First, what is it?
In business and marketing, product market fit is not a new concept, although the term has arisen as a mantra for start-ups and growth hackers. Product market fit means ensuring that the product fulfills a need very well within the target market at which it’s aimed.
In today’s world, it means putting the product first (before marketing), iterating, revising, and improving the product according to the target market. If it is a sign of the times, thinking about product market fit may be understood by considering what it’s not.
The 1960’s were the heyday of marketing and advertising. In fact, many products actually started with marketing first and then created the product. Cap’n Crunch cereal is one such example. Did you know that the character and brand were actually created first and then the cereal recipe was developed? The spirit of product market fit means doing things in the exact opposite way as Cap’n Crunch.
Product Market Fit Survey
“Product market fit is a feeling, backed with data and information.” – Ryan Holiday, author of Growth Hacker Marketing
The key to finding product market fit is to iterate product development with the help of your users and target audience, and that is done with research. Of course, as a research firm, we will be pushing research, but this recommendation comes from those at the center of the growth hacking movement.
For the remainder of this post, we’ll share some research tips and types for various stages of the product life cycle.
A Quick One-Question Survey for Your Users
Sean Ellis, author of Lean Marketing for Startups and prominent growth hacking authority, has a famous question to ask of your primary users:
How would you feel if you could no longer use this product?
a) Very disappointed
b) Somewhat disappointed
c) Not disappointed (it isn’t really that useful)
d) N/A – I no longer use [product]
According to Ellis, “If you find that over 40% of your users are saying that they would be ‘very disappointed’ without your product, there is a great chance you can build sustainable, scalable customer acquisition growth on this ‘must have’ product.” (click here and here for more details)
An alternative to this could be a qualitative approach (as opposed to the quantitative above) asking users or even non-users once they’ve been made aware of your offering.
“What would you do if this product were not available?”
What I like about this question is that the market will tell you where exactly your product fits. Would they use a different product that does the same thing (a competitor)? Would they use a different product (or multiple products in conjunction) to fulfill the need (substitute product)? Would their need go unfulfilled (signifying a truly unique value proposition)?
In this case, the form of the answer is just as important as the answer.
This tactic is best used in the very beginning, either when developing a minimum viable product (MVP) or when assessing the MVP.
Product Concept Testing
The next step beyond a one question survey of your users would be a slightly larger survey of your target audience to assess opinions. Troubadour offers a standard Product Concept Test with a database of comparison products to test against. This means that when you look at the scores for, say, appeal or uniqueness, you will know where you sit compared to a lot of other new products that we’ve tested.
Imagine seeing that your product is in the 95th percentile (extremely good) on ‘fulfilling a need’ but only 67th percentile on efficacy (perception that it will work). That finding would tell you that you are doing the right thing, but that the messaging needs to do a better job of proving that it will work.
The Product Concept Tests we run can be very streamlined and cost efficient (starting at $650), or they can be more in-depth and assess the product from multiple angles to produce insights and knowledge that can drive product development and marketing.
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Segmentation Analysis: Understanding Your Real Target Market
The next step in the research process would be a segmentation analysis. To this point, the emphasis has been on the product, but now the point is to dig into the psychology of your target market.
Segmentation refers to any way of grouping people into categories according to some criteria. Often people will look at demographics (which we often advise against for defining a target market), behaviors, psychographics, or needs. The best kind of segmentation for strategic marketing purposes is a needs-based segmentation; when that’s not as easy, then psychographic or attitudinal segmentation is best.
A Troubadour segmentation will get beneath the surface of what people think they need, and define consumer cohorts according to what will motivate them to be a customer. This level of insight into your target user can drive product development and marketing messaging to ensure that you are connecting with them on their level.
Conjoint Analysis: Quantifying the Value of Product Features
Conjoint analysis is a product development research tool that is regarded as one of the most powerful tools in the market researcher’s toolbox. Once the previous research studies have been conducted and the product needs to be optimized to stand up to a competitive environment, conjoint analysis becomes extremely valuable.
The purpose of conjoint analysis is to test specific features of the product or service and put a value or score to each one so you can see the importance level. We can even translate those into dollar amounts; for example, “people are willing to pay an extra $15 to have this feature.”
This kind of project is actually a controlled experiment where we observe consumers make purchase decisions between a variety of products with differing features, prices, and often brands. We’ll observe about 12-15 product decisions, and from the data analysis, we learn what features buyers are looking at and what’s primarily driving their choice.
What’s more, we can combine the segmentation analysis and conjoint analysis to identify groups of people that are defined by their preferences from the feature sets. Guaranteed product market fit!
Expanding to Different Markets
After the above steps have been taken, there are other, perhaps more custom, research studies or experiments Troubadour can help with to continue to refine and optimize product market fit.
For example, if your product can be modified to attract a new market segment, then the consideration of a product line may be the decision of the day. There are research techniques specifically designed to optimize the product line or multiple offerings so that the set will reach the most people. One such analysis is Total Unduplicated Reach and Frequency (TURF analysis), and its goal is to find the set that reaches the largest number of unique individuals and produces the greatest sales. Now, that’s optimization!
Dale Gilliam is the CEO of Troubadour Research & Consulting, a marketing research and analytics firm committed to delivering true understanding of the story behind the data. Dale can be found on Twitter @data_modeler and LinkedIn.