Product Market Fit: Definition, Stages, How to Measure Success, and Examples

A company is not only successful when it reaches sales targets. Products or services that are indirectly "sold" or recommended by many people can also be one of the success factors. But to do that, you have to go through the Product Market Fit stage. To better understand what Product Market Fit is and the important information contained in it, you can listen to the following article.

What is Product Market Fit?

Product Market Fit is a concept or scenario whereby a company's customers want to buy, use and disseminate information about a product. Of course, if this happens to a lot of the company's customers, this condition can help the company grow and increase its profits.

This concept was originally created and developed by Marc Andreessen, an American businessman who is also a trusted investor. According to him, product market fit is a condition if the company is already in the market and chooses the right customer group depending on the product offering. That way they are satisfied and want others to try too.

Stages in Implementing Product Market Fit

1. Determine the target market

The first thing you need to do is determine the target market that matches the product or service being offered. A product or service can be successful if the target market or customers are right on target. Finding a suitable or suitable target market must be done through market segmentation.

2. Identify customer needs

When creating a product, it must be made according to user requirements. Whether the product can meet customer needs or not. Then, the customer decides whether the product makes sense for them or not.

3. Define the product's value proposition

This value proposition is your plan for how your product or service can help better meet customer needs compared to your existing products or product competitors. Apart from that, a value proposition is also useful in providing features that can become your product brand, making it easier for users to remember it. You also need to focus on a few things that can have a big impact on your customers.

4. MVP design

MVP is at least one viable product or prototype that can be produced according to the marketed product. The goal is to find out whether the products being marketed have a direct impact on customers. In order not to spend too much time on development, you can focus more on the main value that you want to offer.

5. Make MVP points

Develop MVP in a format acceptable to customers. Besides that, it also fulfills the value proposition and features that suit user needs. Generally, this simple form can be in terms of product design, and the user experience matches the value proposition.

6. Experiment

Once the MVP is ready, the final step is to run tests. This experiment is conducted on users or customers that match the target market. When experimenting, it is important to get feedback from the customer on the prototype.

How to Measure Product Market Fit Success

After completing these steps, you also need to know how to measure the success of these steps.

• Net promoter score (NPS)

To find out whether the product launched can achieve the appropriate results, it can be measured by customer satisfaction or Net Promoter Score. This NPS helps collect customer feedback about the products you have launched. This NPS can also help determine the customer's interest in recommending products to others.

If the NPS score is low enough, identification and solutions are needed to increase it. Usually, companies that are successful in Product Market Fit have an NPS value of around 50.

• Churn rate and retention rate

Both are metrics used to measure whether your company has achieved product market fit or not. The higher the turnover rate, the lower the customer satisfaction. At the same time, if the retention rate is high enough, then customer satisfaction is also good. This retention rate also corresponds to the number of people who continue to use the product after the first use. The standard reference that is commonly used for the turnover ratio is around 5%. However, this still depends on the type of business being run.

• CLV or customer lifetime value

This metric is useful when you want to see the average revenue a single customer using your product can generate. So if a customer uses your product for a long time, the profit will also be higher.

• Bounce Rate

This bounce rate is a measure of whether a product is suitable or suitable for the company's product or market. In other words, a high bounce rate means users leave your product without further interaction. ideal bounce, at least less than 60%.

• Growth rates

Some people may believe that if a managed business can grow, it can be called successful or on the right track. However, it is also necessary to understand what this increase can lead to. If growth can be traced back to marketing investments, one cannot speak of successful product-market fit.

Example of Product-Market Fit

Netflix is ​​an example of a company that has achieved product market fit and has managed to maintain it year after year.

Originally, Netflix was a DVD rental service for people who subscribed to the service. However, over time, it adapted and changed to offer services that were less expensive and more convenient than what we know today.

This means that Netflix adapts its products to market needs and makes sure its subscribers are happy with what they are getting so they continue to subscribe every month.

Thus the explanation of product market fit. Isn't it how useful and important the concept of product market fit is for running a business?