As Alex Schultz, Meta's VP of Growth and a marketing consultant, says, companies' most pressing challenge is a lack of product-market fit and not realizing it. You don't have to be a fledgling startup to miss the fit. Some established companies with significant customer bases have also shared that plait.
Take Apple. The company learned its lesson when rolling iPhone 3G out to Asia in 2008. With consumers falling into raptures over the new model in 21 countries, the phone failed to hit the sales targets quite spectacularly in Japan. In the country where around 50 million cell phones were sold the previous year, Apple managed to sell only 200,000 of the 3G.
The reason? Not adjusting the product to the needs of such a unique market as Japan. Apple was so sure of the brand’s halo effect that it completely underestimated the importance of product-market fit.
In this blog post, we'll get deeper into this vital metric. We'll explain how to go about measuring it and how to turn unsatisfactory product-market fit survey results to your advantage.
What is product-market fit, and why does it matter?
Product-market fit is the prerequisite for growth. If you achieve it, you can rest assured that your unique value proposition holds, you target the right audience, and you do it through the channels that will sustain your business. Your MVP solves a problem or addresses a real need of the target market - one that can be monetized and produce sustainable growth.
Also, should you want to take the company to a new level, you won't be able to apply for Series A funding before you have evidence of the product-market fit. You still need to fine-tune your offering so that:
It meets the need of a market big enough to make the product profitable.
The problem your product solves is significant enough to claim higher price tags (particularly important if you target a small market niche.)
Your product or service can hit specific performance targets over time.
What is a product-market fit survey?
The product-market fit survey (a Sean Ellis test) is the brainchild of Sean Ellis - a marketing guru and the author of Hacking Growth, whose approach to business growth propelled the market success of companies like Airbnb, Facebook, and Dropbox.
What Ellis found out is that what it takes is a single question to measure product-market fit:
"How disappointed would you be if you could no longer use this product?"
The answers to this question range from "very disappointed" to "not disappointed at all."
The Sean Ellis testnot only lets assess how well you're meeting the market demand, but it can also help you achieve the product-market fit if you’re not there yet. (More about it farther down the text, so read on!)
How to use the product-market fit survey to assess the fit?
There is more than one way of running the surveys. Everything depends on the context and the goals you have:
You can send the survey to all customers if you don't have a large user base.
With larger, more diverse user bases, you need to segment the customers to draw actionable results. The best would be to segment the audience before running a survey and run it only across the most profitable group. You want to research the engaged customers, customers from the paid pricing tiers, and customers who share characteristics with those most active or lucrative.
You can also break the respondents into industries and job profiles when analyzing the data. This way, you'll be able to detect your best customers and create personas you to design the product for.
Altogether, it's not about an overall product-market fit score but how much of a product-market fit you have across customer segments. It's a positioning exercise.
How do you interpret the product-market fit survey results?
It's simple: If at least 40% of users respond "very disappointed" to your product-market fit survey question, it's a solid indicator you've achieved the fit and can expect sustainable growth.
Where does the number come from?
Having analyzed nearly a hundred startups that measured product-market fit with the survey, Ellis found out that those companies who reached the threshold of 40% were those who experienced rapid growth. The figure is a leading indicator of strong traction and a market fit.
What sample size do I need for a product-market fit survey?
But it's essential to think about who those respondents are. You don't want to waste time surveying customers who logged in once but never actually used your product or service. As we've mentioned earlier - you're looking to run
research among the target audience that is very likely to be your best customers.
As mentioned before, the user feedback you want to analyze comes from users who:
are engaged users
used the core features of your product and are activated
There is no apparent reason, but you want to stay on top of the changes in the market.
It's important to remember that product-market fit is set in stone. Even if you have found it, you still need to measure it in regular intervals, especially if you operate in a highly competitive market and you're developing the product fast.
How to leverage the survey to find the product-market fit?
Determining your product-market fit is crucial for your company's growth. A product-market fit survey is a powerful approach, provided you target the right users/customers and know what to do with the results.
The good news is that no matter how important it is to achieve a match, no one gets there right away. If there is no fit, the question you need to ask is: "To what extent have we achieved it?"
The chances are that, if you analyze the survey results, you'll discover that you have the Sean Ellis score among one or more segments of users. That's great news. Chances are you've just found your target audience. Build on that.
Use the value proposition validation survey template for additional validation of your assumptions. Gather quantitative data to gauge what portion of the market prioritize the jobs, pains, and gains in question the way you have.
Survicate’s robust library of integrations allows collecting user feedback through all companies' communications channels. It enables aggregating data from various sources in one platform. As a result, companies can make better use of the user insights they have accumulated.
Finally, the integrations with product management software, such as Amplitude,Mixpanel, and Productboard, allow SaaS companies to run product surveys and collect product feedback in product management tools. Product teams can efficiently analyze feedback directly in the tools - turn the user insights into product ideas and plan roadmaps effectively.
NET PROMOTER, NPS, AND THE NPS-RELATED EMOTICONS ARE REGISTERED U.S. TRADEMARKS, AND NET PROMOTER SCORE AND NET PROMOTER SYSTEM ARE SERVICE MARKS, OF BAIN & COMPANY, INC., SATMETRIX SYSTEMS, INC. AND FRED REICHHELD.