Product Market Fit

Why Product Market Fit(PMF) is the lifeline of any startup? It is reported that 42% of businesses fail because of poor Product Market Fit. (PMF). The startup’s goal, initially, is to get acceptance of the product or service from the customers. The customers must realize that they are getting value for their money. The value proposition should attract enough number of customers for the business to gain traction.

Every product seeks to solve a problem. For most startups, it’s easy to know whether there’s a market for a solution to that problem. The difficult part is what happens next: determining whether your solution is the right one, building an actionable strategy for making the market aware that a solution exists, that is yours.

 Product Market Fit-Definition

Product/Market Fit was a phrase coined by Marc Andreessen. Marc said, “Product/market fit means being in a good market with a product that can satisfy that market.”

PMF is a necessary precursor to the effective (and profitable) scaling of a company.

 Product Market Fit- Golden Rule

Will Cadwell- Co-Founder and CEO-Dizzle

I realized providing value is the name of the game, and it is critical for the market you are trying to serve that they understand your value proposition instantly. The quicker your customer can understand the value, the more you know your product has achieved product-market fit.

Get your product in the hands of customers ASAP. How do you know if you have a product customers want? Simply ask them. Get your product in their hands and see if they would pay for it. If the feedback you receive is positive, this proves market validation and chances are you have a viable business. From here you need to stay focused and ensure you can deliver on what you promised to your clients.

 Product Market Fit-Sean Ellis View Point

Sean Ellis claims the achievement of product/market fit can be measured according to a specific metric i.e. in a survey, at least 40% of users say they would be “very disappointed” without your product or service.

After studying 100 startups, he claims this is a good indicator of whether a company has achieved basic traction.

Sean Ellis: 

 Product Market Fit- David Cummings 5 Rules

1.   10+ customers have signed on in a modest period of time (e.g. 3 – 9 months) and they haven’t been friendlies (people you already knew, favours you called in, etc.)”

2.   “At least five customers actively using the product with little / no product customization (e.g. the product is valuable and mature enough that heavy development work isn’t required for each new customer)”

3.   “At least five customers have actively used the product for over a month without finding a bug (no matter how great the product is people always find issues with it, which is natural for this beginning stage)”

4.   “At least five customers use the product in a similar way and achieve similar results (early on you find that customers use the product in ways you didn’t imagine, which is great, but the goal is to find consistent, repeatable patterns)”

5.   “At least five customers exhibited a similar customer acquisition and on-boarding process whereby they bought and went live with the product in a timeframe that was consistent with each other (e.g. had a two month sales cycle and took a week to get the product running)”

 Product Market Fit- Significance

High fit means low customer acquisition cost, high loyalty, and high lifetime customer value.

Low fit means high customer churn, high customer acquisition costs, and low loyalty. It really is like a magnet: in one polarity it attracts customers, and in the other, it repels them.

PMF is only the beginning. If the startups get it right they will attract attention and competition will start knocking at their door. The only solution is to put a golden lock on the customer by continuously offering higher value. Innovation is the key for success.

Technology can be a game changer in creating a new PMF.

 Product Market Fit-Examples


1.   Nokia a dominant mobile phone company with 50% market share did not react to changes in the market and had eventually become a marginal player. 

2.   Cavinkare ruffled MNC’s by introducing shampoo sachets which met the needs of the bottom of the Pyramid. 

3.   Gas Candles

This single product success story understood the shift in the market. Gas candles were used as a light source during power outages. With improvement in power availability, sales started dropping and Gas candles were promoted as gifting items. This company ran this business for over three decades.

4.   Monitoring Physical activities- Fitness band is a fit for health conscious generation. They are able to set goals and measure actual performance 

5.   Balaji Wafers,a small town entrepreneur made the wafers at home kitchen and established the quality  of the product, that too at a lower price, before expanding rapidly. Today, they command more market share than MNCs.


Product Market Fit-Conclusion

The PMF is all about saying “get the product right first, and make sure you stay competitive”.

If your customer describes correctly the usefulness of the product/service and is willing to pay for it- that is the first step in PMF.

This concept is relevant to get initial traction and the strategies required at growth phase will be a different ball game as competition sets in.

At the early stages of starting up, there is nothing more important than hitting that “pot of gold at the end of the rainbow”, called Product Market Fit. You don’t really have a business until you have a sustainable and repeatable model of bringing in users and turning them into active (paying) customers.- Vikash Koushik,

I think the right initial metric is “do any users love our product so much they spontaneously tell other people to use it?”  Until that’s a “yes”, founders are generally better off focusing on this instead of a growth target. – Sam Altman, Before Growth