to fail. That’s why it’s so essential to match your product with your target market. Let’s look at how you can ensure a strong product-market fit for your startup.
Defining and identifying product-market fit isn’t always as straightforward as many business owners believe. As a founder/owner, your perspective is inevitably biased. You believe in your idea or you wouldn’t be so eager to launch your company. You also have identified what you believe is a need or solution in the marketplace. Even if your idea is original, innovative, and one that solves a genuine problem, however, isn’t always enough to ensure a good product-market fit. How can this be? The key lies in understanding the difference between the perspectives of customers and business owners. Here are some guidelines to keep in mind.
Identify Your Target Customer
Identifying your ideal customer and creating a buyer personae are fundamental to finding the right product-market fit. Research the demographics of your market and determine who wants or needs your market. You might identify more than one target market. For example, if you’re opening a fitness center in a downtown area, you might find that the greatest demand for this type of business is women between the ages of 30 and 55 who want to lose weight and male bodybuilders between 20 and 30. These aren’t necessarily your only customers but they are the most fruitful place to focus most of your marketing efforts.
You want to identify a need or problem that this population has and make an accurate assessment of what they’re willing to pay to have this need filled. This comes down to their buying power as well as preferences. The more precisely you can pinpoint your target market, the more likely your product will fill a genuine demand.
Test Demand For Your Product
It’s difficult to accurately assess the demand for a product without doing some trial runs. If it’s a physical product, create a prototype or MVP (minimum viable product) and let people try it out. This is easier if it’s an app or any kind of digital product (such as a course or membership site). For services, it’s a little trickier but it may still be possible to do a trial run and test people’s reactions. For example, Amazon is currently testing its grocery delivery service, AmazonFresh in select cities such as Seattle and New York. Most startups can’t afford to test on such a massive scale, but they can use the same principle by testing their service in a small area.
In some cases, a startup creates rather than fulfills an existing demand. Henry Ford allegedly said, “If I had asked people what they wanted, they would have said faster horses.” Like many famous quotes, it’s unclear if Ford actually said this but, either way, it illustrates a valid point. More recent examples include innovative startups such as Uber and Airbnb, which created new models of, respectively, getting rides and finding accommodations.
Creating demand is challenging and requires a certain amount of time, effort, and creativity. If you want to convince people to try something new, you have to tell them a compelling story and show why your solution is superior to existing ones. However, before you try to sell people on a unique idea, make sure you have the resources to convince people it’s something they need or want. And, unlike the early days of the automobile, today new companies can perform all kinds of market research for their new ideas.
Study the Competition
Few products, no matter how innovative, appear in a vacuum. Studying your competition and the existing market gives you valuable information about product-market fit. Among the secrets of Uber‘s success (despite some recent setbacks) was lots of market research regarding people’s transportation needs and preferences. Even though Uber was offering a completely new type of service, it still had competition, mostly taxi companies. It turns out that many people are dissatisfied with taxis and welcome a more convenient and cheaper option. Another factor is the popularity of smartphone apps. Airbnb as an alternative to hotels is a similar case.
When looking at your competition, identify areas where people are not happy with what’s currently available and where you can offer an improvement. Perhaps your product is higher quality, faster, better-tasting, more convenient, or cheaper. This is your unique value proposition (UVP). Once again, it’s essential to measure whether this advantage is important to your customers. It doesn’t help if you offer a benefit that people don’t value.
Look at the Market Through Your Customers’ Eyes
It’s not enough to have a great product or even a solution. You need a product that people actually want or a solution to a problem that’s currently pressing to customers. It’s essential to communicate with the people who make up your target market. There are quite a few ways to get feedback from your potential customers. Creating content about your idea or product, whether on social media, your blog, or on videos or podcasts, is a good way to elicit feedback. Go to industry conferences and trade shows. Talk to people informally about what they think of your idea and whether they’d use it. Listen carefully and don’t let your preconceptions blind you.
Product-market fit is not a simple formula but a set of variables that you must define if you want to ensure that there’s truly a demand for your business. When you do sufficient research and product testing and study market conditions and the competition, you can accurately gauge whether your product is a good fit for the current market.